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House Subcommittee to Debate Bill Giving Drug Companies Windfall Profits

Oct. 3, 2001

House Subcommittee to Debate Bill Giving Drug Companies Windfall Profits

Oct. 4 House Health Subcommittee Markup of Bill That Will Cost Consumers $14 Billion; Legislative Action Almost Certain

WASHINGTON, D.C. ? Legislation being considered Thursday by congressional lawmakers would impose unnecessary additional costs on consumers for prescription drugs and would fail to assure that all drugs likely to be used in children will be tested for safety prior to marketing.

The legislation, sponsored by Reps. Jim Greenwood (R-Penn.) and Anna Eshoo (D-Calif.), would give drug companies a six-month extension on their lucrative monopoly patents just for testing the safety of their drugs in children. The bill will be taken up at 1 p.m. Thursday by the Health Subcommittee of the House Energy and Commerce Committee.

Monopoly extensions first were made available to drug companies in exchange for testing in children by legislation enacted in 1997. If not reauthorized, the law will sunset at the end of 2001. Because of that, supporters of the pending provision will be pushing hard for action this year. The bill ? the “Best Pharmaceuticals for Children Act” (H.R. 2887), would continue the practice of granting what is known as “pediatric exclusivity” to the drug companies.

“Pediatric exclusivity gives a windfall to the prescription drug industry and increases costs to consumers,” said Frank Clemente, director of Public Citizen?s Congress Watch. “If members of Congress want to give consumers relief from the high cost of prescription drugs, they should end the practice of giving drug companies additional patent life for conducting these tests. Instead, drug companies should be required to conduct these low-cost tests.”

The U.S. Food and Drug Administration (FDA) has estimated that the six months of pediatric exclusivity that would be granted for hundreds of drugs over the next 20 years, as their patents expire, would increase brand-name drug company sales by $29 billion. The cost to consumers would be an additional $14 billion over that time because access to lower-priced generics would be delayed six months.

The profits enjoyed by the drug companies from the patent extensions greatly exceed the cost of conducting the studies. The FDA estimates that drug companies will reap $592 million in additional annual profits under pediatric exclusivity. It also estimates that the annual cost of conducting studies if they had been required between 1993 and 1997 was only $80 million. (Click here for a more detailed analysis of this legislation.)

In 2000, the 11 biggest brand name drug manufacturers made $28 billion in profits, prompting Fortune magazine to once again rank the drug industry as the most profitable in America. During the 1990s, the average profits of the Fortune 500 drug companies have been three to four times the average profits of all Fortune 500 industries.

Among the key problems with the pending bill:

  • It relies on pediatric exclusivity, which as a voluntary program cannot assure that all drugs likely to be used in children will be tested before they are used.
  • It increases the costs of prescription drugs for consumers, government programs and businesses by providing a windfall to the drug industry.
  • It does not guarantee that companies will make the results of their studies known through the labeling changes necessary for drugs to be used safely and effectively in children.

In 1998, the FDA issued a rule that would require testing for all new drugs that are likely to be used by “a substantial number of children,” or that would provide “meaningful therapeutic benefit” to children. But enforcement of the rule has been blocked by litigation.

Public Citizen endorses the FDA?s proposal and believes that pediatric exclusivity for new drugs should be ended and that drug companies should be required to test new drugs for use in children as a condition of getting FDA approval to market their products.

“Some advocates for children support the pediatric exclusivity incentive out of frustration and desperation, fearing that drug companies would conduct no pediatric tests without a hefty financial reward,” said Clemente. “This attitude makes it easy for members of Congress to support H.R. 2887. Members may see a vote for the bill, which would continue the handout to the industry, as a safe vote for children. But they should not be satisfied with the flawed approach offered by this legislation.”