The expiration of the patent on $11-billion-per-year Lipitor® (atorvastatin calcium) last November received wide media attention and was eagerly greeted by consumers, reflecting public excitement that seems to have not yet dissipated. In the following months, prices “plunged from about $175 a month for Lipitor to about $15 for generics,” according to a recent article in the New York Times. At times it felt as if legions of consumer Davids had triumphed over a corporate Goliath.
Although the public’s euphoria over the availability of cheaper generic versions of drugs is an understandable cause for celebration, price decreases in themselves should not be mistaken for net gains to society. The societal gains represented by new drugs, to the extent there are any gains at all, come from the new therapeutic benefits that those drugs offer to patients. The entrance of generic competition, on the other hand, merely represents a shift of wealth from one unit of society (originator manufacturers) to another (patients, and also generic drug companies and insurers).
While individual consumers may care little about “net gains to society,” policy-makers should care: If there are no net gains to society from the high prices preceding patent expiration, then perhaps the patent system should be abolished entirely. That option, however, has not been a serious topic of discussion in the United States since the 1870s. Instead of debating the underlying issues, however, the public’s attention is focused on what is easiest to see: When can I pay less? One has to wonder, however, what the innovative landscape would look like if more attention were paid to baking a bigger pie, rather than celebrating the newfound ability to grab a bigger slice.