Healthy Skepticism Library item: 2757
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Publication type: news
Sargent C.
Glaxo, Pfizer Copy Own Drugs in Effort to Fight Generic Rivals
Bloomberg 2005 Nov 10
http://www.bloomberg.com/apps/news?pid=10000102&sid=aqyddiV3bs6M&refer=uk
Notes:
Ralph Faggotter’s Comments:
You don’t hear the big drug companies complaining so loudly these days about generics since they worked out several ways of extending patent times.
And besides- when your company does finally run out of cunning ways of repackaging the same old drug to fool the patenting authorities that you have a new product, then you just become a major generic manufacturer yourself.
Full text:
Glaxo, Pfizer Copy Own Drugs in Effort to Fight Generic Rivals
http://www.bloomberg.com/apps/news?pid=10000102&sid=aqyddiV3bs6M&refer=uk
Nov. 10 (Bloomberg) — The day after a copy of GlaxoSmithKline Plc’s Paxil hit stores in 2003, the company introduced its own cheaper version of the $3 billion-a-year depression drug.
In doing so, Glaxo deprived Apotex Inc. of six months of market exclusivity it had expected under a U.S. law designed to nurture the generic drug industry. Weston, Ontario-based Apotex says the competition cost it as much as $400 million in sales.
Glaxo’s tactic, since endorsed by the U.S. Food and Drug Administration, represents the latest bid by big pharmaceutical companies to fend off generic drugmakers, which produce $58 billion of unbranded medicines a year. The biggest makers of such treatments, Teva Pharmaceutical Industries Ltd. and Mylan Laboratories Inc., are lobbying for new laws to stop what they say is an unfair practice that may increase drug prices.
``The threat is tremendous to independent generic drug companies,’‘ says Bryan Liang, 42, head of the Institute of Health Law Studies at California Western School of Law in San Diego. ``What’s developing is a generics industry that is simply an agent of brand-name firms, not a robust industry aggressively competing to overturn invalid patents.’‘
A 1984 law sponsored by U.S. Representative Henry Waxman, a California Democrat, and Senator Orrin Hatch, a Utah Republican, gave 180 days of market exclusivity to the first company to win approval for a copy of a treatment whose patent was expiring.
`Might as Well Participate’
The FDA dealt a blow to generic drugmakers on July 2, 2004, by ruling that the law doesn’t ban patent holders from selling unbranded versions of their own drugs once they fall into the public domain. The Washington-based agency said the practice increases competition and brings down prices.
London-based Glaxo’s Paxil sells for $3.37 a pill for a light-green, 40-milligram dose in the U.S. The company’s generic white version, sold in partnership with Par Pharmaceutical Cos., goes for $2.88. Apotex’s copy, also white, sells for $2.97. They’re all the same chemical compound — paroxetine.
``Once the product goes off patent you might as well participate in the market afterward,’‘ says Christopher Viehbacher, 45, president of the U.S. pharmaceuticals unit of Glaxo, Europe’s biggest drugmaker. ``It doesn’t compensate for what you lose, but it does help on the bottom line.’‘
In June, the U.S. Court of Appeals for the District of Columbia Circuit upheld the sale of so-called authorized generics when it rejected Teva’s effort to stop Pfizer Inc. from selling an unbranded version of the epilepsy drug Neurontin. New York-based Pfizer is the world’s biggest drugmaker.
Damping Competition
Scrapping the exclusivity period may kill the incentive to fund research into generic drugs, hurting competition and ultimately producing higher prices, says Heather Bresch, a spokeswoman for Canonsburg, Pennsylvania-based Mylan. Rivalry over anything but the best-selling drugs may cease altogether, she says.
``The Hatch-Waxman law struck a balance between competition and innovation, and that was the backbone of the generic industry,’‘ says Bresch, who calls the 180 days ``sacred.’‘
Generic drug companies used to generate about 80 percent of first-year sales and profit from a particular treatment during that period, according to Stephen Mock, a spokesman at Woodcliff Lake, New Jersey-based Par.
The sale of authorized generics may become more prevalent with the patents on drugs representing $103 billion in annual sales expiring by 2010, according to a forecast by London-based market researcher Datamonitor Plc.
`To the Very End’
Par Pharmaceutical shares have fallen 25 percent to $25.47 in New York since the FDA decision, and Mylan stock is down 1.3 percent to $19.93. The shares of Glaxo, Europe’s largest drugmaker, have risen 37 percent to 1,524 pence in London, and Paris-based Sanofi-Aventis SA’s stock has advanced 30 percent to 67.80 euros.
Teva shares have gained as the result of a series of acquisitions, including the planned $7.4 billion purchase of Miami-based Ivax Corp., that helped it regain its place as the world’s largest maker of unbranded drugs. Shares of Petah Tikva, Israel-based Teva are up 23 percent to 183 shekels.
``Pharmaceutical companies have always wanted to defend sales of their drugs down to the very end,’‘ says Eric Bernhardt, who helps manage a $70 million generics fund, which includes Teva and Ivax shares, at Clariden Bank in Zurich. ``Now, because of pricing pressure and patent expiration on bigger and bigger drugs, they’re saying, `OK, let’s take this authorized generics route too.’‘’
Lobbying Congress
Glaxo’s ulcer treatment Zantac, the best-selling drug in 1995, generated about $4 billion in sales that year. Last year the current top seller, New York-based Pfizer Inc.‘s cholesterol reducer Lipitor, had sales of $10.9 billion.
The FDA approved just 21 new drugs in 2003 and 31 last year, down from 53 in 1996, the highest number since 1962, when the regulator decreed that drugs had to be proven both safe and effective to be sold to the public.
Generic drug companies are lobbying Congress to reinstate the exclusivity period after losing a series of lawsuits challenging the FDA decision.
The U.S. Federal Trade Commission opened an investigation after a May 9, 2004, letter from three U.S. senators — Republican Chuck Grassley of Iowa and Democrats Patrick Leahy of Vermont and Jay Rockefeller of West Virginia — that said there were concerns the sale of authorized generics would reduce the number of generic products and lead to higher prices.
`Unfair Practice’
The commission’s spokeswoman, Nancy Ness Judy, said the agency is studying whether authorized generics are anticompetitive. She wouldn’t give any details.
The generics industry is asking Waxman and Rockefeller, together with Senators John McCain of Arizona and Chuck Schumer of New York, to introduce an amendment ensuring the exclusivity period, even in cases where patent holders are concerned, according to Mylan’s Bresch.
``I’m confident we will work to overcome the unfair practice of authorized generics and the many others that will inevitably sprout up in its place,’‘ Waxman said Sept. 20 at a meeting of the Generic Pharmaceutical Association in Washington.
Waxman is waiting for the results of the Federal Trade Commission study before deciding how to proceed, says Molly Gulland, a spokeswoman for the congressman.
Distinctions Blur
The issue of authorized copies has split the generic drug industry. Companies such as Apotex and Mylan have refused to cooperate with big pharmaceutical companies. Others, including Par and Watson Pharmaceuticals, do collaborate. Par entered the agreement to market Glaxo’s unbranded version of Paxil after deciding that such partnerships were a growing part of the industry it couldn’t afford to miss out on.
``We also think authorized generics violate the spirit of Hatch-Waxman,’‘ Par’s Mock says. ``However, the reality of it is that up until now neither the FDA nor the FTC has taken any steps toward supporting the position that it’s anticompetitive.’‘
The company now assumes the introduction of an authorized generic in its financial planning for products that would otherwise have exclusivity, says Mock.
Teva hasn’t cooperated on any authorized copies, but that may change.
``Absent a legislative change, for the moment, authorized generics are part of our landscape,’‘ George Barrett, head of Teva North America, said on a July 26 conference call with analysts. ``We will, as always, adapt to changes in our legal and regulatory landscape and let the economics speak for it.’‘
The practice may become more difficult to regulate as the line between traditional innovative drug companies and unbranded producers blurs.
Zocor Challenge
Some big drugmakers, including Pfizer, have built up their own generic units. Sanofi-Aventis Chief Executive Officer Jean- Francois Dehecq, 65, said in June he was aiming to make small acquisitions to expand the company’s generic drugs business to help defend its older products.
Novartis AG’s Sandoz division, based in Holzkirchen, Germany, has gone a step further, signing agreements with other companies to market authorized generic versions of their drugs, including Bristol-Myers Squibb Co.‘s Monopril heart medication.
Among the biggest brand-name drugmakers, Roche Holding AG of Basel, Switzerland, and Johnson & Johnson of New Brunswick, New Jersey, are also producing generic versions of their own medications.
A turning point in the generic drugmakers’ battle to end authorized generics may come next year when the patent expires on Merck & Co.‘s cholesterol-lowering drug Zocor, which had 2004 sales of $5.2 billion.
If the Whitehouse Station, New Jersey-based company decides not to introduce an authorized generic, there’s a chance the industry as a whole can be persuaded to drop the practice, Apotex Chief Operating Officer Jack Kay says.
``The proof is in the pudding,’‘ Kay, 64, says.
It’s too early to say what Merck will do, says Janet Skidmore, a company spokeswoman.
To contact the reporter on this story:
Carey Sargent in Geneva at csargent3@bloomberg.net.
Last Updated: November 9, 2005 19:00 EST
