The Detroit News, MI
Monday, August 4, 2003

Clock is ticking for drug profits

Patents give drug firms small window to recover investment in medicine

By Deb Price / Detroit News Washington Bureau

WASHINGTON -- Each televised prescription drug advertisement represents a race to recoup millions in research and
development dollars before a drug's patent expires.

While drugmakers technically have exclusive rights to a patented drug for 20 years, they generally apply for a patent
at the start of the lengthy drug-approval process, leaving them with a truncated period of time -- often as little as
eight years -- to profit from the drug before generics are released, said Jeff Trewhitt, spokesman for the
Pharmaceutical Research and Manufacturers of America, which represents major pharmaceutical companies.

As generic competition intensifies and research and development costs go up, advertising increasingly has become part
of the formula that drugmakers rely on to stay profitable.

"The simple reality is the branded products are the ones that innovate, and (the pharmaceutical companies) expend an
obscene amount of money to get new products on the market," said Eric Dezenhall, an image consultant for several major
drug companies.

"If I invest my career, heart, soul and money into developing an innovative drug, it is not an act of diabolical greed
to try to make that money back as quickly as possible. (Advertising) is really a very rational response ... (to) help
you squeeze the best buck out of the market," said Dezenhall, adding that consumers aren't being fair to the drug
industry in wanting innovative products but then not wanting to pay for development expenses.

Generics can eat up to 80 percent of a successful drug's market share within two years after a patent expires. The use
of generics has grown from 19 percent of the market in 1984, when Congress passed legislation that made it easier for
generics to get onto the market, to 52 percent today.

"The situation gets complicated by the fact that for every five potential medicines that go into human clinical
testing, only one comes out approved," Trewhitt said. "Four are discarded as failures, with no return on investment."

Only three of every 10 medicines on the market will make more money than they took to develop, according to a Duke
University study. That means the three profitable drugs not only have to make up for the losses on the seven
unprofitable drugs, but must generate high enough profits to plow back into costly research and development of new
drugs.

U.S. drugmakers are spending $26 billion annually now to create new drugs, including 600 targeted at heart disease,
cancer, arthritis, Alzheimer's, Parkinson's and other illnesses related to aging.

The cost of research is going up because of more sophisticated equipment, higher salaries for researchers, and the
"learning curve" as companies move from traditional chemistry to a new generation of biotechnological medicines,
Trewhitt said.

But critics like U.S. Sen. Debbie Stabenow, D-Lansing, cite a Families USA study that concluded drugmakers are spending
2 1/2 times more on advertising, marketing and administrative costs than on developing new drugs. Stabenow complains
that advertising is not only increasing the price of drugs, but that the profits are more likely to be channeled into
"me-too" drugs, slight variations of successful drugs that enable the manufacturer to extend a patent and profits
without creating anything new.

"The purple pill becomes a pink pill. The daily dose becomes a weekly dose," said Stabenow, who wants Congress to
change tax credits for drugmakers so they can't write off more for advertising and marketing than what they are
spending on research and development of medicines.

You can reach Deb Price at (202) 662-7384 or [log in to unmask]

SOURCE: The Detroit News, MI
http://www.detnews.com/2003/business/0308/04/a06-235313.htm

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