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Why Generic Prescription Drugs Cost so Much

In some cases, you may have noticed cheaper alternative drugs are not as cheap as you might expect--even in the case of a life-saving breast cancer drug.

There's a reason for it. CBS's Jim Axelrod has the results of an Eye on America investigation.

When Lyn Lovinger heads to the drugstore, she's got one thing on her mind: her breast cancer medication.

"It's number 1 priority, number 1 priority. I have to have it," says Lovinger.

Living only on Social Security, it costs her $25 a month.

"It's not peanuts. I'm not desperate but it's certainly somewhat of a burden," says Lovinger.

The burden could be significantly lighter if there was a generic alternative to the world's leading breast cancer drug, tamoxifen (sold under the brand name Nolvadex). But there's not. In part because of an agreement between AstraZeneca, the maker of Nolvadex, and Barr Labs, which wanted to produce a generic version.

"They did contract with each other to keep, best as I understand it, to keep tamoxifen from being sold as a generic drug," says Lovinger.

Here's what happened. Barr challenged the patent, which gives a company that develops the drug a 20-year monopoly to sell it. AstraZeneca returned fire, suing for patent infringement, and then took an additional step--offering Barr $21 million and an offer to distribute the drug under its pharmaceutical name, tamoxifen, if Barr would back off.

"It's extraordinary that a plaintiff that brings the lawsuit actually pays money to the defendant to settle the lawsuit," says Ron Pollack, a consumer health advocate.

In this case, AstraZeneca eliminated the threat of their patent being overturned on a drug that generated $346 million in sales that year. Barr guaranteed profits while avoiding a lawsuit that could have bankrupted the company.

"We believe this agreement doesn't pass the smell test," says Kim Shellenberger of the Prescription Access Litigation Project. "There's something wrong here."

Kim Shellenberger's consumer group is suing, saying this side agreement maintains "the artificially inflated market price for Nolvadex." Barr's tamoxifen sells for only 5 to 10% below the brand name--instead of the usual 50 to 80% discount generics normally offer once a patent expires or is overturned. Barr says without the deal there's no guarantee there'd be any competition because other generic companies subsequently challenged AstraZeneca's patent and lost.

"Had we not agreed and brought a lower-cost product to market . . . the only alternative to consumers today would be Nolvadex--the brand product," says Bruce Downey, CEO of Barr Laboratories.

Other side deals have caught the attention of the Federal Trade Commission. In the last 16 months, the FTC has settled suits against Abbot and Hoechst for paying generic companies to go away entirely. A case against Schering-Plough is still pending.

Mike Antalics, FTC spokesperson, says, "The result of an agreement like this . . . s that the generic company gets paid millions of dollars for doing nothing. The brand name company eliminates competition and continues to charge monopoly prices, and the consumer pays the bill.

The brand name drug companies are the nation's most profitable businesses, and protecting their patents is what keeps them that way.
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