Cheap viagra . . . will consumers identify it?

This post is about intellectual property law (patents), prescription drug prices, and healthcare dynamics. Oh – and depending on what you read into it, this post might also discuss availability of generic (cheap) Viagra.

First some background on a few topics:

1) How drugs are reimbursed – Most people carry drug insurance cards issued by PBMs (pharmacy benefit managers, such as CVS Caremark and Express Scripts). PBMs create formularies. A preferred drug (such as a generic) might cost a patient a $5 co-pay. An expensive branded drug might have a co-pay of $40-$50, for example. In this way, PBMs encourage patients to ask doctors for cheaper, generic medicines. Everyone wins (except the drug companies).

2) Intellectual property law as it pertains to medicines – There are many types of patents issued for drugs. A ‘composition of matter’ patent covers the chemical structure of a drug. Other types of patents include formulation patents (which would cover, for example, mixing a drug with certain stabilizers to create a delayed-delivery form) and method-of-use patents, which protect a specific medical indication of a drug. All patents eventually expire (current law confers protection for 20 years from the date a patent is filed, though some drugs can get an extension of because of time spent in R&D before the drug can be approved and commercialized).

Many drugs have multiple indications (medical uses). For example, Lyrica is approved to treat epilepsy, fibromyalgia, and neuropathic pain (pain caused by conditions such as shingles). It is the same drug with the same name for all of these indications. Another example is Singulair, which treats both asthma and allergies.

Occasionally, one drug will be granted two different names. This is rare. One reason for creating this separate name is to avoid confusion. A more cynical explanation is that, if there are different names for different indications, one brand can remain patent-protected (if its method-of-use patent has not yet expired) even after the other brand goes generic.

Viagra is one of these uncommon cases in which a single chemical ingredient has more than one brand name depending on the use. The basic chemical ingredient is sildenafil. The first brand is Viagra . . . . no explanation needed for that medical indication. The other indication is to treat a progressive and fatal condition called pulmonary artery hypertension (PAH). For PAH, sildenafil goes by the brand name “Revatio.” Medically, sildenafil dilates blood vessels. In PAH, the blood vessels in the lungs progressively constrict, and sildenafil helps counter this.

Sildenafil’s chemical structure (composition of matter) patent expired November 2012. Generic Revatio became available at that time and is now on the market.

The annual cost of Revatio when it was branded was about $10,000 per year. The cost of Viagra is about $12 per tab (there is no ‘annual cost per se, since this is taken on an ‘as needed’ basis. I guess paradoxically one might hope to have a high annual cost for his own personal Viagra needs.)

Generic drugs are extremely cheap to produce. The cost to make a single tablet is generally less then one cent (yes, that is correct . . . less than one penny per pill). While 30 pills therefore technically should only cost about 30 cents, patients generally pay $5 for a one month prescription. This allows for some profit for the middle men (distributors) and the pharmacists who dispense the drug.

So, to recap price . . .

  • Viagra: $12 per pill
  • generic Revatio (sildenafil): 20 cents per pill (retail).

Note, however, the dosages are different. Revatio (generic sildenafil) is a 20 mg tablet. Viagra is dosed at either 25 mg, 50 mg or 100 mg (the 50 mg dose is the most common, with older patients and those with poor kidney function getting 25 mg as the starting dose). Finding the right dose for a medicine is an art, not a science. When doing clinical trials, companies frequently double each dose to test the next strength. It is likely that 40 mg, 50 mg, and 60 mg would all clinically have the same effect. Still, it is important to realize this is not certain. If a person wanting to use Viagra opted for generic Revatio, he could either take 2 and 1/2 tablets to get to 50 mg. Alternately, he could take two tablets (40 mg) or three tablets (60 mg), evaluate the effectiveness of that dose, and adjust the dose if needed.

There is one other caveat to note. PBMs sometimes restrict prescriptions of expensive medicines for uncommon diseases. Insurance would not pay for branded Revatio for people who did not have a diagnosis of PAH. Will PBMs restrict payment for generic sildenafil, especially now that the co-pay would cover the entire cost of the drug? I don’t know. It might even vary by PBM or insurance plan.

It’s unclear whether patients will know that Revatio exists, or that it has the same ingredient as Viagra, or that it is now generic. One of the challenges in efficiently delivering of healthcare is information is often technical, esoteric, and difficult to obtain. Still, the market can be efficient and news such as this (the availability of generic sildenafil) sometimes becomes well known by patients/consumers. If this becomes the case, patients would presumably ask their doctor for a prescription for “sildenafil 20 mg” and they would then take 2-3 tabs (at a cost of about 50 cents) instead of one tablet of Viagra (which would have cost $12). Will this happen? Time will tell.

By the way, Pfizer (the manufacturer) reports US Viagra sales of about $1.1 bn annually. What would happen to Pfizer’s earnings if all patients switched to generic sildenafil and Viagra sales dropped to zero? In the absence of any cost cuts, this would lead to a decline of about 9 cents in Pfizer’s earnings per share (a little less than 5%). Chances are the company would cut costs, so the impact to earnings would be more like 2-3%.  Again, this would be if Pfizer lost 100% of Viagra revenues, which is extremely unlikely even if there is some switching to generics.

If consumers do not figure out that they can get generic sildenafil as an alternative to branded Viagra, cheap prices are still on the horizon. The patent covering the method-of-use will expire in 2019, at which time Viagra (sildenafil 50 mg) will be available at a cost of a few pennies per tablet.

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