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Is big pharma in trouble as patents expire?

The New York Times published an article earlier this month on the financial problems some drug companies are facing due to the expiration of the patents on blockbuster drugs. Once a patent expires, competitors can begin selling generic drugs at a fraction of the cost. These generics eat into the profits of the name-brand, patented drug.

Should we feel sorry for the drug companies? Consider three things: first, the article reports that “Americans fueled the research engine, spending much more per capita on prescriptions than in any other nation, and paying the highest prices for prescribed medicines.” Second, the pharmaceutical companies have billions in cash reserves, much of that borne on the back of regular Americans. And third, U.S. law gives pharmaceutical companies up to 5 additional years of exclusive use beyond the term all other patent owners get. Ordinary Americans have struggled through the latest recession, and few of us have $20 billion in cash lying around to get us through the rough times. I see families every day who have to choose between paying a light bill or buying much-needed prescription medications. So, pardon me if I don’t feel too sorry for the drug companies that gouge American families for hundreds or thousands of dollars a month for medication yet virtually give that same medication away to Canadian and European citizens.

With all the billions the drug companies have lying around, they have plenty to spend lobbying Congress to pay for expensive drugs. Problem is, Congress helped fund the development of many of these drugs. It seems like to me that federal deficits could be substantially reduced if we did two things. First, we could invoke the Bayh-Dole Act so the government pays less for prescription drugs for which it sponsored research. And two, we could reduce the patent terms for prescription drugs so they don’t get preferential treatment. These things will be tough given big pharma’s lobbying power, but they would help get our government out of debt and help the wallets of ordinary Americans.