Regulating Generic Drugs

" Along here on foxbusiness.com. Modular business we we -- this I think last week if you're watching and we did not know on television a couple times to get to at a -- want to remind you. These these new push to. I don't know for any kind of creative transportation if you will and his brown mall and OSHA which is maybe at the top of the list here it's been making a lot of headlines and in terms of how we get around town and never doing a little bit greener friendly here. Interesting the CEO is coming up from Portland and just commencing doesn't prime beach and that we've got pictures so -- problem and -- right talk about that -- but anyway before we knew that. As a set a moment ago we're talking another angle that the health care story in a generic drug market with rob Armstrong of Dow Jones Newswires columnist who joins us in studio today. To talk about how that the generics."

" Are really facing some real regulatory challenges right yeah -- absolutely and that what I mean that's got to mean something. -- want to invest in the second from right a whole whole sort of group of regulators are really focusing on the patent laws around generic drugs. This important right now of course because everybody is looking for government consumers companies looking to save money in the healthcare space. A great way to do that is to take expensive patented drugs. And make some generic when they become many times cheaper. The issue is. Up -- way this often happens is through lawsuits that the laws are set up in the United States to encourage generic companies. To assume branded companies to overturn their patents. When that happens. The first generic company to do that is allowed to sell the generic exclusively but it six months to do so they make a lot of money and so forth right. And this seems to be a good system admitted it encourages bad patents to be overturned medicine get cheaper. Consumers benefit however. Drug the drug companies have branded drug companies are naturally eager to settle these lawsuits they'd rather not go through years in court. They'd rather not lose their patent so that it reaches settlement with the generic company. Sometimes this involves some early entry time into the market for the generic company sometimes a cash payment and it's boost cash payments but the regulators want to eliminate."

" Then why is that they're good they want to eliminate the casket into the system has been marketed for what they're looking to change."

" Well it's the feeling is that. The -- read the drug should stay branded or become generic just on the basis of how strong their patents are. Not on the basis of how much money the big pharma company is willing to pay the little guy to take off. And so the argument is let's just reach agreement about -- the generic could come on the market purely on the basis of the law and the strength of the patents. The former company's work very hard to make as many patents is they can they would patent the color of the bottle with they could do want some of these to be overturned."

" Well and the issue bit like I said coming initiative mirrors essentially two issues one obviously is investors we can talk about that in a moment about how they should look at the others consumers. Ten people that are are using these drugs had a worried about price so -- to take away it doesn't seem like there's a clear take away that. One way or another this leads to lower or higher price run defense well I."

" It's a tough issue because essentially. If the rules change and the only way to resolve these lawsuits is -- with negotiations over time of entry. The brand company who has so much to gain by keeping their branded drug. Exclusively their own is going to fight to the very end right so there may be less settlements of any kind under this rule. Will the generic companies be ready to challenge the patents if they know that the Merck's in the Pfizer's -- AstraZeneca us. Are going to litigated to the very end years fancy lawyers you can imagine the expense."

" You don't want our viewers are bringing up that their -- responding to that point so let me just stick with -- for one more second on on drug pricing and how much you know about the differences between but it -- front of all the time. Canadian people go to Canada right at their drugs and and and Trent who wanted to ask. You know why is -- that all these things consider that we've been talking about the medicine and cat is so much cheaper in the US this is not referring to health care it's a different debate but just specifically. The medicines and this is seventeen --"

" That -- the issuing candid it is really on the brand side entirely and in Canada the government. Negotiates as one big buyer on brand medications so they get better prices than we do in the United States. And a big debate around Obama's health care plan is should there be a provision that it. Saying the United States does that thing we get a nationalized healthcare plan and the whole country. Buys drugs at once and guess therefore gets -- volume three -- And for investors in these pharmaceutical companies dwell on the generic side if there. It's sort of still to be determined if there's more restrictions on settlements with the brand companies the generic companies Tampa -- might land all these companies those settlements. Are an important source of profits for them. And if that bat chain gets broken. Things are going to change them financially maybe they win some of the lawsuits in the end and make some money there but it looked at the very least there's a trade off on the brand side. I think it though there's a risk there too these patents are now going to get litigated that was settled before and it's a big drug goes off. That's going to be hit profits hard quite so everybody loses. Continents every I would say everybody's at risk okay write that though that everybody should be aware that the rules are going to change I would think that. Consumers may benefit here. But it's very much up in the air. The brand companies probably win the generic companies probably lose -- had to guess."

" And -- impact the amount of money that some of these big companies put into developing new drugs is this thing that's a huge upfront costs about."

" Yes. Absolutely and there's no question that. How much profitability the big companies have is related to how much money they have to spend on -- date right. It but the money they have been spending on -- in the last ten years hasn't had a perk particularly good return on assets. So I did you raise good questions and I wish I had more cut and dry answers for you. But it's an industry in transition and a lot of the that a teacher and that's what makes this fascinating kind of conversation just brought a little bit as we land. Rob is that you have. The new regulations coming what you just outlined some of the ones maybe we can take as much about right but then you have this broader issue of health care debate that's happening in Washington as he did some developments on that front today and the speaker of the house and comments of what happiness and -- to get something done before the August restore recess who knows whether -- not that'll happen. Most -- in time to. To talk to executives and and others that are in the industry right now right what are you hearing I mean how well wouldn't. Of course the first thing they say it's everything's going to be fine you know it's all upside from here to the horizon however. You know I. I think there is a general level of anxiety. Among executives across the health care spectrum that we you have one government buyer. The price negotiations are going to be brutal and their profit margins are going to be pressed down over time. And that's bad for those companies expect those companies investors. It's not necessarily good for the economy but we have to make decisions about this as a society. Right. We've got healthcare heating up a bigger and bigger slice of our GDP. -- and these are going to be hard choices. There's not everyone is going to win. -- for sure and announces the matter picky when it rises was exactly possible -- FitzGerald and that's -- a lot of people and Joe segments earlier. -- it's tough to eat dessert goddamn right investment part it's enough to know. What's gonna we're not -- you know what the new laws mean until the rubber hits the road out. And when you are picking a price to buy an asset that. You better factor in that risk -- because what's these these are complicated. These are complicated situations. The outcome is not clear get yourself a discount before you invest. Good points for. -- always -- always looking for discount yeah I'm gonna turn thank you it's been a pleasure Dow Jones Newswires columnist with us --"