Monday, August 20, 2012


A brand-name drug is patented in the United States for about 10-15 years. After that, generic versions of the drug come on the market, offered at prices drastically lower than the brand-name drug. The vast majority of consumers immediately switch to the generic. The companies that make the brand-name drug hate it every time this happens, because it means a big bite out of their profit margin.

Right now, there's a particularly large glut of brand names coming off patent, which has the drugmakers very concerned. If they thought they could pull it off, you'd probably see them try to get patent law warped to Steamboat Willie levels, but since that isn't going to happen, they've come up with the idea of offering coupons to try to hang on to at least a few of the people who would otherwise bolt for the generic. (Or at least, people on private insurance. People on government insurance don't get to use them.) Even hanging onto a small number of people for a short time makes a big difference given the amounts of money we're talking about.

This is what you'd call 'Step 1'. Step 2 would be offering the coupons while the drug is still on patent, and Step 3 would be to offer them at lower prices in the first place.

No comments: