Simple. It makes a very minor modification to an existing drug and hails that as the great new thing. It can charge just as much as it would for a truly innovative drug, so keeping its board and shareholders happy.
The only losers are the patients and the health authority buying the drug, but both of these have always been low priorities, as far as the drug industry is concerned.
Canadian health inspectors recently decided to investigate the practice to find out just what impact it had on the government's purse strings. Between 1990 and 2003, Canada's health watchdogs approved 1147 'new' drugs but, of these, just 68, or 5.9 per cent, were genuinely novel compounds. The rest were just copy-cat drugs, also known as 'me-too' drugs.
Despite the fact that Canadians were getting no real benefit from this enormous activity, the costs for the health authorities doubled over the period. Of this, 80 per cent was spent on 'new' drugs that actually weren't.
Canada's inspectors are confident that every health authority in the developed world would discover a similar pattern (BMJ, 2005; 331: 815).