HOWARD: Expensive innovation is only path to cheap Lipitor

Patent protection is key to incentivizing costly research for health miracles

Last month, Pfizer’s cholesterol-fighting drug Lipitor, the world’s best-selling medication, saw the expiration of its patent protection, thus opening the market to generic competition. Within just the past two weeks, Pfizer has lost nearly 50 percent of the market to atorvastatin (the generic version of Lipitor), a figure that probably will rise sharply over the next several months. But instead of cheering on the virtuous cycle of innovation, competition and consumer benefits that this represents, policymakers have slammed Pfizer for slashing the price of its own drug to compete with cheaper generics.

Patents are critical to pharmaceutical innovation because it can cost $1 billion and take longer than a decade to bring a single new drug to market. Patents allow companies a monopoly period when they can exclude competitors from producing cheap copycat versions of innovative medicines. This gives companies enough time to recoup their investments, generate profits and reinvest in research and development to discover the next lifesaving medicine. After the drug loses patent protection - usually after about a decade on the market - generic competitors can come in and produce the same medicine for pennies on the dollar.

U.S. policymakers should defend patent protection and market competition, which have given the U.S. both a vibrant, innovative pharmaceutical industry and a highly competitive (and inexpensive) generic-drug industry. Today, generic drugs make up about three-quarters of all U.S. prescriptions, saving consumers and health insurers billions of dollars annually. Over the next few years, drugs representing tens of billions of dollars in prescription-drug sales will lose patent protection, allowing generics to increase the savings even further.

But the point of the patent system isn’t to supply cheap generics. It’s to incentivize innovation and the health gains that come from newer and better medicines.

Take heart disease, for example. Heart disease has long been the nation’s leading killer, but safer and more effective medicines have helped drive astonishing declines in heart-disease mortality. For instance, U.S. age-adjusted mortality rates for heart disease declined by 32 percent from 1999 to 2009, according to the Centers for Disease Control and Prevention.

Those gains are even more remarkable considering rapidly rising obesity rates in the United States, because obesity is a known risk factor for heart disease (particularly through complications like diabetes). This massive decline in mortality rates from heart disease is one of the towering achievements of modern American medicine - and much of it owes to better and safer medicines.

Statins - the class of drugs that reduce cholesterol - weren’t developed by the U.S. government or the National Institutes of Health. As a 2008 Manhattan Institute report documented, private companies led the charge to develop cholesterol-lowering drugs in the mid-1970s, until the first statin drug was approved by the Food and Drug Administration in 1987. Follow-on statin drugs were then developed that were either more powerful or better tolerated, helping millions of Americans control their risk factors for heart disease.

As many statins have approached the end of their patent protection, companies have invested hundreds of millions of dollars searching for even more effective medicines. That research is extraordinarily expensive and risky. Several years ago, Pfizer lost more than $800 million when an attempt to improve on statins by raising “good” HDL cholesterol through a new drug called torcetrapib imploded in a late-stage clinical trial. Yet companies continue to take these kinds of risks because of the tremendous good they can achieve when they are successful - and because the financial rewards that come with patenting a new drug (at least for the time being) compensate them for their many failures.

Patent expiration - for Lipitor or any other drug - is part of a cycle of innovation that can take decades to complete. Losing reliable cash cows like Lipitor motivates companies to invest billions of dollars in the hope that they will uncover even better drugs for treating heart disease and cancer or cure Alzheimer’s. Pfizer’s attempt to cut its losses from generic competition with Lipitor - for a few months, anyway - is indicative of an increasingly competitive drug market and the challenges innovative companies are facing as pipelines of new medicines have thinned out in recent years.

If we want to continue to enjoy the health breakthroughs that medications like statins have provided, we have to be willing to allow innovative companies to maintain their patents and profits as they search for the next “blockbuster” medicine. In time, we’ll take the next batch of miracle drugs for granted and cheer loudly when they become cheap generics - but first, they have to be created.

Paul Howard is director of the Manhattan Institute’s Center for Medical Progress and managing editor of Medical Progress Today.

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