In 2018, the U.S. Department of Health and Human Services (HHS) released a report detailing Medicare Part D spending on brand-name drugs that were also available as multi-source generics. At the top of that list was a popular medication known as Nexium, for which Medicare spent $1.06 billion (pre-rebate) in 2016, despite its manufacturer losing its patent exclusivity in early 2015.
When HHS released this report, we were fascinated by the fact that the highly competitive Medicare Part D program collectively produced such a perplexing outcome. Nexium not only had ample generic competition in 2016, but it had significant therapeutic competition from other inexpensive medications prescribed to regulate and/or suppress gastric acid secretion.
Motivated to understand the root cause of the elevated spending on this high-profile brand-name drug in 2016, we started to research the story of Nexium, and the old drug from which it was derived, Prilosec. It didn’t take long to figure out that Nexium has been a lightning-rod of a topic for more than a decade. Numerous journalists have written about the myriad tactics used by its manufacturer, AstraZenca, to block the generic market for Prilosec from taking hold while it transitioned patients from Prilosec to Nexium. But the press has not been completely negative. AstraZeneca was lauded by business school strategists and national marketing agencies for its ability to manifest a $35+ billion U.S. Nexium franchise out of the ashes of Prilosec – a drug that had lost its exclusivity, and as a result, essentially all its value for AstraZeneca in the U.S.
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