Saturday’s New York Times documented efforts Pfizer is making to thwart conversion from brand name Lipitor to generic atorvastatin. Pfizer is promising huge discounts on brand name Lipitor if the Pharmacy Benefit Managers (PBMs) block coverage for generic atorvastatin for six months.
Here’s what this will do:
1) Patients will continue to pay the higher ‘brand name’ copay or coinsurance, rather than paying the lower cost share for a generic
2) Employers will in general pay more – although if the Pfizer discounts are deep enough the incremental payment could all be absorbed by increased patient cost-sharing
3) Enhance profitability for PBMs, which will take a share of the ‘discount’ offered by Pfizer as detailed in employer contracts. PBMs usually make more money with generics – but Pfizer’s move would upend that situation for Lipitor for the next six months.
4) This will be a financial body blow to the two generic manufacturers, Ranbaxy and Watson, who have a 6 month window of semi-exclusivity when they can sell their generics for a discount compared to Lipitor. Six months later, when all generic manufacturers are able to produce and sell atorvastatin, the price will collapse, and there will only be a small profit opportunity.
New generic medications, in general, sell for about 20% less than the brand name equivalent during the 6 month semi-exclusive window. At that point, it’s likely that the price of generic atorvastatin will decline to just a little bit more than generic simvastatin, which is now sold at WalMart and other pharmacies for as little as $4 per month. Lipitor now sells for $160 for a one month supply (drugstore.com, 20mg).
Pfizer has earned a quarter of its revenue, or $106 billion, from Lipitor over the last decade.
The manufacturers willing to run the legal gauntlet to challenge Pfizer’s patents to be the first to offer generic equivalents must see a substantial payoff, otherwise we would have a de facto six month extension for drugs going off patent. Delaying availability of generics could cost us billions.
More important than the higher prices consumers or employers will pay is that Pfizer’s actions threaten the profitability of the initial generic manufacturers. That could prove the most expensive result – and employers and regulators should look at this deal very closely.
