Viagra and the threatened arrival of competition

Pfizer is feeling the financial pressure as patents run out. In November 2011 it lost exclusivity on its top-selling anti-cholesterol drug. With generic statins now on sale, the manufacturer is desperately cutting its costs, particularly its R&D budget, to maximize the profits from the drugs that remain within patent protection. This made Pfizer's case against Teva Pharmaceutical Industries in August 2011 particularly important. Pfizer collected about $1 billion from the US market from the sale of viagra. If cheap generics were allowed to compete, it would have to drop its price and that would alarm investors. So a ragged cheer was heard when Judge Rebecca Smith accepted Pfizer's argument that its patent for the use of the drug for the treatment of erectile dysfunction did not actually expire until 2019. For the record, the initial patent only protected Pfizer's use of the drug for treating high blood pressure.

So it's interesting the FDA should now approve a fourth erectile dysfunction drug. This is not you understand, a "new" drug. The basic chemistry is the same and it works in exactly the same way as viagra. The only advantage claimed for the use of this new version of an old product is that it may work up to fifteen minutes more quickly than the other three drugs. In other words, there's no particular advantage for anyone to switch to the new drug. Yet here it comes, full of vim and vigor, and hoping to take some of the full-price business away from the existing three drugs.

This leaves the US market in a very interesting position. There are no cheap generics available in the brick-and-mortar drugstores. You have to go to an online pharmacy to make the savings. This shows us the best and worst of the patent system. It's perfectly reasonable that a manufacturer should have a period of protection during which development costs can be recovered. This encourages more people to develop new products. But when this forces consumers to pay unusually high prices for extended periods of time, the result is less pleasing.