Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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Generic drug makers can't be sued if they have FDA approval

The Supreme Court ruled last Monday that Generic drug makers can't be sued for defective designs when their previously FDA-approved products cause injuries link here. That might appear to be a questionable decision. But it is also a victory for competition and lower prices in a product line that raises already high medical care costs.

The choice here is between having reasonable consumer safeguards and a steady flow of improved treatments for tough and often rare health problems. There is of course a presumption that the approval process has been thorough. But then the plaintiff's recourse is the FDA which is generally very careful. Indeed it is often criticized for taking excessive time to approve new treatments.

One should note as well, that this is not a criticism of drug patents, which are constitutional but questionable, given the games that new product-owners pursue to extend their patent-created monopoly with no public benefit. Note rather that the need for safety approval will exist whether or not there is a patent.


One little tidbit from this article that was apparently overlooked is the 80% of all prescriptions are now for generic drugs, up from 50% just a few years ago. As was predicted five years ago, patented drugs are having less and less effect on the prices of pharmaceuticals and health care overall, and (to my surprise) the growth in generic prescriptions is continuing.

I once thought generic prescriptions would top out at about 90% of all prescriptions, but the slow rate of release of new drugs is forcing me to change my guesstimate significantly. Unless something changes, I suspect that generic prescriptions will continue to grow fairly steadily until they are about 92% of all prescriptions, and then continue to grow more slowly until they account for 96% to 98% of all prescriptions. The growth in generic prescriptions may then grow even more slowly to form an asymptote to 100%, though probably never reach 100%.

While opponents of pharmaceutical patents are probably unhappy with any pharmaceutical patents, the result of the expiration of pharmaceutical patents and growth of generics is that in another 5 years 90% of all money spent on drugs will be for generic drugs, which means that patented pharmaceuticals are having a decreasing effect on the cost of health care.

On the other hand, we should talk about persistent generic drug shortages, which as of today stands at 238, which, amazingly enough is slightly down from the peak, but still threatening the lives of cancer, heart disease, and asthma patients, among others. Fortunately, though perhaps not from a financial perspective, many of these drugs have patented alternatives that, while much more expensive than the generics, are readily available with an apparently unlimited supply. Would you rather have a cheap, unavailable generic, or an expensive, available patented drug?

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