Industry divided on authorized generics issue

One of the most challenging issues facing generic drug manufacturers is that of authorized generics. An authorized generic is a pharmaceutical originally produced by a branded manufacturer but, upon patent expiration, is marketed under a generic name.

Because many authorized generics are launched by subsidiaries of the branded companies, bringing them to market is easy. Authorized generics can bypass the rigorous FDA approval process and do not have to adhere to the 180-day market exclusivity provision granted by the Hatch-Waxman Act to the first generic on the market.

According to Kathleen Jaeger, president and chief executive officer of the Generic Pharmaceutical Association, the practice of authorized generics “is a brand tactic aimed at discouraging generic competition.”

The pipeline for authorized genericsSource: First Databank; MediSpan; Orange Book; FDA; Merrill Lynch; company reports
Brand companyBrand productAG companyApprox AG launch datePartnership vs. settlementTiming of AG launch vs. first ANDA launch
Sanofi-AventisKlaronPrascoJan-07PartnershipAfter
AlavenRowsawaPrascoJan-07PartnershipAfter
ValeantEfudexOceansideJan-07SubsidiaryBefore
Warner ChilcottOvcon-35WatsonJan-07PartnershipAfter
DavaVospire ERDavaFeb-07SubsidiarySimultaneous
GlaxoSmithKlineZantacParMar-07PartnershipSimultaneous
SchwartzUnireticKremers UrbanMar-07SubsidiarySimultaneous
PfizerNorvascGreenstoneMar-07SubsidiarySimultaneous
GracewayMetroGel VaginalPrascoApr-07PartnershipAfter
Sanofi-AventisAmbienPrascoApr-07PartnershipSimultaneous
Sanofi-AventisDermatopPrascoApr-07PartnershipAfter
GracewayMetroGel VaginalPrascoApr-07PartnershipAfter
AbbottOmnicefDavaMay-07PartnershipSimultaneous
AbbottOmnicefDavaMay-07PartnershipSimultaneous

Since 2003, 103 authorized generics have been launched onto the U.S. market. Generic companies launched 69 percent of these drugs while brand subsidiaries launched the remainder.

Those statistics beg the question, Why would generic companies who are only hurt by competition from authorized generics, get into that business themselves?

“The one-word answer is revenue,” according to Eric Bolesh, research team leader with Cutting Edge Information. “If you can guarantee investment, it’s hard to turn it down. This is money going in the door and it’s money Wall Street is going to see.”

It also gives smaller generic companies an opportunity to get drugs out there, if they work for the branded companies, he added. “A small company is never going to invest in R&D and in having a law firm to bring the branded companies to court. So authorized generics make sense.”

While GPhA may be firmly against authorized generics, the Pharmaceutical Research and Manufacturers of America last year issued a report stating that authorized generics save consumers money by increasing price competition among drug makers. The report says that the generics are sold to pharmacies and health care facilities at greater discounts than regular generics.

These savings are hard to ignore, said Mark Merritt, president of the Pharmaceutical Care Management Association, which supports payers and consumers “I think it’s unclear whether, long-term, the generics companies will be hurt,” he said. “It’s very hard for us to turn down short-term savings until we know more about the long-term [impact]. It’s a trickier issue than it seems.”

Bolesh questioned the savings, citing studies that have shown prices actually drop more significantly in the long-term if there are many generic products on the market. But, the number of generic products that are launched is typically less if an authorized generic is present during the 180-day exclusivity period.

While the debate over authorized generics continues, bills have been introduced to both the House of Representatives and the Senate, asking for authorized generics to be blocked during a generic drug’s 180-day period of exclusivity. The Federal Trade Commission also is conducting a study of the use, and likely short- and long-term competitive effects, of authorized generics in the prescription drug marketplace, but as yet has drawn no conclusions.

Branded pharmaceutical companies and their authorized generic subsidiariesSource: Prasco
Brand companyAuthorized generic subsidiary
PfizerGreenstone
BradleyA. Aarons
Johnson & JohnsonPatriot
ForestInwood
Boehringer IngelheimRoxane
EndoEndo Generics
Schering PloughWarrick
AllerganPac Pharma
UCBUpstate
ValeantOceanside
SchwarzKremers Urban

Authorized generics are not the only thing that’s being thrown at generic companies by the branded pharmaceutical giants.

The number of citizen’s petitions, in which the FDA is asked to review a NDA based on legal or scientific reasons, that are filed is on the upswing and there is no sign that the pace is slowing down.

“These petitions have always been around,” said Bill Rakoczy, a partner at law firm Rakoczy Molino Mazzochi Siwik, who represents generic companies. “But they’re increasing because of the sheer number of generics [on the market now]. The brand companies have nothing to lose and it costs them nothing.

“It’s out of control and has almost become a knee-jerk reaction by the branded companies,” he said. For almost every generic that’s launched these days, he noted, there’s an accompanying citizen’s petition.

Citizen’s petitions are typically launched just before a generic drug is approved, which holds up the approval process and gives the branded equivalent more market exclusivity.

The FDA is not doing anything to protect generic companies against these petitions, although Sen. Kennedy has launched S.1082 legislation, the Food and Drug Administration Revitalization Act, which has a provision to remedy the delays wrought by them. It would also force the FDA to make decisions on them, so as not to delay the launch of generic drugs.

“So there could be some movement in Congress in the next year,” Rakoczy said. “It’s become such a problem that Congress has had to step in, because the agency, for some reason, hasn’t.”

Don Mizerk, an attorney with law firm Winston & Strawn also is confident that there are changes ahead. “I’m optimistic…that the FDA will be prohibited from delaying approvals while they are considering a citizen’s petition. And they’d have to act on them within 180 days, which would encourage brand companies to file them sooner.”

The FDA is in a difficult situation, he said, because if a citizen’s petition shows safety concerns, “[the FDA] is reticent to issue an approval until that concern is addressed,” since safety concerns are paramount.

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