AARP’s Public Policy Institute have released a new Rx Price Watch report examining efforts by Pfizer to reduce the impact of generic competition for the popular anti-cholesterol drug Lipitor. The report breaks down the unusually aggressive strategy reportedly undertaken by Lipitor’s manufacturer before and after the drug’s patent expired and discusses how the effort could become a model for other brand name drug manufacturers facing generic competition, ultimately increasing costs for consumers and publicly-funded programs like Medicare and Medicaid.
Pfizer reportedly employed a variety of tactics in an effort to retain Lipitor’s revenue and market share, which had already been on the market for 14 years with a patent protected monopoly. These tactics included a “pay-for-delay” agreement, when a brand-name drug manufacturer pays a generic competitor to hold its competing product off the market for a certain period of time. The Federal Trade Commission estimates the increasing number of “pay-for-delay” agreements in recent years costs the American public an estimated $3.5 billion due to delayed price competition from other generic drugs. (These agreements are the focus of a soon-to-be-decided Supreme Court case FTC v. Watson Pharmaceuticals, et al.)
Further, Pfizer reportedly offered rebates to insurance plans and pharmacy benefit managers (PBMs). These rebates reduced the cost of Lipitor to less than the cost of the generic version of Lipitor (known as atorvastatin sodium) and in exchange, insurance plans and PBMs rejected atorvastatin claims for six months, effectively preventing pharmacists from dispensing the generic drug. Additionally, patients were offered a generic-level copayment.
“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 report also highlights a dramatic increase in the price of Lipitor in the years immediately prior to its patent expiration. Between December 2006 and December 2011, the average annual retail cost of therapy for Lipitor 20 mg tablets increased by 50 percent from $1,290 to $1,939. In 2011, the year its patent expired, Lipitor’s average annual retail price increase was 17.5 percent – more than four times the average annual retail price increase from 2006 to 2009.
“The rising cost of prescription drugs remains a real challenge for consumers, particularly older Americans. These price increases can result in higher out-of-pocket costs or even lead a person to stop taking a needed medication,” continued Whitman. “Rising drug prices also increase spending in government programs like Medicare and Medicaid, and as spending increases so does the cost burden shouldered by beneficiaries and taxpayers.”
AARP continues to urge Congress to help lower prescription drug costs by creating more competition in the marketplace. The Association has called for improving the pathway to approval of generic biologic drugs, reducing the exclusivity period for biologics, offering rebates for drugs dispensed to low-income Medicare beneficiaries and allowing Medicare to negotiate prescription drug prices directly with drug manufacturers. AARP is also advocating to end pay-for-delay agreements and filed an amicus brief in the Supreme Court case FTC. v. Watson Pharmaceuticals, et al.
The full PPI Rx Price Watch case study is available at http://www.aarp.org/rxpricewatch.