Drug Company Games–The Case of Prilosec vs Nexium

Prilosec is a drug I started taking in 2001 for heartburn. It’s the best-selling drug in pharmaceutical history, netting billions of dollars in profits for AstraZeneca, the manufacturer. In early 2001, this branded version of generic omeprazole was available only by prescription–$4.00 per pill.  Now the brand name is available for 63¢ each. The generic form is only 40¢.

What happened to Prilosec price?

The Prilosec patent ran out in 2001. Until then, AstraZeneca had a monopoly on omeprazole. Demand let them set the price sky-high. But in 2001 they had to scramble to save their cash cow. Generic companies would soon be able to sell the generic form of Prilosec and charge amounts more in line with production costs.

One corporate strategy was to develop a replacement drug for Prilosec, rename the drug, and get a new patent. Their R&D team came up with Nexium, an isomer of Prilosec. An isomer is a compound almost identical to the parent compound, with a molecule or two tweaked. Unfortunately, the new drug performed no better than Prilosec. It was basically the same compound with a new name and a higher price.

This was a problem. The company had to find some reason to claim that Nexium worked better than Prilosec.  So they surveyed patients taking Prilosec for signs of discontent. To their delight, only half of the patients were entirely satisfied and pain-free.

Drug company tricks

Using a tried-and-true industry move, AstroZeneca designed clinical trials to show improved performance of the new drug, no matter how slight. Data from two of four studies showed enough difference to build a weak case for Nexium. The other two showed no difference. The two favorable studies became the company’s marketing platform. Data from the other two studies were ushered out a back door.

Racing against the clock, the company got FDA approval for Nexium two months before expiration of the Prilosec patent in 2001.  But they needed more time to build a customer base for Nexium before patients could buy low-cost generics.

Company lawyers found legal loopholes that gave them six extra months of exclusive Prilosec sales.  They dug up a clause in their FDA contract that allowed only one generic competitor on the field at first. According to a former company executive, the idea is, “If you’re going to lose, you lose to one generic. Because if four or five come in, it gets really ugly.”

Corporate greed works

The company’s legal experts stalled the introduction of cheap knockoffs for several years. Delaying tactics, including a series of lawsuits against generic companies, bought AstraZeneca enough time to court U.S. doctors with promotional claims about Nexium, Prilosec’s child.

Although the last U.S. Prilosec patent expired in 2001, not until December 2007 did the first generic manufacturer get FDA approval to sell the drug. By that time, Nexium had a solid foothold. In both 2009 and 2010, AstraZeneca reported Nexium sales at $5 billion.

Today consumers pay ten times more for a heartburn medication (Nexium) no better than its parent drug Prilosec or generic omeprazole. As David Campen MD, a Kaiser physician and pharmacy executive, says, “Nexium clearly is a no-value-added drug.”

Winners Never Lose

This scenario is played out in the marketing and legal departments of most pharmaceutical companies facing the disaster of expiring patents for high-dollar drugs.  Their ploys work almost every time.

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