A new drug enters the market with a 20-year monopoly before a generic version of it can be sold. This is the time period in which the pharmaceutical company recoups the amount it spent in developing the drug. In other words, unlike your small business, they get to charge a high price for that little pill until they break even. If that’s the case, why don’t they drop the price after 20 years? The answer is simple: more profits.
Yes, a generic company can make a cheaper version and challenge the 20-year window through the FDA. It’s really a patent challenge, claiming that there’s a flaw in the patent or it isn’t valid for some other reason. Of course, the big-pharma company counter-sues leading to lengthy and expensive litigation. If they think they might lose or don’t want to take the chance, they just settle it all with an agreement that the generic company will drop the suit and hold off introducing their more affordable pill, and, in exchange, big-pharma will pay them a tidy sum. Everybody wins, right?
Wait a minute. What about us consumers who depend on the medicine, especially people who, because of the expense, must often choose between life-saving medications and food or rent? And doesn’t that also add to the high costs of our medical system? Mmmmmmmmm.