Generic Drugs Reveal the Cost of Drug Regulation

Letting lawyers kill off useful medicines.

The New York Times recently bemoaned the fact that patients who are harmed when generic drugs are used incorrectly can't sue the manufacturers.  They told how Debbie Shorck lost her hand when an emergency room worker injected an anti-nausea drug improperly.  Her lawsuit against the manufacturer was thrown out of court.

The Times contrasted this with the case of Diana Levine who won $6.8 million from Wyeth, who developed the drug, when the same drug was injected into her incorrectly.  Both injured women claimed that the label on the package wasn't explicit enough about the dangers.

Wyeth had identified the problem and asked the FDA for permission to make the label stronger; the FDA had told them they couldn't change it.  Nevertheless, the Supreme Court held Wyeth liable for an inadequate label.

Why couldn't Debbie Shorck make the same claim?  Because she received a generic version of the drug.  Under a 1984 law, generic drug makers don't have put their products through the FDA approval process.  They can manufacture the drug once the patent ends but only if they make everything about the drug exactly the same as the original, including the label.  Bypassing the multi-billion dollar approval process allows them to offer the same drugs at lower prices which saves consumers a lot of money.

Since they have no control over the labels whatsoever, the Supreme Court ruled that generic manufacturers can't be held liable for labeling issues.  Patient advocates argue that the FDA ought to give generic manufacturers control over labels so they could be sued.  The FDA is reluctant to do that and the manufacturers aren't exactly beating down the doors to receive this costly new privilege.  Why take responsibility when you can just photocopy?

A Comedy of Regulatory Errors

The situation would be laughable if it weren't so damaging to our national health.  The 1984 law which permits generic manufacturers to skip approvals leaves responsibility for maintaining labels with the original manufacturer.  If the original manufacturer finds a problem, it changes the label, and the generic drug maker must make the same change.

The problem is that the original manufacturer usually stops making the drug once cheaper generics come on the market.  Why?  Their production line is up, running, and paid for, why not just drop the price as needed to compete?  The Times explained:

Lawyers for generic drug companies say their clients are able to provide low-cost drugs because their primary task is replicating drugs. If the companies were expected to take responsibility for updating their labels, “we would effectively start to turn generic companies into brand companies, and of course the tremendous cost savings that American consumers have benefited from would start to wane,” said Jay Lefkowitz, who served as the lead attorney representing generic companies before the Supreme Court.  [emphasis added]

In other words, generics are cheap because generic companies only have to manufacture the drugs, they don't have to mess with labeling, litigation, or the approval process.

Think about that for a moment - having a factory and producing pills that heal disease is the easy and cheap part.  The really hard, expensive, time-consuming, and challenging part that drives medicinal costs up to astronomic levels is all the bureaucratic hoopla and legal red tape!

The generic companies say their "tremendous cost savings" would disappear if the generic companies had to act more like FDA-regulated manufacturers.  The Times gave an example:

Thousands of patients have sued Roche, the maker of Accutane, claiming that it caused their inflammatory bowel disease, and several have won multimillion-dollar verdicts against the company. In 2009, citing litigation costs and competition from generics, Roche removed Accutane from the market.

Patients who believe they've been harmed by the generic version of Accutane can't sue.  The company that took all the risk and spent several billion dollars developing the drug in the first place had to stop making it because they couldn't handle lawsuits while competing with lower-cost generics who weren't subject to the same legal risks.

Points to ponder:

  • A company which developed a drug had to stop making it even though their factory was up and running.  They couldn't handle the litigation risk while competing against competitors which had no such risk.
  • Reduced exposure to lawyers entirely covered the generic manufacturer's start-up costs - they could built a whole factory and set up an entire production line with the money from legal fees not paid.
  • When the original manufacturer drops out, nobody worries about updating labels as new issues emerge.  Generics can't, and the original manufacturer won't.
  • Nearly 80% of American prescriptions are filled with generics.  Nearly 80% of our pill-takers have no legal recourse for labeling issues.
  • Our adversarial system for taking care of people who are harmed by medical mishaps is dysfunctional and counterproductive; we desperately need to come up with something else.  This would include issues with drugs, drug interactions, mistakes connecting tubes, and other issues.
  • A no-fault system would work best, but trial lawyers are such heavy contributors to Democrat campaign funds that this won't happen any time soon.

In the meantime, fewer and fewer drugs are in the pipeline and a lot of drug research is moving to other countries.  We shouldn't count on seeing medical technology improve as rapidly as in the past - government simply won't let it happen.  Many people will die because of drugs not developed or made unavailable by excessive regulation, but the FDA won't turn a hair.  Is that what the Obama Administration means by "shovel ready?"  More work for grave-diggers?

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Bureaucracy.
Reader Comments

The policies of government of not letting generic drugs into market has create a problems for patients. The brand named drugs are available for hefty prices whereas generic drugs are available very cheap. For instance, drugs for sexual pleasure are not included into healthcare plan, so men have to pay extra fortune for it. If these drugs are available cheap, its good for people. So instead of purchasing Pfizer's " The Viagra" , they can try generic drugs containing sildenafil citrate. These sildenafil tablets are cheap hence widely used by men.

February 6, 2013 2:35 AM
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