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Me-Too Drugs: What’s Ailing the Pharmaceutical Industry

Pharmaceutical patents, in theory, serve an important purpose: aside from the investment incentives they provide, drug manufacturers rely on profits from patented medications to fund new research. Patent proponents claim that without these market protections pharmaceutical companies would be unable to finance expensive drug development; [1] they are incorrect. Drug prices are rising at a rate that greatly outpaces general inflation, and patents may be partially to blame. [2] Under the status quo not enough money is being devoted to R&D, which has led to stagnant drug innovation. In addition, excessive pharmaceutical advertising has resulted in overpriced prescriptions. Both problems could be adequately addressed however, by strengthening short term patent protection while allowing more generic competition in the long run.

Some critics suggest that continuously high profit margins are responsible for both elevated drug prices and the industry’s failure to properly fund more beneficial drug research. [3] Yet, profits account for only 10% of the total resources involved in creating new medications. [4] Advertising and legal support, on the other hand, make up nearly 50% of industry finances. [5] In fact, the top 30 representative firms spend “about twice as much in promotion and advertising as [they] do in R&D.” [6] In other words, funds currently used for advertising could be spent in a more productive manner, such as price reductions or additional research. One reason such colossal advertising budgets exist is due to medications known as “me-too” drugs. [7]

Rather than invest time and money in creating new drugs from scratch, pharmaceutical companies often chemically re-engineer drugs already sold to the public, provide them with new names, develop massive advertising campaigns, and sell the “newly” created medications to the public as “the latest innovative breakthrough[s].” [8] These new drugs are sometimes referred to as “me-too” drugs because of their copycat nature; manufacturers use the same active ingredients of medications already on the market but achieve novelty by altering “dosage forms, routes of administration, or combinations with other ingredients.” [9] Me-too drugs are different from generic drugs, which the FDA defines as the “identical, or bioequivalent to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.” [10] The problem with me-too drugs in terms of patent policy is that they contribute few additional social benefits over their original counterparts, yet are often just as costly due to their high litigation and advertising expenses. [11]

The National Institute of Health Care Management determined that between 1989-2000, “54% of FDA-approved drug applications involved medications that contained active ingredients already in the market.” [12] In addition, only a portion of these drugs were judged to have sufficient clinical improvements over existing treatments. “In other words, about 77% of what the FDA approves is ‘redundant’ from [a] strictly medical point of view.” [13] The pharmaceutical industry is not making as significant a contribution to medicine as they could if they focused more R&D dollars on drugs that could be more beneficial to society. When corporate pharmaceutical research is compared to university and government funded projects, the publicly supported projects are often more effective at creating useful new drugs. [14] This may be a result of their focus on researching more socially beneficial drugs, rather than pouring resources into replica drugs that will demand a large amount of advertising.

Marketing campaigns for erectile dysfunction (ED) drugs provide a model example of an inefficient use of funds. There are currently three ED drugs on the market, Viagra, Cialis, and Levitra. Viagra spends over $100 million dollars annually on advertising to distinguish itself from its competitors, despite the fact that all three drugs work in a similar fashion. [15] There are subtle differences in how long and quickly each drug works, but this does not justify forcing consumers to pay higher prices for such little innovation. [16] Although market competition is usually advantageous to consumers, in the case of me-too drugs competition is actually harmful because it forces companies to direct too much of their profits towards advertising and away from R&D. Manufacturers are forced to advertise their products in an attempt to distinguish themselves from the competition (which is usually an insignificant distinction).

One possible solution to correct this funding imbalance would be to eliminate direct to consumer (DTC) advertising. But this may do more harm than good. Not only would drug companies find new ways to spend large budgets to entice consumers to use their products, but DTC advertising has some significant benefits. The FDA recognizes that DTC advertising encourages patients to be “more involved in their health care,” and it helps “educate patients about their health problems, and provide[s] greater awareness of treatments.” [17]

A better solution is to change existing patent policy. Currently generic manufacturing is regulated by the Drug Price Competition and Patent Term Restoration Act of 1984, better known as the Hatch-Waxman Act. [18] Although there have been several alterations to this act, its basic provisions have remained the same. The Act provides that any drug with a patent will receive a twenty year protection from generic competition from the time of filing or seventeen years from the time of grant, which ever was longer. [19] However, the Hatch-Waxman Act does not block patent protections for me-too drugs. Me-too medications are capable of receiving their own patents because of their slight alterations on the original compound.

My proposal is as follows: all drugs should receive a ten year patent that includes current patent rights, as well as a complete protection from me-too competition (to be appropriately defined by the FDA). The patent would then continue for an additional ten years, but without the added protection from me-too competition. Therefore, after a medication is patented it still has a twenty year patent life, but under this proposal the first half will be free from all me-too and bioequivalent medication competition, and the second half will only be protected from bioequivalent compounds competition. Furthermore, me-too drugs, unlike new and innovative medications, would not receive any type of patent protection. Instead, these medications would be open to generic manufacturers as soon as ten years expire on the original patent.

This proposal would be beneficial to every party involved in the pharmaceutical industry. Original drug manufacturers could face a greater amount of competition up to ten years earlier in their patent life if a generic me-too version of their drug is developed; but, they should also receive higher profits over the first ten years of their patent because they will not be burdened by a substantial portion of the legal and advertising costs they currently endure due to market competition. Higher revenues coupled with lower advertising demands should lead to additional capital that can be devoted to future R&D. If advertising and litigation currently represent 50% of a drug’s cost, it is easy to imagine a drug may be more profitable under this new proposal when a) it will not share any of its market revenue for ten years and b) advertising and litigation costs will be greatly reduced (though not eliminated) both before and after this ten year mark.

Other manufacturers will also benefit from a change in patent policy. If they are able to develop a me-too alternative, generic manufacturers will be permitted to produce this less expensive medication alternative, as a generic, ten years sooner. Although they will need to make additional investments to have the me-too generic developed and approved, pharmaceutical companies should be willing to make these investments as they will lead to quicker access to a profitable market. Rival manufacturers not interested in manufacturing generic medications may object to this proposal because they will no longer be able to produce patented me-too drugs. Instead, these companies will be forced to research new and innovative compounds. Despite potential objections, these companies may nevertheless benefit because if they discover new medications through increased R&D, they will receive the same protection all branded manufacturers receive, a ten year competition-free patent and the profits that accompany it.

Finally, the public will benefit the most from this new proposal. Drug costs will be significantly reduced due to the early availability of generics. Additionally, consumers may save on drug costs because drug prices should drop due to decreased advertising budgets both before and after patent expiration. Consumers will also benefit from the creation of an increased amount of innovative drugs. Manufacturers, who once spent a large amount of their budget pursuing me-too drugs, will now have a stronger incentive to use their capital to research original chemical compounds that currently have no patent protections.

The successful discovery of a new medication is a difficult task. This policy may force some manufacturers into bankruptcy. However, evidence of higher success rates from university and government researchers indicates pharmaceutical manufacturers can and should conduct more efficient and successful R&D. In an ideal world, rather than having three ED drugs, we would have one ED drug and two medications for diseases that are currently untreatable. A change in patent policy could bring us one step closer to that world.


[1] Lehman, Bruce, The Pharmaceutical Industry and the Patent System, 2003 http://www.earthinstitute.columbia.edu/cgsd/documents/lehman.pdf
[2] AARP: Drug Prices Still Rising
http://www.consumeraffairs.com/news04/2005/aarp_drug_prices.html
[3] Pharmaceutical Companies are in the Business of Making Money from People’s Sickness
http://www.actupny.org/treatment/PharmcoProfits.html
[4] Boldrin, Michele, and David Levine, Against Intellectual Monopoly, 2005, chapter 9
http://www.dklevine.com/papers/anew09.pdf
[5] Id.
[6] Id.
[7] Spector, Rosanne, Me-too drugs; Sometimes they’re just the same old, same old
http://mednews.stanford.edu/stanmed/2005summer/drugs-metoo.html
[8] Id.
[9] Boldrin, chapter 9
[10] United States Food and Drug Administration, Office of Generic Drugs
http://www.fda.gov/cder/ogd/#Introduction
[11] Goozner, Merrill, The $800 Million Pill: The Truth Behind The Cost of New Drugs http://onthecommons.org/node/22
[12] Boldrin, chapter 9
[13] Id.
[14] Id.
[15] Stephens, Michael, E(rectile) D(ysfunction) TV,
http://www.alternet.org/mediaculture/19551/
[16] http://www.webmd.com/content/article/57/66227.htm
[17] Lewis, Carol, The Impact of Direct-to-Consumer Advertising,
http://www.fda.gov/Fdac/features/2003/203_dtc.html
[18] Mossinghoff, Gerald, Overview of the Hatch-Waxman Act and Its Impact on the Drug Development Process
http://www.fdli.org/pubs/Journal%20Online/54_2/art2.pdf
[19] Id.

Posted by at April 5, 2007 5:40 PM in Commentary Posts