Patented Drug Extension Strategies on Healthcare Spending: A Cost-Evaluation Analysis

: In a cost-evaluation analysis of pharmacy invoice data in one Canton in Switzerland, Nathalie Vernaz and colleagues find that “evergreening” strategies pursued by drug manufacturers have been successful in maintaining market share and contribute to increased overall healthcare costs. Background: Drug manufacturers have developed “evergreening” strategies to compete with generic medication after patent termination. These include marketing of slightly modified follow-on drugs. We aimed to estimate the financial impact of these drugs on overall healthcare costs and also to examine the impact of listing these drugs in hospital restrictive drug formularies (RDFs) on the healthcare system as a whole (“spillover effect”). Methods and Findings: We used hospital and community pharmacy invoice office data in the Swiss canton of Geneva to calculate utilisation of eight follow-on drugs in defined daily doses between 2000 and 2008. “Extra costs” were calculated for three different scenarios assuming replacement with the corresponding generic equivalent for prescriptions of (1) all brand (i.e., initially patented) drugs, (2) all follow-on drugs, or (3) brand and follow-on drugs. To examine the financial spillover effect we calculated a monthly follow-on drug market share in defined daily doses for medications prescribed by hospital physicians but dispensed in community pharmacies, in comparison to drugs prescribed by non-hospital physicians in the community. Conclusions: Evergreening strategies have been successful in maintaining market share in Geneva, offsetting competition by generics and cost containment policies. Hospitals may be contributing to increased overall healthcare costs by listing follow-on drugs in their RDF. Therefore, healthcare providers and policy makers should be aware of the impact of evergreening strategies. Background: The development of a new medical drug—from discovery of a new compound to regulatory approval for its use—can take many years and cost millions of dollars. In 1995 the World Trade Organization adopted an international law (Trade-Related Aspects of Intellectual Property Rights—TRIPS) by which pharmaceutical companies can protect their intellectual property through patents. Under TRIPS, pharmaceutical companies are granted exclusive manufacturing rights for up to 20 years for each new drug, generating large revenues that often exceed initial investments costs, thus providing an incentive for pharmaceutical companies to continue to invest in the research and development of new drugs. However, recent stricter regulatory procedures for drug approval, national price control policies, and increased competition from generic manufacturers (that produce drugs similar to the brand drug once the patent has expired) have meant that pharmaceutical company profits have increasingly come under pressure. Why Was This Study Done?: One of the tactics that pharmaceutical companies currently use in response to this situation is to extend their market monopoly. This practice is known as “evergreening” and refers to the situation in which pharmaceutical companies slightly change the formulation of their brand drug into “follow on” drugs, for example, by combining formulations or producing slow-release forms, so that they can extend the patent. The impact of such follow-on drugs on overall healthcare costs in high-resource settings is unclear and has received little attention. In this study, the researchers assessed the overall costs associated with the prescribing of follow-on drugs in the Swiss canton of Geneva. What Did the Researchers Do and Find?: The researchers identified prescriptions of eight follow-on drugs issued by hospital and community pharmacists in Geneva between 2000 and 2008. To analyze the impact of evergreening strategies on healthcare spending, they calculated the market share score (an indicator of market competitiveness) for all prescriptions of the originally patented (brand) drug, the follow-on drug, and generic versions of the drug. The researchers then used hospital and community databases to analyze the costs of replacing brand and/or follow-on drugs with a corresponding generic drug (when available) under three scenarios (1) replacing all brand drug prescriptions, (2) replacing all follow-on drug prescriptions, and (3) replacing both follow-on and brand prescriptions. What Do These Findings Mean?: These findings show that in a high-income setting, evergreening strategies developed by pharmaceutical companies for follow-on drugs substantially contributed to an increase in overall healthcare costs. These findings also provide further evidence that policies encouraging prescribing of generic medicines could have substantial savings on healthcare expenditure and, if implemented in hospital formularies, could also influence prescribing outside of the hospital setting, resulting in further savings. However, in their analysis, the researchers assumed that the health outcomes of patients would be the same whatever type of drug they used (brand, generic, or follow-on), as they had no information on health outcomes. Nevertheless, this study provides useful information for healthcare providers and policy makers about the cost implications of the evergreening strategies used by the pharmaceutical industry, particularly for follow-on drugs. Additional Information: Please access these websites via the online version of this summary at http://dx.doi.org/10.1371/journal.pmed.1001460.