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GENERIC DRUG COMPANIES' R&D INVESTMENT AVERAGES 8% OF SALES

Executive Summary

GENERIC DRUG COMPANIES' R&D INVESTMENT AVERAGES 8% OF SALES, Copley Chairperson and CEO Jane Hirsh told a June 14 seminar for congressional staff sponsored by the Senate Special Committee on Aging. Citing research expenditures for the 30 "true" generic companies, Hirsh said the cost of bringing a generic drug product to market ranges from $250,000 to $3 mil. At Copley, generic R&D costs include salaries for a "formulator" and six chemists, comprising a team that can produce "two to three products a year," Hirsh said. Costs also include "at least $1 mil. of laboratory equipment" for these seven people "to do the work." Bioequivalence studies constitute another substantial cost, the Copley exec continued. Biostudies for a generic version of Wyeth-Ayerst's conjugated estrogens product Premarin cost about $1.5 mil., she said. Testing for a generic competitor to Sandoz' antihistamine/decongestant Tavist-D also cost approximately $1.5 mil., while biostudies for a generic copy of Marion Merrell Dow's calcium channel blocker Cardizem cost $100,000, she estimated. Aging Committee staffer John Coster mentioned that brandname products are dispensed for about 35% of all Medicaid prescriptions, despite generic substitution requirements. Innovator products should be dispensed, he contended, for only "about 5%" of Medicaid prescriptions. Generic substitution is not as prevalent as it could be due to financial disincentives, Nancy Lewis, Philadelphia College of Pharmacy and Science Institute for Pharmaceutical Economics, told the seminar. Lewis said that when pharmacies buy a brandname product for $85 and its generic equivalent for $38, and a health insurance plan pays the pharmacy $90 and $35 for the respective products, the pharmacy is encouraged to dispense the brandname product and earn $5 rather than absorb a $5 loss. Hirsh urged that legislators resist proposals to extend drug product patent protection rights by banning the import of foreign bulk compounds used to make pharmaceuticals. Noting that generic companies depend on foreign supplies for their raw materials, the Copley exec urged that the overseas pipeline for substances be kept open. "We would not like to see any type of impositional pipeline protection that would prevent us from [obtaining] our raw materials," Hirsh said, contending that a number of brandname drug companies are lobbying for legislation to block the import of raw materials during a period of seven and one-half years during a drug product's patent life.
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