Last week, the European Commission (EC) published a preliminary report that described how the makers of branded pharmaceuticals delay the introduction of competing generic medicines. Industry associations for originator companies and generics manufacturers in Europe were quick to weigh in on the report. Now a UK judge has joined the debate.
The Right Honourable Sir Robin Jacob of the Court of Appeal of England and Wales cautioned the EC against changing the patent system in ways that could hinder the development of new drugs. “The big truth is that if you damage the income stream of research companies, you are going to imperil future research at the expense of European—indeed world—citizens. Yes, you will save money now, but at the cost of less future medicines,” said Sir Jacob, according to an Outsourcing-pharma article.
Must decreased revenues necessarily slow research and development (R&D)? Even if generic drugs reduce originator companies’ profits, I think originators might maintain their R&D budgets by reducing other expenses such as marketing.
A study published in PLOS Medicine analyzed market data from IMS and CAM for the year 2004 (the latest year for which figures were available). The authors estimated that US drug companies spent $57.5 billion on promotional activities and $31.5 billion in research and development. If this analysis is accurate, it seems plausible that, faced with reduced sales revenue, a pharmaceutical company could cut its marketing expenses to maintain its research budget. The research expenditures cited in the study included public funds, which could provide some budgetary security even when sales fall.
I agree with Sir Jacob that we ought to promote pharmaceutical R&D, but I think competition from generics would not necessarily jeopardize innovation.