China is in the process of positioning itself to compete in the major world generics markets, according to a report by Reuters.  The Chinese move is expected to drive down generics prices below current market rates.

 Reuters reported on the Chinese strategy as follows:

Pharmaceutical information group IMS Health Inc said last year’s first okay from the U.S. Food and Drug Administration for a Chinese generic — a copy of AIDS drug nevirapine — was a sign of things to come. . . .

Zhejiang Huahai Pharmaceutical Co Ltd won a U.S. green light last July to sell generic nevirapine, once the patent held by Germany’s Boehringer Ingelheim expires in 2012.At least 10 other Chinese companies are set to follow suit with other generic products, according to IMS. Some could be available as early as this year. The result will be increased competition in a generic drugs industry that is already struggling with tumbling prices.

"In order to ensure their success in the market, the Chinese manufacturers are likely to undercut all others on price," IMS said in its annual Intelligence.360 report.

According to Reuters, the one potential roadblock that Chinese companies are likely to encounter is the fact that they do not have a good reputation for quality, particularly in light of the recent heparin scandal.  This may give Indian companies, which are also trying to enter the generics market, a competitive advantage.

As a consumer, I welcome the additional competition, which will ultimately result in lower prices at the drugstore.  With all the recent Chinese safety scandals, however, I cannot help but wonder if the increased presence of Chinese generics companies in the marketplace is going to end up generating even more safety problems for American consumers–and perhaps even more legal problems as well.  Hopefully the FDA is following what is happening in China and responds accordingly to better ensure that U.S. consumers are not purchasing unsafe Chinese products.

Bioworld Today is reporting that the FDA and Congress will be joining forces to develop follow-on biologics legislation.

According to Bioworld Today, the Bush Administration indicated in the 2009 federal budget package released last week that “it would seek regulatory authority for the FDA to approve follow-on biologics, also called biosimilars or biogenerics, which would be financed through user fees. Currently, no such approval pathway exists for follow-on biologics.” Both the House and Senate had introduced follow-on biologics legislation last year, and planned to move the legislation forward in 2008.

What is the FDA’s current vision for the legislation?

Bioworld Today reported:

In a document titled “Other Legislative Items” that is part of the White House fiscal year 2009 budget, the administration said the follow-on biologic legislative proposal would include a “predictable and public guidance process for licensing follow-on protein products” under the Public Health Service Act.

“The proposal will prescribe the type of data required for FDA to review applications for follow-on protein products and will require labeling for the safety concerns related to the interchangeability of these products,” the Bush administration said.

The proposal also will include “adequate intellectual property protections to preserve continued robust research into new and innovative life-saving medications,” the document stated.

The news was viewed as a promising development  by both Sen. Charles Shumer (D-N.Y.) and Department of Health and Human Services Secretary Michael O. Leavitt, both of which were interviewed by Bioworld Today.  Similarly, Jim Greenwood, CEO of the BIO industry organization indicated his support for the FDA approach, as well as Kathleen Jaeger, CEO of the Generic Pharmaceutical Association (GPhA), who also expressed her approval for the development.  Having said this, the Bio Job Blog took issue with the FDA’s decision, stating:

I don’t think that Congress’s involvement is a good idea given the political wrangling, deal-making and concessions that must be made in order to get legislation passed.

Is the Bio Job Blog right to express concern about how this new joint effort will pan out?

Well, there is no doubt that the legislative process is time-consuming and is inevitably intertwined with politics and political compromises.  However, it is also true that a collaborative effort can greatly speed up the process, and having the administration on board means that any agreed-upon legislation is unlikely to end up with the words “vetoed” stamped on its front.  I would have to say that on the whole the development is a positive one, and suggests that we are one step closer to voting into law follow-on biologics legislation, which even Bio Job Blog concedes is likely, stating:

It looks as though follow-on biologics may become a reality in the US. . .  . I don’t think Americans will see follow-on biologics on the market before 2010 or 2011. That said, it gives us Americans something to look forward to!

Pfizer may serve as a good case study for the potential impact of new generics legislation, in light of its reports today of plunging profits due to generic competition.

Dow Jones Marketwatch reported:

Pfizer Inc. said Wednesday its second-quarter profit fell 48%, largely due to generic competition for its top-selling drugs Zoloft, Norvasc and Lipitor. . . .

Pfizer’s top line has been under pressure in recent quarters because of the loss of patent protection for several of its once-popular products, such as Zoloft, Zithromax and, most recently, Norvasc.

Once a patent expires, other drugmakers are legally permitted to make generic versions of the drug, which are often sold at considerable discount.

Pfizer has said that it expects revenue to be largely flat until 2009, when it sees sales of newer products compensating for those lost to patent expirations.

The House has passed legislation that will overhaul the Food and Drug Administration, but has declined to address the provisions of the legislation dealing with generics, which previously passed in the Senate.

The Wall Street Journal reported:

The House FDA bill, approved 403-16, mostly parallels a bill that passed the Senate in May. Both versions would devote more money to monitoring the safety of marketed drugs and increase the agency’s authority over medications that raise safety concerns. The agency would have the clear ability to order follow-up studies, restrict distribution and enforce changes to the medications’ labels. The bills don’t grant the FDA the power to force a moratorium on direct-to-consumer advertising, a tough restriction that was discussed earlier, though the agency would be able to levy fines for false and misleading promotions.

The conflict between the House and Senate legislation means that we can expect more debate over generics in the coming months.

According to The Wall Street Journal’s Health Blog, house leaders appear to be “cooler on biogenerics than their counterparts in the Senate.”

Does the House’s action signal the death knell for generics legislation this year?  It may be too soon to say for certain, but it is clear that the legislation still has a rocky road ahead.

Of course, even if the House ends up passing the legislation ultimately, it’s unclear whether it will be supported by President Bush.

The Los Angeles Times reported:

It’s unclear how the White House will react to the finished product. Before the Senate voted in May, the administration said it agreed with the goals of the legislation but had serious concerns about aspects of the risk plans.

So, if the generics provisions of this legislation were not passed by the House, what did make it through?  The Los Angeles Times explained as follows:

The House bill follows the same basic approach to safety as the Senate version, but consumer groups said it would give the FDA stronger regulatory powers in some areas.

Both bills would set up a computerized network to scan medical insurance and pharmacy records for patterns that could signal problems with new drugs. The FDA now relies on anecdotal reports submitted by doctors and drug companies, which are believed to capture only a small fraction of bad drug reactions.

A computerized system could take several years to deploy. The Senate bill sets some benchmarks for the FDA; the House version does not. . . . .

The House bill also includes stiffer fines for drug companies that violate FDA requirements and tighter rules to reduce conflicts of interest among outside scientists who advise the agency.

There is little doubt that we are in for a long battle ahead on the generics issue.  The biotech world will be following this issue closely over the next few months to see how it unfolds.

The National Law Journal ran an article yesterday, which examined the strategy that patent holders are using to delay the entrance of generics on the market.

The article focuses on the controversial use of  “citizen petitions” brought before the Food and Drug Administration (“FDA”) to temporarily delay the approval of a generic drug as a patent is about to expire while the FDA investigates safety challenges raised in the petitions.

The National Law Journal reports:

“For a relatively small amount of money, a company can inflict substantial harm on a competitor,” said David Balto, a Washington attorney and former assistant director in the Federal Trade Commission’s Bureau of Competition.

“It becomes attractive to keep rivals off the market and there is no better example than the citizen-petition process,” Balto said. . . .

It is clear the objective of many petitions is delay for financial advantage. The petitions arrive for FDA review as the brand-company drug expires, and they are based on information available much earlier, according to Balto.

While the new legislation proposed last week specifically addresses the issue of curbing these delaying tactics, The National Law Journal suggests that this will not necessarily provide a real solution to the issue, and may in fact just generate litigation, which could have the effect of generating even more delays than what are currently being caused by the petitions.

The National Law Journal explains as follows:

The U.S. Senate last week inserted petition reforms in a major FDA overhaul bill. The measure would not allow a petition to delay FDA approval of a generic unless delay is necessary to protect public health. As a check on competitors, petitioners must verify who is making the challenge and whether they expect to be paid for filing the petition. Congress must get annual reports on delays to generics based on the petitions.

[Scott Lassman, senior assistant general counsel for Pharmaceutical Research and Manufacturers of America (“PhRMA”)] said  PhRMA opposes the citizen-petition reforms and predicted that, if the measure becomes law, it may produce even more litigation. “These new requirements are so onerous, companies may decide to go to court to seek whatever they are seeking currently in petitions,” he said.

As I have indicated in prior blogposts, there are no easy answers to the tug of war between generics and brand-name drugs.  While there certainly is a push by the insurance industry and certain members of the left to make generics more available faster, there is very real tension on the part of biotech and pharmaceutical companies to prevent this from happening, so that they have an opportunity to fully realize the value in their investment.   The National Law Journal article highlights one specific aspect of this generics-brand name controversy, particularly with respect to how both sides are using  legal maneuvering to promote their cause.

However, what I think we should take away from this article, is the idea that the new legislation, which purports to end the legal maneuvering may actually result in only creating more problems for both sides of the dispute.   Is that really what is intended?  It is ironic to think that at a time when Congress is busy debating patent reform, which is in part intended to curb patent litigation, the same legislative body is simultaneously considering legislation that could have the effect of generating even more patent-related litigation.  What is wrong with this picture?

In “The Impact of a Brand Generic Launch on the Recovery of Patent Damages” published in the Summer 2005 IPL Newsletter, James D. Veltrop and Chad A. Landmon explore the positive and negative effects of a brand name drug company making the decision to also launch a brand name generic. In light of the extensive litigation between brand and generics drug companies, the authors’ discussion raises some interesting issues to consider.

With respect to the two sides of the debate, the authors write:

On the one hand, the launch of the brand generic significantly reduces the profitability of the launch by the first generic competitor, who otherwise is often entitled to a six-month window of exclusivity before other generics can enter the market. In addition, the launch of its own generic allows the brand company to increase sales, albeit potentially at the expense of significant profits on its brand product. On the other hand, if the brand company also has patent claims against the generics, its launch of a brand generic might generate additional costs because any damages it might be entitled to recover could be substantially less than it might have recovered had it refrained from launching the brand generic in the first place. Because the brand generic would be a noninfringing alternative to the generic product, lost profits damages could be wholly or partially unavailable and the brand company would have to rely on a lower measure of damages than lost profits. . . . the launch of a brand generic might suggest that the brand company lacks confidence in either the merits of its patent claims or its ability to collect the full measure of damages from generic companies. Alternatively, it could suggest that the brand company is at least partially motivated by other factors, such as reducing the incentives of generic companies to challenge brand company patents.

According to the authors, the practice of launching brand name generics is thought by many generics companys to undermine the Hatch-Waxman Amendments, which made generics more widely available. Passed by Congress in 1984 in order to shorten the generics approval process,
the Hatch-Waxman Amendments enabled generics companies to launch a generic product simply by filing an Abbreviated New Drug Application (“ANDA”), which demonstrated that the generic product is bioequivalent to the brand drug that was already approved. In this manner, generics companies were able to quickly launch generics products, without having to bear the expense of producing safety and efficacy data. The authors go on to say, however, that

[H]aving recently passed the Medicare Modernization Act, it is doubful that Congress will take up again soon the Hatch-Waxman Amendments. Thus, the practice of launching authorized generics during the 180-day exclusivity period likely will remain a key brand company strategy for some time to come.

While the authors present an excellent summary of the issues involved with this debate, as a consumer myself, I wonder why brand name drug companies are pursuing this strategy at all, despite the litigation that is arising out of the generics-brand name disputes. How can companies think it makes good business sense to launch an expensive and then a cheaper version of its own products? While it is true that once a generic is available, some consumers will choose to buy the generic over the brand name product automatically, others will be reluctant to go with a generic simply because it was manufactured by a different company. However, if one company manufactured both versions of the drug, the majority of consumers would without a doubt simply purchase the cheaper version of the medication. In my mind, this practice seems to be a lousy business strategy that is out of sync with common sense. Although from a patent perspective, it may have some valid rationales, but from a business perspective, the brand generics strategy seems to undermine the company’s investment in the brand product.

As for the brand generics strategy itself, I can see why the generics companies dislike it, but I am conflicted as to whether or not it really undermines Hatch-Waxman. Certainly the practice has antitrust implications, but I suspect Congress intended to protect the public with Hatch-Waxman more so than the generics companies. Since the public receives a generic, regardless of whether or not it is a brand product, I don’t see how this undermines Hatch-Waxman. Apparently, however, my view is not a popular one among generic companies. Thus, the debate continues.