When drugmakers face the patent loss on blockbuster products, they might try a number of tactics to soften the blow. Price hikes ahead of the loss are popular, as are pay-for-delay deals to get a few extra months of exclusivity. Discounts and coupons sometimes work. A new AARP study says Pfizer ($PFE) employed all of these tactics when Lipitor faced generic competition and worries that the company's aggressive defense will become the blueprint for the industry.
"Strategies that hinder competition, like those reportedly employed by Pfizer, are harmful to consumers and all payers responsible for purchasing prescription drugs," said Debra Whitman, AARP executive vice president for policy, strategy and international affairs. "We're hopeful these strategies are not a model for the future."
The AARP report itself is a pretty good playbook for drugmakers facing a patent loss. Ahead of losing its patent on the world's best-selling drug, the AARP says Pfizer boosted prices by 50%, from $1,290 to $1,939 in the 5-year runup. Then, when the patent loss was upon it, the drugmaker provided consumers with discount coupons to keep them from dropping the drug. It also wooed insurance plans and pharmacy benefit managers (PBMs) with rebates. Those reduced the cost of the cholesterol-lowering drug to less than the cost of the copycats. And that enticed payers to reject claims for the generic for about 6 months, the report claims.
Of course, as the record shows, none of these tactics kept Pfizer from seeing devastating results. The patent loss has been so hard on the drugmaker that it has led CEO Ian Read to downsize the company dramatically with layoffs and spinoffs. By itself, the cholesterol drug last year lost 59% of its worldwide sales--and 81% in the U.S. From $9.577 billion in 2011, Lipitor faded to $3.948 billion in 2012. Overall, pharma sales dropped 8.8%. To respond, Read sold Pfizer's nutrition business to Nestlé for $11.85 billion and spun off a portion of the company's animal health business. Interestingly, in its first quarter this year, Pfizer reported that stronger-than-expected Lipitor sales of $626 million were a bright spot in a quarter when it reported sales overall off 9%.
And that is the kind of report the AARP does not want to hear. The group says Congress needs to do more to keep drug costs low for consumers, urging it to pass legislation to end pay-for-delay deals when drugmakers work a deal with generic companies to hold off the launch of their copies. It is also asking Congress to improve the pathway to approval of generic biologic drugs and to reduce the exclusivity period for biologics.
- see the AARP release
- here's a link to the study