Accupril

WASHINGTON -- Facing the loss of patent protection on branded pharmaceuticals, drug companies increasingly are making deals with generic drug makers to bring authorized generic versions of their drugs to market.

The practice minimizes the financial impact on branded drug companies and benefits generic drug makers that sign licensing agreements to market and sell the authorized generic versions.

Proponents of the process say it benefits consumers by offering better prices and increased access to generic drugs. Others, however, are crying foul, claiming the marketing of authorized generics lessens the incentive for generic drug makers to bring new drugs to market because of increased competition and decreased profit margins.

The U.S. Food and Drug Administration issued its ruling on the practice early last month.

In one swift action, the FDA denied petitions the nation's largest generic drug makers submitted, each seeking to end the sale of authorized generics during the six-month honeymoon period when only one generic drug is allowed on the market.

Teva Pharmaceuticals USA and Mylan Pharmaceuticals both filed petitions seeking to prohibit the marketing and distribution of authorized generics during the 180-day exclusivity period built in as a condition of the Hatch-Waxman Act. The exclusivity period is meant to provide an extra incentive for generic drug makers to be the first to file an abbreviated new drug application. Generic drug makers with first-to-file status enjoy a period of 180 days when they can sell generic drugs at a higher price before other generic competition hits the market.

Some generics companies and industry supporters contend that authorized generics sold during the 180-day exclusivity period undermine the law's intent.

But for others, the unlikely alliance between powerful pharmaceutical companies and generics companies offers a mutually beneficial relationship where distribution and manufacturing agreements allow innovator companies to continue to manufacture drugs at their plant and give generics companies distribution rights in exchange for royalty payments. The agreement also eliminates patent disputes and lengthy court battles.

"Even if prohibiting the marketing of authorized generics were desirable, the FDA lacks the statutory authority to establish such a policy," said William Hubbard, associate commissioner for policy and planning for the Department of Health and Human Services.

He added that pharmaceutical companies make a variety of competitive arrangements to market their approved products without interference from the FDA. Generics companies, for instance, routinely arrange with other drug manufacturers to distribute an approved drug product under the distributing entity's label or trade name. Such agreements can expand a generic drug maker's marketing capacity, enhance its ability to service a geographic market or fill a gap in its product line.

For generic drug makers without a robust pipeline, entering an agreement with an innovator company gives them an opportunity to market a drug that they may not have had otherwise, said Doug Long, vice president of industry relations at IMS Health.

In its petition, however, Mylan argued that the FDA should establish an approval process for authorized generics under which innovator companies would be required to submit pre-approval supplements and that the drug products should receive only tentative approval if there is an ANDA applicant eligible for the 180-day exclusivity period for the same drug product, with final approval granted only after the end of the 180-day exclusivity period.

Teva, in its petition, further argued that the FDA should require new drug application holders to submit supplemental NDAs if they planned on marketing or distributing a version of their product that "purports to be, resembles or could be confused with a generic version" during the 180-day exclusivity period. In its petition, Teva specifically asked the FDA to require Pfizer to submit an NDA for Accupril (quinapril), marketed for the treatment of hypertension, with annual sales of approximately $598 million. The FDA granted Teva final approval for its ANDA for quinapril in June 2003, and Teva, as the first company to file, received 180-day marketing exclusivity. Patent disputes, however, have kept the generic drug from entering the market.

"To the extent that the 180-day exclusivity period is diminished, it makes it financially difficult for a generic company to bear the cost of litigation," said Christine Simmon, vice president of public affairs and development for the Generic Pharmaceutical Association. "That could ultimately discourage such patent challenges. During the 180 days that the generic company is awarded exclusivity, they can recoup substantial costs."

During the exclusivity period, generic drugs generally are priced at about 30 percent less than the branded drug, When the exclusivity period ends and more generics companies enter the market, the price of the generic drug can drop to 70 percent less than the branded drug.

It is the GPhA's position that authorized generics shut out generics companies from recouping substantial costs during the six-month window when generic drugs are priced higher.

"It certainly makes it difficult for generic companies that operate on slim margins to take on patent challenges," Simmon said. "What that ultimately means is consumers who rely on generics to keep prescription costs manageable, as well as state and private health purchasers, will certainly be impacted."

Apotex Corp., which submitted comments to the FDA in support of Mylan's petition, went one step further in saying: "By granting first applicants this exclusivity period, Congress intended to stimulate the development and marketing of new generic products, and, for this reason, the 180-day exclusivity period is best seen as a pro-competitive legislative measure. But the promoters of authorized generics are attempting to deprive first applicants, and ultimately the public, of the pro-competitive benefit of the Hatch-Waxman Act. For this reason, authorized generics are anti-competitive."

Will the FDA's decision mean fewer generic drug makers will make the effort to be the first to file if the financial incentives are diminished? "The preferred position is a valuable position to be in," Long said. "But only time will tell."

A history of authorized generics

* In 1992-93, the Stewart Pharmaceuticals Division of ICI Americas (now AstraZeneca) marketed an authorized generic version of Nolvadex (tamoxifen) by Barr Laboratories.

* In 1994, SmithKline Beecham Pharmaceuticals (now GlaxoSmithKline) marketed an authorized generic version of Dyazide (triamterene/ hydrochlorothiazide).

* In 1995, Dey LP marketed an authorized generic version of GSK's Ventolin (albuterol) inhaler, and Warrick Pharmaceuticals, a subsidiary of Schering Corp., marketed an authorized generic version of Schering's Proventil (albuterol) inhaler.

* In 1997, Barr marketed an authorized generic version of Bayer Pharmaceutical Corp.'s Cipro (ciprofloxacin).

* In 1999, Mylan marketed an authorized generic version of Pfizer's Procardia XL (nifedipine).

* In 2003, Par Pharmaceutical marketed an authorized generic version of GSK's Paxil (paroxetine hydrochloride) and Glucophage (metformin hydrochloride).

* In 2004, Watson Pharmaceutical marketed an authorized generic version of Procter & Gamble's Macrobid (nitrofurantion), and Teva Pharmaceuticals marketed an authorized generic version of Bristol-Myers Squibb's Paraplatin (carboplatin).

Source: Department of Health and Human Services

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