TCS Daily

Over-the-Counter and Through the Woods

By Ryan H. Sager - March 26, 2002 12:00 AM

Do you ever get the feeling that pharmaceutical companies care more about their own bottom lines than they do about your health? Of course they do - and they should. Pharmaceuticals are like any other good: the fiercer the competition in the market, the better the product will be and the cheaper it will be sold. Where problems arise, however, is when the government allows companies to game the regulatory system at the expense of consumers.

Such gaming is on proud display this month as Schering-Plough gets ready to wrap up what's been a fairly profitable game of one-on-two against consumers and their health plans (with the Food and Drug Administration refereeing) over the non-drowsy allergy drug Claritin. The prescription drug, which allows allergy sufferers to live in hostile environments without either perpetual sneezing or perpetual dropping off behind the wheel, has been a cash cow for the company for years, generating billions in revenue. It has generated such revenues mainly because health plans have been forced to pay for it, shelling out around $70 per allergy sufferer for a 30-day supply.

Now, however, Schering-Plough has announced this month that it will offer a non-prescription version of Claritin later this year, forgoing the windfall profits to which it has grown accustomed. Why would a company deliberately stick its thumb in its own eye? It wouldn't. A pharmaceutical company's decision of when to switch their drugs from prescription to over-the-counter status is complex and perverse, but Schering-Plough is riding it out in textbook fashion.

The process works something like this: After receiving huge subsidies and tax breaks from the government (which funds roughly 40 percent of drug research), pharmaceutical companies receive patents from the government on the drugs they invent, giving them temporary monopolies. When these patents run out after a few years, it's then time for the companies to petition the FDA for permission to sell their drugs over the counter. If the FDA deems the drugs safe enough, permission is granted, and often the companies are given a few years' monopoly in the over-the-counter market to sweeten the pot.

So, it should be no surprise what presaged Schering-Plough's move to petition this year for over-the-counter status. That's right, its patent on Claritin is set to expire in December. Plus, the company is rolling out a Claritin upgrade called Clarinex in the prescription market.

While allergy sufferers will now likely be able to buy a month's supply of oldie-but-goodie Claritin for closer to the $11 it sells for in Canada (since now consumers will have to pay out of their pockets instead of through their health plan's noses), it's ludicrous that the drug hasn't been available over-the-counter for at least the last few years. Claritin, as its users know, is about as safe as a drug can possibly be - and its likely safer than Benadryl, given that the pink stuff makes your eyelids heavy (or tries to counteract that effect by buzzing you with caffeine).

In fact, there have been people calling for Claritin to be available in non-prescription form for years. WellPoint Health Networks, a California-based HMO, asked the FDA as early as 1998 to switch the status of Claritin and its closely-related competitors, which were costing it $45 million a year (and its customers another $45 million in co-pays). WellPoint's petition marked the first time a third-party has ever been allowed to ask for a status change against a drug manufacturer's will, but ultimately the FDA refused to act.

At the time of the petition, Schering-Plough basically argued that Claritin wasn't safe enough for over-the-counter distribution; or as they more tactfully put it (in anticipation of their eventual flip-flop), a status change would have raised "serious questions about quality of care."

Of course that was a load of Schering, but as much fun as it would be to ask executives there why they are now suddenly willing to raise such "serious questions," you can hardly blame them for trying.

The pharmaceutical companies may be trying to game the system here, but it's the system that is broken. In the ideal world of Good Government types, the FDA would be able to rationally asses whether a drug was safe enough to be handled by consumers trolling the isles of their local CVS, put the safe ones out on the shelves, and keep the dangerous ones under lock and key. In the real world, however, the system has turned into an elaborate regulatory chess game with consumers pitted against Big Blue.

While Schering-Plough and other companies have a legitimate point to make about keeping control over how the drugs they produce are dispensed to patients, the system needs to be liberalized. The FDA should not be able to force companies to sell over-the-counter as WellPoint requested, but there should be more incentive for the companies to do so.

Shortening the duration of patents could be a sensible first step. Lowering the regulatory bar for companies that want to make their drugs available over-the-counter would be a second. (In 2000, the FDA refused to switch the status of two very safe cholesterol-lowering drugs, ensuring that fewer people would have access to them; also, oral contraceptives remain prescription drugs with very little justification.)

The benefits of moving more drugs over-the-counter would be manifold. Lower prices would be a given, and people could avoid many costly and inconvenient doctor visits (over half of all doctor visits result in prescriptions). Furthermore, people would be prone to take more responsibility for their own health. Facing high prescription drug prices, consumers have already started using billions of dollars worth of dietary supplements. If people are going to self-medicate, they might as well have access to something other than modern day snake oil.

There are certainly risks inherent in liberalizing - and the FDA, as with any government agency, has huge incentives to avoid risk - but when a system makes it cost $70 a month to keep away itchy eyes, it's time to consider some changes.

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