Copyright 2002 Globe Newspaper Company  
The Boston Globe
February 23, 2002, Saturday ,THIRD EDITION
SECTION: BUSINESS; Pg. C1

LENGTH: 764 words

HEADLINE: GOVERNORS MAY SEEK WIDER USE OF GENERICS DRUG FIRMS SAY '84 LAW NEEDS NO ALTERATION

BYLINE: By Naomi Aoki, Globe Staff

BODY:
Arguing that the pharmaceutical industry has become unreasonably aggressive in its attempts to stymie generic competition, Vermont Governor Howard Dean is pushing his counterparts in other states to lobby Congress for significant changes to the nation's drug laws.

A proposed policy would place the National Governors Association in direct opposition to the drug industry, creating a particularly thorny situation for states like New Jersey and Indiana, which have large pharmaceutical concerns, and Massachusetts, with its concentration of biotech firms.

   Before the wording is even finalized or the policy put to a vote, it is already rankling the industry. The initial draft urged Congress to reform the 1984 act known as Hatch-Waxman, closing loopholes that allow drug makers to extend patents and add hundreds of millions of dollars a year to state Medicaid budgets.

The four-paragraph draft elicited an almost immediate eight-page response from the Pharmaceutical Research and Manufacturers Association, expressing "concern at evident misperceptions that intellectual property and patent rights may somehow play a role in contributing improperly to rising costs."

The policy will be debated at the governors association's winter meeting in Washington, which opens today.

Without patent protection for research, the response continued, "patients awaiting new cures would have much less reason for hope."

Hatch-Waxman works well, the industry group argued, as evidenced by the more than 8,500 generic drugs that have come to market since the law was passed and by the growing strength of the generic drug industry.

Under what Dean of Vermont describes as "significant pressure" from the pharmaceutical industry, the staff responsible for drafting the policy softened its language, asking Congress to "review" rather than repair the act. But Dean plans to put forth the tougher version, asking his fellow governors to throw their full lobbying power behind reform.

"The practice of keeping generic drugs off the market could cost states $1 billion by the end of 2004," Dean said. "We just can't afford it. I don't begrudge drug companies their profits. But I don't think they should be exploiting loopholes to make that profit."

The cost of prescription drugs is the fastest-growing piece of state Medicaid budgets. In 1998, Vermont paid less than $40 million for prescription drugs. The tab is expected to reach $100 million this year. Ensuring generics reach the market in a timely fashion is the fastest way to help curb rising drug costs, Dean said.

By postponing a generic for even six months, drug companies can gain hundreds of millions of dollars in sales on blockbusters such as the heartburn medication Prilosec. The profits, however, come at the expense of consumers, states, and employers, who foot the bill for drugs even after their patents have expired, Dean said.

Hatch-Waxman was intended to speed the approval of less expensive generic drugs while preserving incentives provided by patents to develop new drugs. Several highly publicized patent battles, however, have called into question whether the law is being abused. In November, 18 governors signed a letter urging Secretary of Health and Human Services Tommy Thompson to approve a generic version of Prilosec. The drug's original patent expired in October 2001.

Drug companies argue they are defending legitimate patent rights, without which they could not recoup the costs of developing drugs and could not afford to invest in research to discover new, breakthrough treatments. Hatch-Waxman's success is underscored, the pharmaceutical association document states, by the fact that only 6 percent of generic applications from 1984 to January 2001 raised any patent issues at all.

Nearly $70 billion worth of drugs will come off patent in the next 10 years, it says, without any legal reforms.

The association's response also criticizes congressional attempts at reform, namely the McCain-Schumer bill, calling it "terribly flawed" and saying "it will not achieve faster access to generics that is sought" by Dean.

Pharmaceutical association spokesman Jeff Trewhitt said the industry wanted the opportunity to explain to the governors the importance of patent rights to the future of drug discovery and development. With that in mind, however, he said, the group's focus this year is on lobbying for a Medicare prescription drug benefit, and not on reforming an act it believes is working fairly well.

Naomi Aoki can be reached by e-mail at naoki@globe.com.

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