Over-The-Counter Remedies That Would Reduce Health Care Costs – Pacific Research Institute

Over-The-Counter Remedies That Would Reduce Health Care Costs

Earlier this month, the pharmaceutical company Pfizer announced that it may ask the Food and Drug Administration to allow it to market the cholesterol-lowering statin Lipitor over the counter after its patent expires in November.

The FDA has not yet signaled whether it would approve Pfizer’s proposal. And some doctors have reacted coolly to the possibility of an OTC version of Lipitor.

But the development offers regulators — and the public — the chance to reconsider how patients access important medications. If done wisely, making more drugs available over the counter can generate significant savings for both consumers and the overall health care system.

Pharmaceutical companies face significant challenges in the immediate future. Patents for seven of the world’s top-selling brand-name drugs — including the top two, Lipitor and Plavix — are set to expire over the next 14 months.

About 4.3 million Americans take Lipitor. Each year, Pfizer takes in nearly $11 billion on sales of the drug. After the patent expires, those revenues will dwindle virtually overnight, as generic competitors enter the marketplace.

Consumers, of course, benefit from generic competition by paying lower prices. But the high prices of many patent-protected drugs generate the revenues needed to underwrite the massive research and development expenses that the inventors of brand-name drugs incur.

Bringing a single drug to market costs about $1.3 billion. For every drug that makes it to market, as many as 10,000 compounds fail. That’s why pharmaceutical firms invest more in R&D than any other industry — over $105,000 per sector employee as compared to an average of $10,000 across all U.S. manufacturing companies. According to the National Bureau of Economic Research, U.S. drug companies invest about 17 percent of their sales in R&D.

The looming patent expirations — combined with those massive drug-development expenses — is causing many pharmaceutical firms to shed jobs. Merck recently announced that it would eliminate 13,000 jobs by 2015. This year, the pharmaceutical sector as a whole has slashed 5,000 jobs — on top of 54,000 in 2010 and 61,000 in 2009.

Those are substantial numbers. In 2009, the industry directly employed more than 674,000 U.S. workers. It supported an additional 3.4 million jobs indirectly. With patents expiring and ObamaCare set to assess millions of dollars in new taxes on drug firms, the sector could shrink even further. That would be bad news not just for workers but for all levels of government, as the industry pays about $85 billion annually in local, state, and federal taxes.

Selling their wares over the counter — rather than by prescription, as in the past — may help some brand-name firms weather this economic storm.

The advantages for the brand-name companies are obvious — they’d stand a better chance of keeping some of the revenues from their products.

But patients would stand to gain, too. For starters, over-the-counter medications tend to be cheaper than prescription drugs. OTC drugs can even be less expensive than generics, as patients don’t have to shell out for a visit to the doctor in order to get a prescription.

That convenience factor is significant, too. Rather than take off work for a doctor’s appointment, consumers can simply pop into their local drug store when convenient.

Writ large over the entire health care system, the potential savings from a drug’s shift to over the counter are immense. Consumers would see lower prices for the drugs they need, and doctors would waste less time seeing patients who just need prescriptions for common meds.

Several drugs have safely made the transition over the counter. Consumers can now buy Claritin and Zyrtec to deal with their allergies or Prilosec to tackle heartburn.

The FDA and some doctors have expressed concern that drugs like Lipitor are different because they treat conditions whose symptoms are not as obvious as those addressed by Claritin or Prilosec. In the absence of a doctor’s supervision, they fear that high-risk patients would end up undertreated, while low-risk patients would end up taking a drug they didn’t need.

But non-prescription statins exist in the United Kingdom. And new technologies like prescription cards can allow patients to be monitored without direct physician supervision.

Some researchers in Britain are even suggesting that statins be served alongside burgers and fries at fast food restaurants to offset the cardiovascular, noting that side effects are minimal.

Soon, most pharmaceutical companies will no longer have the luxury of relying on blockbuster, patent-protected drugs to bolster their balance sheets. Pushing to offer their products over the counter may keep them afloat — and save consumers and the health care system money in the process.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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