Generic Atorvastatin: Expensive Delays

Today’s Managing Health Care Costs Indicator is $324 million

This week New England Journal has a simulation showing the value of the introduction of generic atorvastatin in terms of lowering health care costs. 

Some numbers:

·        Pfizer had revenue of $7 billion last year from Lipitor. It was the top selling medication in America
·        Judging from generic simvastatin introduction in 2006, the cost will decline by 16% one month after generic introduction, 19% at six months after generic introduction, and 60% by 12 months.   
·        Savings from the introduction of the generic medication will be over $2 billion next year, and will be over $4.5 billion in 2014.
·        Pfizer’s agreement with Ranbaxy to delay the introduction of generic Atorvastatin by 6 months cost Americans $324 million in savings. (I suspect this understates the lost savings – since the delay will continue to increase costs for an entire year or longer after the final introduction.)

Generic drug introductions continue to remain one of the major sources of new value in the health care space.  Vigorous antitrust enforcement and regulatory actions to speed introduction of generics is important to be sure we get the maximum value from generic introductions.

Pfizer’s efforts to lower the profits of the generic companies that brought the first atorvastatin to the market might seem like a good deal at first. Consumers can purchase brand name Lipitor for as low as $4 per month – as opposed to $160 per month at today.  However, these efforts will lower the profits of the initial two generic manufacturers and could dissuade generic manufacturers from pushing hard for early generic introductions in the future.