Generic Versus Brand-Name Drugs

In 1983, a group of New York State legislators tried to save consumers money by changing the prescription forms used by physicians. Under their proposal, patients in New York would receive a generic drug from pharmacists unless the doctor prescribed a brand-name drug and wrote “dispense as written” on the form. A prescription drug marketed under its generic name can cost half the price of the same drug sold under a brand name—the name given it by the company that held the original patent.

Three of America’s largest drug companies—American Home Products, Bristol-Myers, and Hoffmann-La Roche—sent key New York legislators a “Memorandum in Opposition.” It featured aerial photos of two modern “major pharmaceutical manufacturers” played against a ground-level photo of “a New York City generic manufacturer.” The latter focused on a garbage-strewn vacant lot. “We would appreciate your contrasting their facilities,” the memo said, “and question whether you believe [they] can uniformly produce identical drug products.”

That was the opening salvo in yet another round of a long war waged by the makers of brand-name drugs against the generic drug firms that compete with them. The brand-name companies dominate a prescription-drug market worth $25 billion a year as of 1987. They barrage legislators, physicians, pharmacists, and consumers with an unrelenting message: Generic drugs are low in quality and may harm you. Few distortions in the history of commercial propaganda have cost consumers more money than that one.

Who Manufactures What

The firms that make brand-name drugs are called “innovator” drug companies. There were 59 such U.S. companies in 1986; by 1988, the number had jumped to 92. Each of them devotes millions of dollars a year to developing new drugs and ushering them through a long testing and approval process. When an innovator’s drug is finally approved by the U.S. Food and Drug Administration (FDA), the company gives it a brand name such as Valium or Inderal and then spends millions more promoting it. As a reward for its investment, the innovator earns a patent that protects the drug from competition for a number of years, usually at least a decade. Until the patent expires, the innovator may license other companies to produce the drug—with FDA approval—under their own brand names. Once the patent expires, any pharmaceutical company can apply for FDA approval to produce its own version of that drug and market it under the drug’s “generic” name—diazepam rather than Valium, for example, or propranolol rather than Inderal.

Most generic drugs are manufactured not by seedy factories operating next to garbage dumps but by the very same companies that develop brand-name drugs. Indeed, in 1986 the 59 innovator drug companies manufactured about 80 percent of all generic drugs, in addition to their brand-name products. Some 300 smaller pharmaceutical companies scrambled for the rest of the generic market.

More than a dozen companies now produce generic diazepam to compete with Valium, which is made by Hoffmann-La Roche. Those manufacturers include not only generic companies but also two of the largest innovator firms, American Cyanamid and Warner-Lambert. The tablets differ from Valium in color and shape, and in the inactive “excipients” used to formulate all tablets. But they contain the same amount of the same active ingredient that Valium contains.

For the innovator companies, however, the big profit is in their brand-name products, not their generic sidelines. And the main price competition for those high-profit brands comes not from other innovator companies but from the smaller generic firms, which commonly charge the lowest prices.

Thus, brand-name firms “would have you believe that only they make that magic formula,” says a senior FDA official. “But they don’t. And frankly, what’s required is not all that complicated.”

Is There a Difference in Quality?

FDA inspectors visit all drug-manufacturing facilities to ensure they meet standards for equipment, workplace cleanliness, and drug quality, purity, and strength. “In most instances,” says the FDA, “the generic firms have modern, state-of-the-art equipment and plants that compare favorably to or even surpass those of innovator companies.”

But the real proof of generic quality resides in the drugs themselves: Do they work as well as their brand-name counterparts? Independent experts we’ve consulted say the answer is yes. They cite FDA approval standards as the reason.

Generic-drug approval differs from new-drug approval in one major way: Since 1984, the maker of a generic drug no longer has to carry out costly clinical trials to establish safety and efficacy for drugs introduced since 1962 by innovator companies. Such studies, says the FDA, merely redemonstrate what’s already known from the original manufacturer’s studies. Instead, a generic manufacturer must prove to the FDA that it has formulated the product correctly, using the same amount of the identical active ingredient as in the brand-name version.

If the generic is made properly, it will be absorbed into the bloodstream as rapidly and completely as the brand-name product it matches. The FDA test required to demonstrate this is called a bioequivalence study, a far more sophisticated procedure than the tests the agency used in earlier years for pre-1962 drugs. The generic manufacturer carries out this study on 20 to 24 healthy men. Typically, the men are first given a single dose of the generic product. Technicians take blood samples at timed intervals and then determine the amount of drug in each sample. These values are plotted over time, producing a “bioavailability curve” that describes the absorption of the drug into the bloodstream.

Later the same procedure is repeated on the same subjects, this time using the brand-name product. If the generic drug’s bioavailability curve closely matches that of the brand-name drug, the FDA will approve the product. A drug that’s bioequivalent to another should have the same therapeutic effect.

Bioequivalence tests enable generic companies to market their products relatively quickly and inexpensively. Rankled by that competition, the brand-name companies publicly attack the validity of the tests. Yet brand-name firms also rely on bioequivalence testing at times. Many of them reformulate their own products occasionally, adding a new coating or changing the inactive ingredients. Not surprisingly, they don’t want to spend millions of dollars on clinical studies to show that the newly formulated pill also works. Instead, they do what generic firms do—carry out a bioequivalence test comparing the new formulation with the old. They then submit their data to the FDA for approval. As of 1987, Hoffmann-La Roche had gotten 13 of its formulations approved this way; American Home Products, 86; Bristol-Myers, 105.

When evaluating bioequivalence, the FDA is looking at two things: how much of the drug is absorbed into the bloodstream, and how fast. The generic must match the brand-name drug closely, but it needn’t be identical. That’s because two formulations of the same drug can vary slightly in their absorption and still work equally well in the body. Most pharmacological experts agree that differences of 20 percent or less are not clinically significant for most drugs. And if a generic drug differs by more than 20 percent in either the speed or amount of absorption, the FDA won’t approve it.

This allowable difference is called the “plus-or-minus 20 percent rule.” The brand-name companies insist that the variability allowed for generics is much too great. They’ve distorted the carefully established rule into a scary hypothetical situation that goes like this:

A patient takes Generic X, whose bioavailability tested as 120 percent of the brand-name’s. The patient’s prescription is then refilled with another version of the drug, Generic Y, whose bioavailability is 80 percent of the brand-name’s. While both versions are within the plus-or-minus 20 percent rule, the change from 120 percent to 80 percent means a 33 percent decrease in bioavailability—and, it’s claimed, drug therapy that may no longer be effective.

Brand-name companies call this scenario “the dangers of indiscriminate interchange.” It sends a clear message to physicians: Generics may differ from each other in bioavailability. So play it safe and stick with the dependable brand-name product.

Actually, the differences among versions of a drug are extremely small. In 1986, the FDA reviewed all new generics it had approved since 1984. It calculated the average difference in bioavailability between brand-name drugs and their generic copies to be only 3.5 percent—no greater than the difference between one batch of a brand-name drug and another batch off the same assembly line. So far, about 5000 generics have been approved as bioequivalent to brand-name products. The FDA stated that it is not aware of a single documented case in which any of the 5000 generics has caused a treatment problem.

Those claiming it’s dangerous to switch from one version of a drug to another are deceiving the public. The only exceptions are a few “critical” drugs that have a narrow range between blood levels that are ineffective, effective, or toxic. These drugs include digoxin (Lanoxin), levothyroxine (Synthroid, Levothroid), and warfarin (Coumadin). For this small number of drugs, blood levels should be monitored when patients switch from one formulation to another.

The Threat of Competition

Over the past decade, organizations that pay health-care bills—the federal government, the states, and insurance companies—have sought ways to brake the rapid rise in health-care costs. In this climate, lobbying efforts by generic companies stimulated Congress to consider legislation that would make lower-priced generic drugs more widely available. The result was a new federal law, the Drug Price. Competition and Patent Term Restoration Act of 1984.

The law represented a painstaking compromise between the generic drug companies and the Pharmaceutical Manufacturers Association, the trade association that represents the innovator drug companies. The innovator companies got what they wanted: longer patent protection on new drugs. Generic companies, in turn, won the right to eventually market the same chemical under its generic name without having to prove again that the chemical works. The law quickly helped spur the introduction of generic competitors for many of the leading brands.

The increased competition promises special benefit to consumers who pay for prescription drugs completely out of their own pockets, including the majority of people 65 or older. Suppose you were a diabetic taking Diabinese, Pfizer Laboratories’ brand of chlorpropamide, a drug that reduces blood-sugar levels. In 1987, a major national pharmacy chain charged $31.54 for 100 tablets of Diabinese. The same chain charged $7.59 for 100 tablets of generic chlorpropamide. If you were taking one tablet a day, the cost would be about $115 a year for Diabinese, versus about $28 for the generic version.

A Federal Trade Commission report estimated that, in 1984 alone, generic drugs saved consumers approximately $236 million. Such savings are especially important to anyone who must take drugs regularly, as older people often do. People over 65 currently constitute 12 percent of the population but consume about 30 percent of all prescription drugs.

The Propaganda War on Generics

The contrasting photographs of spiffy brand-name manufacturers and seedy generic manufacturers sent by large drug companies to New York state legislators in 1983 was just one battle in a larger war of propaganda. With increased price competition from generic companies in sight beginning in 1983, the major pharmaceutical firms opened a campaign of disparagement, confusing and frightening physicians, pharmacists, and patients alike.

Consider the propaganda put out in 1986 by Ayerst Laboratories, a division of American Home Products, when it realized it would soon face competition from generic versions of Inderal, its brand name for propranolol, a drug used for hypertension and other disorders. Inderal rang up yearly sales of $350 million and was Ayerst’s most profitable drug.

Ayerst Laboratories, like all major drug companies, employs hundreds of sales representatives, called “detail persons,” who make the rounds of doctors’ offices. Just before generic propranolol became available, Ayerst indoctrinated its sales force with a “sales simulation” videotape. It shows a detail person telling a physician that patients on Inderal “are high-risk patients,” who “need Inderal’s proven therapeutic efficacy.” With a generic propranolol, the doctor is told, “there’s always the chance that patient response may be compromised.”

Ayerst also sent out “Dear Pharmacist” letters. They discussed a pharmacist’s “potential liability” if generic propranolol were dispensed instead of Inderal and something went wrong. The letter warned of “troublesome and expensive” lawsuits that would “generate adverse publicity.”

The letter was labeled false and misleading by the FDA. “It serves only to confuse and intimidate pharmacists into dispensing only Inderal … by suggesting unknown perils,” the agency wrote in a regulatory notice it sent to Ayerst. Laws in most states protect pharmacists from incurring any increased liability when they dispense an approved generic product.

The FDA has challenged similar “Dear Pharmacist” and “Dear Doctor” letters sent by other companies, including Sandoz and A. H. Robins. The FDA regards such letters from drug firms as part of a drug’s labeling; the agency can thus take action when a letter is false or misleading.

But the FDA has no authority over similar letters sent by “public interest” groups. In the summer of 1985, California pharmacists received a notice headlined “Generic Alert!!!” It was sent by Pharmacists Planning Service Inc., a nonprofit educational organization. Pharmacists were warned of lawsuits that could arise if they didn’t dispense “brand-name propranolol.” A short time later, that organization received a $10,000 check from Ayerst “to support the educational goals of the Pharmacists Planning Service.”

Another Ayerst “educational” grant went to the Philadelphia College of Pharmacy and Science, the country’s oldest pharmacy school. In exchange, the college agreed to sponsor a new organization with the avowed aim of educating professionals and the public about “the critical role research-intensive pharmaceutical firms play in preserving health care.” The organization’s educational thrust tended to run in a narrow groove. “Pharmaceutical research … is threatened by widespread consumer use of generic drugs,” said its press release. Increased generic drug use, it said, “could be catastrophic.” The college disbanded the organization six months after its creation because the antigeneric propaganda had become so dominant.

Ayerst nevertheless got its message across through a speakers’ bureau staffed by physicians and pharmacology professors, who are paid to travel around the country on media tours. These tours resulted in over two dozen newspaper articles, with headlines such as “Warning Sounded on Generic Drugs,” and “Some Doctors Still Uneasy About Generics.” The articles often omit the speakers’ affiliation with Ayerst.

Such antigeneric campaigns occur with “predictable regularity,” according to Peter Rheinstein, M.D., director of the FDA’s office of drug standards. “Every time a brand-name drug becomes vulnerable to generic competition, the makers do whatever they can to protect their market.”

The campaigns seem to have an impact. Surveys show that physicians, pharmacists, and consumers prefer brand-name drugs to generics. According to a 1985 Federal Trade Commission report, when prescriptions give pharmacists a choice between dispensing a brand-name drug or its generic equivalent, they dispensed the generic only about 15 percent of the time. Their reluctance stemmed partly from fear of liability, the FTC report found. It also found that consumers tend to “equate price with quality,” especially for “high perceived risk” products like drugs. Doubts about generics make some consumers refuse them or even switch to a different pharmacy—another reason pharmacists haven’t embraced generics. But as health-care cost-containment efforts continue, this cool reception to generics should gradually warm.

Advertising Rx Drugs Directly to Consumers

Traditionally, prescription drugs have been advertised only to physicians, usually through professional journals and medical trade magazines. Federal law requires such ads to carry an FDA-approved summary of the drug’s side effects, contraindications, warnings, and precautions—all meant to provide prescribing physicians with balanced information about the drug.

Advertisers have no problem giving physicians balanced drug information in ads. The phrasing can be highly technical, since it’s aimed at those who understand the technicalities. But consumer ads are something else again. Some summaries of risks and benefits require pages of small print, often not comprehensible to consumers.

So, in recent years, manufacturers began advertising their prescription products—without all the details—directly to the public, circumventing physicians and pharmacists alike. The practice stopped abruptly—with few exceptions—when the FDA called for a voluntary moratorium in 1983. The agency was concerned that high-pressure ad compaigns might encourage consumers to demand that their physicians prescribe inappropriate products. Most physicians, pharmacists, and consumers shared that concern.

Since then, the FDA has settled on a compromise arrangement: Ads that mention the product’s name must include prescribing and precautionary information similar to that found on a package insert. This rules out radio and television commercials, but print ads can sometimes accommodate the extra information. The way around this prohibition is for the manufacturer to warn about a health problem, hint that medication is available, and urge you to see your physician or pharmacist—who will presumably dispense the mystery product. However, the FDA objects to any ad—with or without the product name—that promotes the only available treatment for a condition.

The opposition to consumer ads among medical professionals is not surprising. Ad campaigns can build powerful expectations for particular products. Patients may then be confused by a doctor’s choice of some other course of treatment. Ads may also induce consumers to pressure physicians to prescribe inappropriate products. At the very least, physicians are concerned about the time they might have to spend answering ad-prompted inquiries on products that aren’t appropriate for a patient’s treatment.

Does anyone but drug manufacturers support the advertising of prescription drugs directly to consumers? The media that would carry the ads apparently do. In 1984, the CBS television network said that, according to a survey it had taken, consumers want more drug information—especially in such areas as safety, efficacy, and proper use. In a press release about the survey, CBS said that “health care communications can be improved through direct-to-consumer advertising of prescription drugs which meets high standards of education and information.”

But nothing in the CBS survey itself indicated that consumers wanted—or would trust—advertising as a source of prescription-drug information. Indeed, an FDA report cited an independent study showing that only 9 percent of surveyed consumers considered advertising an appropriate way to disseminate information about prescription drugs. More reasonable sources of drug information would be books, educational courses in schools, and package inserts written for patients—as well as consultation with a reliable physician or pharmacist. (The most comprehensive—and comprehensible—source of unbiased information on over 5000 prescription and over-the-counter drugs is Drug Information for the Consumer, prepared by the United States Pharmacopeial Convention and now available in a Consumer Reports Books edition.)

Manufacturers and other supporters of direct-to-consumer prescription drug ads may presume to educate the public, but no doubt they especially want to sell more drugs. Most of the ads that promoted brand-name products did so by undermining confidence in their generic equivalents. Ever resourceful, these manufacturers have had to make do with other means to achieve the same end. And that they have done.

Undermining Generics with Worrisome Tales

During a congressional hearing in April 1987, Gerald Mossinghoff, president of the Pharmaceutical Manufacturers Association, was asked if he could assure consumers that generics were as effective as brand-name drugs.

He could not. “We have trouble with the Food and Drug Administration’s tests for generic drugs,” said Mossinghoff. “In some cases that test, we think, is not sharply defined. It led, for example, in November to the Epilepsy Institute putting out a physicians’ alert saying some anticonvulsive drugs were not effective. So I am not in a position, Congressman, to give you that assurance.”

The Epilepsy Institute is a nonprofit organization in New York City. On November 3, 1986, the institute issued a three-page medical-alert bulletin, headlined “GENERIC MEDICATIONS LINKED TO RENEWED SEIZURE ACTIVITY IN PEOPLE WITH EPILEPSY.” The text warned against generic versions of three brand-name drugs: Tegretol, Dilantin, and Depakene, made by Ciba-Geigy, Warner-Lambert, and Abbott, respectively. The warning went to 7000 physicians and to some 100 media outlets.

The Epilepsy Institute’s bulletin has been cited many times as proof that generic drugs can endanger health.

Boston’s CBS television affiliate broadcast a segment, seen by 300,000 people, that began, “Well, the health of nearly five million people with seizure disorders might be in jeopardy now because of a generic drug that’s been approved by the FDA.” Articles conveying the warning appeared in Medical World News, Woman’s Day, the Boston Globe, the Arizona Republic, and other publications.

Four months earlier the Epilepsy Institute’s president, Ira Brody, had written a letter soliciting money from three drug companies: Ciba-Geigy, Warner-Lambert, and Abbott. In his letter, Brody listed various institute “programs” that needed financial support: educational pamphlets for drugstores, seminars for physicians, and the institute’s New York Journal of Epilepsy, which needed advertising so that it could appear quarterly.

Brody scored with all three firms. Ciba-Geigy agreed to pay $4000 for a five-page ad in the spring 1987 issue of the journal. Warner-Lambert agreed to advertise in the summer 1987 issue. Abbott would sponsor the fall 1987 issue and would also donate $22,000 for brochures and another $8000 to sponsor a seminar. Brody said there was “no connection whatsoever” between their contributions and the decision to issue the medical-alert bulletin. “It’s just doing good fundraising,” he said. “We solicit funds from companies that have a vested interest in us.”

The Epilepsy Institute decided to sound the alarm, its bulletin said, “after receiving and confirming scores of reports” showing that seizure-free epileptics had convulsions after being “switched from brand-name pharmaceuticals to generics.”

When asked about the “scores of reports,” Brody called it a “typist’s exaggeration,” saying the actual number of cases was 23. The institute “confirmed” eight of those, he said.

The bulletin quoted Hart deC. Peterson, M.D., professor of neurology and pediatrics at New York Hospital–Cornell Medical Center and former chairman of the Epilepsy Institute’s professional advisory board. The FDA contacted Peterson. In a November 1986 letter, the agency asked him for “all available data that you have on these alleged therapeutic failures.” It offered to send an investigator to look at records. Peterson did not accept the offer.

In 1987, CU contacted Peterson about the reports. “They’re hearsay,” he said. “But the inclination is to believe at least some of it. If I could get any good solid cases and I could prove them, I certainly would. I personally haven’t seen any really good cases where switching to a generic has caused problems.”

Meanwhile, foes of generic drugs were having a field day with the Epilepsy Institute’s bulletin. Ciba-Geigy, maker of Tegretol, paid eight New York neurologists $100 each to attend a dinner discussion of their product. While the restaurant served pasta, Ciba-Geigy served up the Epilepsy Institute’s medical-alert bulletin.

“It made us feel anxious about switching our patients to a generic drug,” said a physician who was present. “After all, this reputable institution had issued an alert.”

The Medical Tribune, a medical-news tabloid that is mailed free to more than 100,000 physicians, gave the story page-one treatment. The paper, which has long crusaded against generic drugs, was published by Arthur Sackler, M.D., who died in 1987. Sackler had concurrently owned an advertising agency that served many innovator drug firms.

Louis Lasagna, M.D., dean of Tufts University’s Sackler School of Graduate Biomedical Studies and one of the nation’s most outspoken opponents of generic drugs, also stressed the epilepsy theme in a debate presented in USA Today. “Doctors,” he said, “hear stories, like those from the Epilepsy Institute, and are justifiably concerned. It only takes a few cases to engender anxiety.”

That, of course, is exactly the purpose of such anecdotal scare tactics.

Another nonprofit organization has also fronted for a major drug company in spreading fear of generics. In December 1986, local news shows on 23 television stations ran a chilling two-minute segment that featured an 11-year-old girl clutching her throat as she demonstrated what happened when she was switched from her brand-name asthma medication to a generic version. “It’s like someone strangling you,” said the girl. “And it hurts, and you can’t get enough air through.”

The reporter concluded with this advice: “If you take medication for a chronic illness—diabetes, asthma, epilepsy, or heart disease—you should ask your physician to indicate—in writing—’Dispense As Written’ or ‘Do Not Substitute’ on your next prescription.”

The story, seen by an estimated 1.3 million people, was actually a “video news release”—a commercial message masquerading as news. The sponsor of this commercial message was listed as the “Asthma and Allergy Foundation of America, Los Angeles Chapter.” But its $30,000 cost was paid by Key Pharmaceuticals. Key (now part of Schering-Plough Corp.) makes Theo-Dur, a drug for asthma. Theo-Dur had lost 20 percent of its $100-million-a-year market to theophylline, the generic product vilified in the commercial.

Schering-Plough claims that the commercial message was an “important public service announcement.” But the Asthma and Allergy Foundation feels differently. “The Los Angeles chapter saw it as an opportunity to get some publicity,” said David Branson, president of the national foundation. “But it was a mistake. They shouldn’t have done it.”

CU spoke with one of the asthmatic girl’s physicians. He reported that her physicians made no effort to confirm that the generic drug was actually the cause of her breathing problem.

The FDA has followed up on these publicized reports of “bad” generics. According to FDA’s Rheinstein, the result is always the same: “You ask for documentation and you get evasion.” Yet such reports proliferate. FDA officials say that these anecdotes are a key part of the antigeneric campaign. By having a nonprofit organization Spread the word, the drug company avoids FDA charges of deceptive advertising.

Campaigning for Medical Hearts and Minds

Promotional efforts, whether deceptive or not, are the lifeblood of the prescription-drug business. Major drug companies generally spend more each year on promotion than on research. Most of that promotion money is lavished on physicians—and it has an impact.

“Most doctors are brainwashed,” the director of medicine at a hospital in Westchester County, New York, told CU. “I know some very intelligent practitioners who always prescribe brand-name medications and would never think of prescribing a generic product.”

Years ago, physicians had some cause to be wary of generic drugs. In 1969, millions of capsules of ineffective tetracycline were recalled. In 1971, problems were reported involving one generic version of digoxin. Now, however, the FDA’s more rigorous generic approval process makes such failures extremely unlikely.

Isolated cases of illegal generics have also influenced physicians’ perceptions. In 1979, the FDA found that three firms were illegally marketing unapproved and ineffective versions of furosemide, a diuretic. Many doctors still refuse to prescribe generic furosemide, turning instead to the more expensive brand-name drug, Lasix.

Such problems with low-quality or illegal generics have been extremely rare. But physicians remember those incidents. And brand-name drug companies try to make sure they never forget.

The effort to influence physicians starts while they are still in training. To familiarize interns and residents with their brands, companies practically give drugs away to hospital pharmacies. The practicing physician encounters drug-company influence everywhere. Drug companies sponsor seminars, conferences, breakfasts, luncheons, dinners, and awards. They give away books, slides, and video and audiotapes. They entertain lavishly at medical conventions. (For a meeting of the American Academy of Family Physicians, SmithKline Beckman rented Disneyland for an evening to entertain physicians and their families.)

A major part of a drug company’s promotional budget goes to two areas: advertising in medical journals and fielding a marketing sales force. In leafing through the journals, a physician will encounter thousands of ads each year. They rarely mention drug prices. As a result, most physicians know very little about the cost of the medicines they prescribe. Drug company sales representatives provide physicians with much of the information they receive about drugs. They also give doctors free drug samples as well as pens, note pads, prescription pads, calendars, and other merchandise.

But increasingly, sales reps influence physicians in other ways. Ciba-Geigy, for example, has placed special emphasis on “Peer Influence” programs designed to get physicians to influence other physicians. One such program involves clinical conferences. A sales rep gets a group of physicians together for lunch or dinner. They’re shown a videotaped case history and then asked for their ideas on possible therapy. The idea, a sales rep says, is to include at least one or two physicians who use the Ciba-Geigy product. That way, “they can tell success stories of their therapy that may rub off” on the other physicians.

Then there are the seminars in paradise. Large firms regularly send the nation’s most influential specialists and their spouses on all-expenses-paid trips to tropical climes. In 1986, for instance, Ciba-Geigy flew 100 gynecologists to Cancun, Mexico, to bone up on Estraderm, the company’s new estrogen skin patch.

Generating Sales Income to Fund More “Research”

In 1985, the top 50 pharmaceutical companies officially spent $1.26 billion on “promotion,” according to industry sources. But the total amount spent to influence physicians is actually far greater. According to FDA sources, drug companies often charge costly promotional activities, such as convention entertaining and the far-flung seminars, to their education or research budgets. The FDA sources estimated in 1987 that total promotional spending by major drug companies exceeds $4 billion a year, or almost $9000 per doctor.

Many physicians prescribe brand-name drugs specifically to reward the innovator companies that develop new drugs. They figure the company will use the sales income on research that will lead to better drugs in the future. Innovator companies naturally encourage this attitude among doctors. They warn that increased sales of generics will cut into their profits and prevent them from investing in the necessary research.

But a congressional study suggests that research doesn’t get top priority. In 1987, the House subcommittee on health and the environment investigated recent hikes in prescription-drug prices—a 12.2 percent increase between July 1985 and April 1987 (versus only a 2.7 percent increase in the Consumer Price Index during that time). The subcommittee staff obtained revenue data from the nation’s 25 largest drug companies and prepared a report. Subcommittee chairman Henry Waxman summarized the findings at a hearing:

“Most of the money generated by the recent enormous price increases is not going to fund R&D [research and development]. Between the years 1982 and 1986, drug-price increases produced revenue gains of $4.7 billion. During the same period, R&D expenditures rose only $1.6 billion—or about a third of the revenue gains from price increases.”

The antigeneric campaign numbers many consumers among its casualties. Some are patients who pay brand-name prices for medication available at a fraction of the cost. But the casualties also include taxpayers.

Medicaid pays the prescription bills of many low-income people—and those costs are shared by the federal government and the states. The New Jersey Health Department analyzed the cost of 2.6 million Medicaid prescriptions the state had paid for in 1985. All of the drugs were available in both brand-name and generic form. Each brand-name prescription cost the state an average of $12.39; the average generic prescription cost $6.66.


To realize the savings offered by generic drugs, you need the cooperation of both your physician and your pharmacist.

Physicians usually write the brand name when they prescribe drugs. It’s shorter and easier to remember than the generic name. And since the brand name had no generic competition during the long life of its patent, the doctor is probably accustomed to writing it.

That medical habit doesn’t prevent you from buying generically. The laws in all 50 states allow pharmacists to substitute a less-expensive generic version when the physician prescribes by brand. Indeed, the physician must make a conscious effort to limit the pharmacist to the brand name. In some states, that means he or she must write out “dispense as written” or some other phrase. In other states, the physician signs on one of two lines on the prescription pad if the pharmacist must dispense the brand specified, or signs on the other line if a generic may be substituted.

The major drug companies lobby fiercely for two-line prescription pads. Physicians seldom bother to write out “dispense as written”; but studies show that when doctors must merely choose one of the two lines, they sign the brand-name line more than half the time. Some drug companies try to make the choice for both patient and physician. They give doctors preprinted prescription pads with the brand name and the words “dispense as written,” in the doctor’s handwriting, on each form. This “professional courtesy” sticks you with the brand-name drug and its premium price. It’s also illegal in several states.

Your physician, therefore, may represent a hurdle to your getting a generic drug. You must explicitly ask your physician to write the prescription so that it permits a generic version to be dispensed.

What if your physician doesn’t know whether a generic version of the drug you need is yet available? That doesn’t matter; the pharmacist will know. Whether the pharmacist will dispense the generic is a different question. Drug-company propaganda has led many pharmacists to fear that dispensing generic drugs may result in lawsuits.

So once again, you must take the initiative. Tell your pharmacist that you want the least expensive version of the drug that’s been prescribed for you. Usually, that will be the generic version. Occasionally, the brand-name version may be cheaper—if the pharmacist has gotten a special deal from the maker, for example.

Drug prices vary widely from pharmacy to pharmacy. So shop around, checking both chain stores and independent pharmacies. Many pharmacies now give out price information over the phone.

If you switch from a brand name to a generic, don’t worry if its color and shape are different from the brand-name product you’ve been taking. (Brand-name makers may sue generic firms whose products duplicate the appearance of brand-name drugs.) The product’s appearance won’t affect how the drug works.


  1. Mary Klaus Reply
    July 17, 2012 at 3:23 am

    While this article is certainly well-written and research-based, I don't find it safe or logical to dismiss the allowable variance in bioavailability in every medication. While it is true that there is very little variance in most formulations, that is not all-inclusive, nor does it take into the account the significance that those variations may have on patient health.

    Some medications for conditions such as thyroid disease, those requiring blood thinners or clotting agents, and cardio-pulmonary disease simply should not be covered under the same blanket assumption that close is close enough.

  2. Joleen Reply
    October 25, 2014 at 5:08 am

    Everything is very open with a really clear clarification of the issues. It was truly informative. Your site is useful. Many thanks for sharing!

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