Issue 12 / 7 April 2015

IN 2010, I was invited to speak at a conference in Hyderabad, India, about strategies for the prevention of diabetes as I have a longstanding interest in chronic disease and its human and economic consequences in middle- and low-income countries.

The conference was attended principally by Indian physicians with an interest in diabetes, almost all from the private sector.

My session was sparsely populated but a stampede followed as attendees filled the lecture hall to hear the next presentation on new insulins and how they may be used as adjuncts in the management of type 2 diabetes. As you can imagine, the potential market in India is vast.

Most Indian patients, even those with insulin-dependent diabetes, struggle or are unable to pay for insulin. But the doctors at this conference would not see many of these patients. Instead, Indian colleagues in Delhi told me, their practices largely treated wealthy, fee-paying patients enthusiastic to have the latest medications irrespective of efficacy or cost.

It was in January 1922 that Canadian orthopaedic surgeon Frederick Banting, his medical colleague Charles Best and biochemist Bertram Collip, used an animal pancreatic extract they called insulin to revive Leonard Thompson, a 14-year-old with diabetes.

Insulin was a smart discovery but hardly a feat of the imagination. It was patented soon after discovery to maintain its quality.

Nearly a century later it still remains locked up inside the pharmaceutical industry as though it came from another galaxy or was a major intellectual breakthrough. No generic form is available.

It is true that insulin has been modified in many creative ways including brewing it from Escherichia coli carrying a genetic implant to produce human insulin. Other modifications allow for delayed release and metabolic effects.

These technological advances, not all recent and not all expensive, still carry proprietorial labels and are not available in generic form. This was the subject of a recent article published in the New England Journal of Medicine, titled “Why is there no generic insulin? Historical origins of a modern problem”.

“Viewed in historical perspective, insulin is not a single entity but a family of related products that has evolved through incremental improvements”, the authors write. “Subsequent iterations of insulin represented actual innovations, each one being safer, more effective, or more convenient than its predecessor. And yet after generations of incremental innovation, insulin may be no more affordable than it was when the original patent holders sold their stake for $1 to ensure access to this essential medicine.”

Facts. First, almost all pharmaceutical development occurs in the private sector. The huge investment, many hundreds of millions for today's drugs, needs to be recouped and a profit made.

Second, despite strong commercial drive, many ethical pharmaceutical companies are motivated by a humane concern, not just profits, and do not engage in gouging.

Third, there are many people at the table, including the wholesalers and retailers, who make a handsome profit from the sale of pharmaceuticals.

So the ultimate cost of medications is not solely a reflection of what drug manufacturers charge. The rules of commerce are tough, but blockbuster drugs do not emerge from non-capitalist societies, so “you pay the price and take your ticket”.

Hence pharmaceutical companies strive to modify their products when expiry of the patent looms. Whatever the wording of the patent law, the parents of an effective new drug seek to keep their child at home for as long as they can especially if they receive generous payment for board. Therefore, minor changes are made to drugs to support claims that the modified form should, in turn, be patented.

The machinations of international law, including those concerning intellectual property and patents, determine the availability and price of pharmaceuticals. International agreements, such as the Trade-Related Aspects of Intellectual Property Rights, protect patents for products including pharmaceuticals for 20 years.

However, the rules are interpreted loosely as low- and middle-income countries develop generic drugs for their home markets outside the agreement. The complex history of antiretroviral drugs and the changing fortunes of those with HIV, who need them, especially in sub-Saharan Africa, is a case in point.

In Australia, while we enjoy the fruits of pharmaceutical research, we pay far more than other comparable nations for many drugs including statins. This is partly because we do not prescribe generics and partly because wholesale and dispensing costs remain high.

But back in India, where there are about 62 million people with diabetes and where many could benefit from insulin, there is a lot of ground to make up. A widely available generic version would be good to have, especially for the desperately poor.

The NEJM authors conclude that insulin “demonstrates that the generics market is like other markets” — in other words it will not automatically meet health care needs. They write: “The history of insulin highlights the limits of generic competition as a public health framework. Nearly a century after its discovery, there is still no inexpensive supply of insulin for people living with diabetes in North America, and Americans are paying a steep price for the continued rejuvenation of this oldest of modern medicines.”

Even more so in Australia.


Professor Stephen Leeder is the editor-in-chief of the MJA and emeritus professor of public health and community medicine at the University of Sydney.

Jane McCredie is on leave.

8 thoughts on “Stephen Leeder: Generic costs

  1. 316802@amamember says:

    Respondents concerned about the quality of generic medicines available in Australia should read:


  2. Beverley F Snell says:

    1. R&D  – ‘More than 4/5 of all funds for basic research comes from public sources’: Lexchin and Light: Pharmaceutical research and development: what do we get for all that money BMJ 2012;344:e4348.
    -York University study  ‘U.S. pharmaceutical industry spends almost twice as much on promotion as it does on research and development …….’

    2. Generics: Generic medicines can be clinically equivalent to original medicines and have the same quality, safety and efficacy profiles.  Quality of both generic and innovator name drugs is assured in countries with strong regulatory systems.  Brands can be poor quailty too. 

  3. Dr. Balaji Bikshandi says:

    Steve GP – I think it is an altered perception of risk to think that brand mixup is more dangerous than the risk of contamination/inefficacy because of the substandard manufacturing process of a generic item. In my view, quality is the degree to which a product or service matches its promise. In a generic prescription, there exist no specific person to guarantee that promise! Let’s not forget we don’t drive ‘generic’ cars or for that matter buy generic anything (even ‘homebrand’ is a brand). The brand layer is an added accountabiity in my view. When I buy Panadol for instance, I am fairly confident that it has Paracetomol in addition to its inert base; I know where that person that manufactures it is located in AU/NZ to hold him/her accountable; At least, I know for certain that open defecation does not happen anywhere near the manufacturing unit. Tens of thousands of kilometeres away, no person from Australia to oversee the manufacture, in a different socio/polito/cultural/legal environment – I would buy a socks or shoe from there but not something that goes inside my veins or my patient’s veins! 

  4. University of Queensland - Central Library says:

    To clarify, generics are what mostly gets dispensed in Brisbane pharmacies. I suspect this would be much the same in any part of Australia. I have no fundamental problem with generics, as long as the quality is equivalent, but there is a problem. The problem is that patients and doctors get confused by the multiple different brands of “the same” medication, and it gets really ridiculous when sometimes each time they get a repeat it is a different brand ! This sometimes results in extra costs to Medicare due to patients getting things mixed up, and of course occasionally results in serious patient harm. In other words, the multiplicity of generic brands is at the very least a false economy, and at worst is dangerous.

  5. Dr. Balaji Bikshandi says:

    Well said Dr. Dawson. In India you could buy any medicine in any street corner pharmacy. Antibiotic resistance happens because of unrestricted dispensing of drugs by such street corner pharmacists. There exists no medication record in most hospitals in India. I was appalled to see the NSW health supply of piptaz coming from chennai India. I doubt it’s quality having known the very place of its manufacture struggling for basic infrastructure. I doubt that clean water is available to manufacture it in irungattukottai!! I wonder who makes such buying decisions risking the lives of ICU patients. Generic substitution should stop. We cannot wait for patients to die before we stop this capitalist driven Indian import pharmas. 

  6. robert mcritchie says:

    The New York Times have repeatedly pointed out that may generic drugs made in India contain very liitle actve ingredient (FDA). I am reliably informed that the PBS has a stricter regimen for checking locally available generc drugs.

  7. Philip Dawson says:

    Stephen Leeder says ” we do not prescribe generics” !!! i dont know who the “we” is, but patients often get no choice but a generic. The pharmacists substituting even scripts marked with a cross to not substitute ( because they are epileptic, on warfarin or digoxin and even minor changes in bioavailablity will have an effect). usually they substitute with a generic form a particular Indian company which my chinese patients tell me is a front for chinese pharmaceutical companies, because chinese wont but chineres made drugs ( would you?) . There is no gaurantee of quality in an Indian drug, they have been accused of bribes to find out when Autralian authorities do their rare testing, and patients report the Indian brand of temazepam “doesnt work” but the Australian made generics do. But of course the pharmacists doesnt get the Australian made generics at half price. The federal government has negotiated high prices for eg Atorvatatin generic, even though queensland , WA and NZ all have negotiated a fraction of that. If government want to pay less to substitute Insulin they need to pressure the pahramceutical companies and the wholesaler and retailer. Certain drugs not on PBS are far cheaper in UK, even the US than here, and many savvy patients buy on the internet.

  8. Dr. Balaji Bikshandi says:

    I think the problem is one of social inequity. When there are few wealthy in India who could afford such advanced treatments there is a vast majority struggling for potable water. I would be very cautious in extrapolating the Indian experience to anywhere in the world! This I say with confidence because my origin is from there and I have experienced what it means to call difficulty – the atrocities of inequity. It is a very different experience to your few days stay sponsored by those money monger private practitioners of India. I would gladly pay more being a proud Australian and preserve this egalitarian society with equitable access to everyone. I would also support preservation of intellectual property rights by stringent legislation. I am against cheap Indian import pharmaceuticals made in a country without proper sewage system. Magnanimity set aside, I am a proponent of social equity and quality. Countries such as India should concentrate on improving the social equity first. I disagree that capitalism promotes innovation! Statins were invented by a Japanese inventor who did not even want it patented for example. Capitalism is the single worst scourge of modern society – money as means has become money as ends! Quantity has overtaken quality. My humble opinion. 

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