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Hidden Costs of Generic Drugs
July 23, 2002
by
Betsy
McCaughey
,
Betsy
McCaughey
Insurance companies have spun a medical myth that generic drugs save money and are as good as brand name drugs. Congress and lawmakers in many states are falling for the same misinformation.
As Congress considers adding a prescription drug benefit to Medicare, nearly all the proposals make seniors pay higher co-payments for brand name medications than generics, and an even higher copayment if the drug is advertised on television. Similarly, state legislatures are limiting low-income people on Medicaid from getting virtually anything but generics.
This push for generic drugs is a mistake. Relying on generic drugs could lower your chance of recovery, force you to stay longer in the hospital, and increase your risk of side effects. Relying on generics will also push the nation’s health spending higher, rather than saving money.
Unfortunately, most lawmakers don’t know the facts about generics. Here they are:
What are generics? By definition, yesterday’s drugs. They ought to be called patent-expired drugs. Federal law allows generic drug companies to copy a brand-name drug once its patent expires, usually after it has been on the market for twelve years.
The issue is not whether the generic drug is as good as the twelve year old brand name it is copying. Chances are, it is. But medical knowledge is advancing so quickly that a twelve-year old drug—whether it has a brand name or not—could be a poor choice.
Are newer drugs better for you? In general, yes. That has been proven in a study of 230 patients by Columbia University health expert Frank Lichtenberg. Patients treated with newer drugs had lower death rates and better recoveries. Though their medications cost more, their total health costs were lower than for patients of the same age and medical condition who used older drugs. Newer drugs reduced doctors’ visits, nursing home care, and emergency room treatment. Patients on newer drugs “had significantly fewer hospital stays than persons consuming older drugs.” That’s important because hospital stays account for 42 percent of total medical spending.
Then why do insurance companies encourage using generics? Most managed care companies take a short term approach, because their enrollees stay with a plan less than two years, on average, before moving to another one. Why pay for new, more expensive drugs to lower someone’s cholesterol or protect him from ulcers, when the long term rewards will be reaped by a competing insurance company?
Jeanette Thompson’s experience with managed care is typical. She is a grandmother and office manager in New Jersey who has constant pain in her hand from arthritis. Most arthritis drugs, she said “feel like they are burning a hole in my stomach.” She wanted to take Celebrex, a newer anti-inflammatory that eliminates gastrointestinal irritation. Her insurer refused to pay, saying she would have to suffer with older, cheaper drugs such as ibuprofen and Naprosyn until she actually developed bleeding. So much for preventive medicine.
Should government discourage brand name drug companies from advertising on television? Absolutely not. The ads empower patients. Without advertising, many patients would not know to ask about newer treatments. Some doctors don’t recommend newer, more expensive drugs because insurers penalize them for it.
Insurers would like you to think that the biggest difference between brand name drugs and generics is the cost of advertising. Blue Cross Blue Shield of Michigan launched a public relations campaign last fall to encourage the use of “generic drugs—the unadvertised brand.” The truth is that last year, pharmaceutical companies spent $30 billions dollars on research, ten times what was spent on advertising. Its not advertising that makes drugs expensive, it’s the years of scientific research to develop them.
Consider, for example, two of the life-saving drugs that became available in 2001. Gleevec, an anti-cancer drug, shrinks gastro-intestinal stromal tumors, which are highly resistant to chemotherapy and radiation. Before, the only option was surgery, and the average survival time after diagnosis was less than a year. Natrecor, a breakthrough in congestive heart failure, dilates veins and arteries, allowing patients with a weakened heart muscle to still pump enough blood supply to the rest of the body. Congestive heart failure has put more seniors in the hospital for long stay than any other disease—proof again that new drugs will save the health system money while saving lives.
Are older drugs safer? Michigan Blue Cross Blue Shield argues that older drugs are “tried and true” and therefore safer. Tried, yes. True, no. Missing out on the newest drugs is far more dangerous to your health than the minute risk that a newly approved drug could be unsafe.
Since 1993, there have been an estimated 1,002 deaths where an unsafe drug may have been a contributing factor and the drug was removed from the market. In contrast, hundreds of thousands of lives have been saved by new drugs for cancer, heart disease and stroke.
Favoring generics over newly developed pharmaceuticals is bad public policy. Pharmaceutical research has helped make the United States the undisputed world leader in the search for cures.
A longer version of this article appeared in the Investor’s Business Daily on June 3, 2002, and is reprinted with permission.
As Congress considers adding a prescription drug benefit to Medicare, nearly all the proposals make seniors pay higher co-payments for brand name medications than generics, and an even higher copayment if the drug is advertised on television. Similarly, state legislatures are limiting low-income people on Medicaid from getting virtually anything but generics.
This push for generic drugs is a mistake. Relying on generic drugs could lower your chance of recovery, force you to stay longer in the hospital, and increase your risk of side effects. Relying on generics will also push the nation’s health spending higher, rather than saving money.
Unfortunately, most lawmakers don’t know the facts about generics. Here they are:
What are generics? By definition, yesterday’s drugs. They ought to be called patent-expired drugs. Federal law allows generic drug companies to copy a brand-name drug once its patent expires, usually after it has been on the market for twelve years.
The issue is not whether the generic drug is as good as the twelve year old brand name it is copying. Chances are, it is. But medical knowledge is advancing so quickly that a twelve-year old drug—whether it has a brand name or not—could be a poor choice.
Are newer drugs better for you? In general, yes. That has been proven in a study of 230 patients by Columbia University health expert Frank Lichtenberg. Patients treated with newer drugs had lower death rates and better recoveries. Though their medications cost more, their total health costs were lower than for patients of the same age and medical condition who used older drugs. Newer drugs reduced doctors’ visits, nursing home care, and emergency room treatment. Patients on newer drugs “had significantly fewer hospital stays than persons consuming older drugs.” That’s important because hospital stays account for 42 percent of total medical spending.
Then why do insurance companies encourage using generics? Most managed care companies take a short term approach, because their enrollees stay with a plan less than two years, on average, before moving to another one. Why pay for new, more expensive drugs to lower someone’s cholesterol or protect him from ulcers, when the long term rewards will be reaped by a competing insurance company?
Jeanette Thompson’s experience with managed care is typical. She is a grandmother and office manager in New Jersey who has constant pain in her hand from arthritis. Most arthritis drugs, she said “feel like they are burning a hole in my stomach.” She wanted to take Celebrex, a newer anti-inflammatory that eliminates gastrointestinal irritation. Her insurer refused to pay, saying she would have to suffer with older, cheaper drugs such as ibuprofen and Naprosyn until she actually developed bleeding. So much for preventive medicine.
Should government discourage brand name drug companies from advertising on television? Absolutely not. The ads empower patients. Without advertising, many patients would not know to ask about newer treatments. Some doctors don’t recommend newer, more expensive drugs because insurers penalize them for it.
Insurers would like you to think that the biggest difference between brand name drugs and generics is the cost of advertising. Blue Cross Blue Shield of Michigan launched a public relations campaign last fall to encourage the use of “generic drugs—the unadvertised brand.” The truth is that last year, pharmaceutical companies spent $30 billions dollars on research, ten times what was spent on advertising. Its not advertising that makes drugs expensive, it’s the years of scientific research to develop them.
Consider, for example, two of the life-saving drugs that became available in 2001. Gleevec, an anti-cancer drug, shrinks gastro-intestinal stromal tumors, which are highly resistant to chemotherapy and radiation. Before, the only option was surgery, and the average survival time after diagnosis was less than a year. Natrecor, a breakthrough in congestive heart failure, dilates veins and arteries, allowing patients with a weakened heart muscle to still pump enough blood supply to the rest of the body. Congestive heart failure has put more seniors in the hospital for long stay than any other disease—proof again that new drugs will save the health system money while saving lives.
Are older drugs safer? Michigan Blue Cross Blue Shield argues that older drugs are “tried and true” and therefore safer. Tried, yes. True, no. Missing out on the newest drugs is far more dangerous to your health than the minute risk that a newly approved drug could be unsafe.
Since 1993, there have been an estimated 1,002 deaths where an unsafe drug may have been a contributing factor and the drug was removed from the market. In contrast, hundreds of thousands of lives have been saved by new drugs for cancer, heart disease and stroke.
Favoring generics over newly developed pharmaceuticals is bad public policy. Pharmaceutical research has helped make the United States the undisputed world leader in the search for cures.
A longer version of this article appeared in the Investor’s Business Daily on June 3, 2002, and is reprinted with permission.
Betsy McCaughey is an adjunct fellow of Hudson Institute. She is a patient advocate and founder of the Committee to Reduce Infection Deaths and former Lt. Governor of New York State.
Betsy McCaughey is an adjunct fellow of Hudson Institute. She is a patient advocate and founder of the Committee to Reduce Infection Deaths and former Lt. Governor of New York State.
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