Ignoring Drug Trademarks

Abstract

If you walk into a pharmacy with a prescription for Merck’s ZOCOR, which contains simvastatin, the pharmacist will probably give you a product containing simvastatin made by another company. The pharmacist will dispense a “generic” simvastatin product. State generic substitution laws, passed in the 1970s to help the government save money by switching patients to cheaper generic drugs, either permit or require this substitution. But drug brand names -- such as ZOCOR -- are trademarks. Like other trademarks, they distinguish goods in the market from others, and they signal the source of the goods. These state laws essentially treat the words as something else. As soon as generic drugs are available, state law instructs the pharmacist to read the brand name -- written by the doctor -- as an instruction to dispense a different company's product. This is the opposite of how trademarks are supposed to operate. This Article examines the history of substitution and drug trademarks over the last century and a half, as well as the relationship between the two, against the backdrop of an evolving drug industry, an evolving drug regulatory framework, and improvements in regulatory science. It shows that the generic drug substitution laws are an anomaly in our legal system. Substitution at the pharmacy was illegal, and it still is otherwise illegal. The substitution laws of the 1970s created an exception in pharmacy law and broke with long-standing policy in food and drug law as well as unfair competition law. This Article also shows that the substitution laws were intended to, and did, undermine proprietary (trademark) rights. This was done to achieve savings for payers, after efforts to mandate generic prescribing failed. As the Article points out, much has changed since the 1970s. The regulatory framework has changed, regulatory science has evolved, drug research and development has evolved, the industries have changed, the healthcare finance system is utterly different, the relationship among parties in healthcare delivery has evolved, and so on. The Article therefore concludes by reconsidering (and criticizing) the exception for generic drug substitution, with the benefit of a clear understanding of the relationship between a brand drug and its generic equivalents and a clear understanding of the role for drug trademark after patents have expired. The exception prioritizes short-term cost savings over the dynamic pro-competitive benefits of a properly functioning trademark system. And although the laws are more than 40 years old, this point is important today, because hostility to drug trademarks and devotion to generic substitution laws inform scholarship and policy proposals today.