Product hopping is a practice commonly used by pharmaceutical companies to extend the life of their patents, and as a result, the period of time they can charge high prices for their drugs. Normally, after an initial, patent-protected monopoly period, new drugs face competition from identical drugs manufactured and sold by other companies as a generic. This competition drives down drug prices for patients as a result.
But with product hopping, when the drug is supposed to go generic, the drug company instead makes a minor tweak to the drug and rebrands it. Drug companies market this practice as “innovation,” but don’t be fooled. This practice really just allows the manufacturer to put what is essentially the same drug back on the market as a “new” drug, push patients onto that materially same drug at a higher price and take advantage of charging patients high monopoly prices a second time.
A new report from Matrix Global Advisors (MGA) helps illustrate the impact these harmful tactics have on patients seeking access to affordable medicines. According to the findings, just five instances of product hopping – for the brand drugs Prilosec, TriCor, Suboxone, Doryx, and Namenda – cost patients and the U.S. health care system $4.7 billion annually.
However, it’s not just the billions of additional dollars that patients have to pay for their drugs—it’s also the cost shouldered by employers, unions, and government programs that help pay for health coverage. These higher costs push premiums higher, limit wage growth for working Americans, and force higher spending on U.S. taxpayers—all so pharmaceutical companies can get a second bite at the apple.
This report comes on the heels of a previous report by MGA showing the multibillion-dollar cost of pharmaceutical companies’ anticompetitive gamesmanship to the U.S. health system.
The good news is that policymakers can stop anticompetitive pricing schemes like product hopping by brand drug companies. For example, a bill introduced by Senators John Cornyn and Richard Blumenthal would empower the Federal Trade Commission to take action against abuses like product hopping and patent thickets, which delay timely competition from more affordable alternatives. This would help ensure that the patent system appropriately incentivizes innovation and permits timely competition.
CAPD encourages policymakers to take action on this issue—and will continue to advocate for policy changes to stop product hopping and other gamesmanship by drug companies. Without closing these loopholes, American patients and taxpayers will be stuck paying needlessly higher prices for the drugs they need to stay healthy.