Generic drugs dominate market, look to expand into biologics

Key Points

Since enactment of the Hatch-Waxman Act 25 years ago, the generic drug industry in the United States has grown exponentially. Generic drugs now account for 70% of prescriptions in the United States, as health plans, payers and pharmacy benefit managers (PBMs) promote these less-costly, bioequivalent medications as a way to reduce healthcare costs and to facilitate patient access to important treatments. Sales have tripled in the past decade, from $15 billion in 1999 to nearly $50 billion today. Industry analysts anticipate further growth, as brand-name products with about $60 billion in sales lose patent protection over the next 2 years.

One aim of the landmark Drug Price Competition and Patent Term Restoration Act of 1984 was to maintain a balance between encouraging generic product development, and providing incentives for innovation. This goal has been tested over the years by efforts on both sides to "game the system."

Generics makers have aggressively challenged drug patents before scheduled expiration, while brand-name manufacturers have delayed generic entry through 30-month stays, citizen petitions, and deals to "authorize" generic products that are less threatening to the brand.

With procedures for developing and marketing generic drugs well established, generics makers are looking for future growth in follow-on versions of more complex dosage forms and "biosimilars" of large molecules. Health reform legislation is slated to establish a pathway for FDA to approve follow-on biologics (FOBs), something that wasn't included in Hatch-Waxman.

Policy makers on Capitol Hill generally agree on how much clinical research FDA should require to document similarity between an innovator and FOB, and on difficulties for establishing interchangeability.

But patent exclusivity remains contentious. Generic drug companies strongly oppose the 12-year market exclusivity policy proposed in reform legislation, claiming it will discourage development of generic biologics and also stymie innovation.

There's also dispute over the framework for resolving patent disputes. Proposals differ for requiring disclosure of patent information, for challenging patent terms, and for communicating pending challenges to the involved parties. Generics makers won a requirement in Senate legislation to apply the same Medicare billing codes for brand and follow-on products, an approach that encourages biosimilar utilization. But that's a relatively minor item in the bigger debate.

CARVE-OUTS & SETTLEMENTS

Generics makers also would like Congress to support their fight against several policies designed to curb or delay product utilization. One challenge comes from state "carve-out" laws that limit generic substitution at the pharmacy. Such policies arise from anxiety, often generated by brand competitors, that a generic drug raises safety issues for patients. Congress' Government Accountability Office may investigate.

Another point of dispute involves marketing of authorized generic products by pharma companies just before patent expiration, which usually results in limited generic competition during the 180-day exclusivity period. The looming wave of major patent expirations is prompting development of more "branded generics," produced either by the original manufacturer or under contract with a generics firm. Brands are expanding their capacity in this area through the purchase of generics firms around the world.

Interestingly enough, both brands and generics want flexibility to settle patent disputes through agreements that involve pharma payments to generics firms to delay market entry until an agreed-on future date. While the Federal Trade Commission (FTC) and other critics have labeled these "pay-for-delay" deals as anti-competitive, manufacturers on both sides claim that such arrangements can avoid lengthy patent battles and end up accelerating consumer access to generic products. The FTC has gone to court to block delay settlements, and Congressional leaders may try to curb these deals.

ENSURING QUALITY

Generic-brand market competition also affects FDA regulatory programs, as innovator firms challenge the safety and quality of certain generic products, particularly for more complex dosage forms. Agency officials maintain that its test procedures and standards ensure that an approved generic drug will yield the same clinical results and safety features of the reference product. Such assurance, though, requires clear documentation that generic drugs meet manufacturing standards and comply with regulatory requirements.

Here, generics makers could do more, according to drug regulators, as a number of product recalls and FDA warnings have tarnished the industry and aggravated public concerns. Last year, FDA banned the import of Ranbaxy products from two plants in India. In recent months, FDA hit KV Pharmaceutical and Caraco Pharmaceutical Laboratories with consent decrees, launched an extensive recall of products from Actavis' New Jersey plant, and banned imports from Canada's Apotex.

One result is public skepticism about the equivalence and safety of generic drugs, a development that troubles Gary Buehler, director of FDA's Office of Generic Drugs (OGD). At the October technical conference sponsored by the Generic Pharmaceutical Association (GPhA), he expressed concern about a wave of anti-generic claims in consumer publications and television programs that feature patients' charges about extreme adverse reactions to generic therapies. The fuel for this fire may stem from FDA approval of generic versions of newer epilepsy treatments, which has generated complaints from neurologists about poor patient response and adverse events.

Helen Winkle, director of the Office of Pharmaceutical Science at the Center for Drug Evaluation and Research (CDER), FDA, urged manufacturers to be more vigilant in monitoring manufacturing processes and supply chains. As the demand grows for more affordable generic drugs, Buehler noted, it's important for the public to have confidence in these treatments. "Many Americans are waiting for our products," he said, "but we want them to be the products they are waiting for."

At GPhA's annual meeting, FDA deputy commissioner Joshua Sharfstein called on generics industry leaders to assume more responsibility for informing doctors and patients about how to use drugs safely. He cited how overdoses of acetaminophen can cause liver damage and urged greater industry collaboration on such important public health issues, as described recently in FDA's Safe Use initiative.

SPEEDING APPROVALS

Sharfstein also responded to manufacturer complaints that it still takes almost 2 years to gain approval of a generic drug application, and that backlogs in pending applications continue to rise. He said that reducing the generic application backlog was a top priority for FDA's leadership, but that a user fee program was needed to achieve this goal.

OGD receives more than 800 abbreviated new drug applications a year (up from about 350 in 2002) and approves about 600; the result is more than 1,600 pending applications. Congress earmarked an extra $10 million for OGD in its 2010 budget, but user fees would provide more reliable funding to expand the office.

At the GPhA meeting, both Sen. Orrin Hatch (R-Utah) and Rep. Henry Waxman (D-Calif.) agreed on the need for increased funding for OGD and for generic drug user fees. This would expedite the review process for generics, said Hatch, and speed consumer access to medicines. Waxman noted that a user fee program should come with "real accountability" on review processes and regulatory transparency.

SUPPORT FOR SCIENCE

Another way to address quality and safety concerns, added Winkle of FDA, is for the generics industry to provide greater support for efforts to "strengthen the science underpinning FDA regulatory decisions." FDA researchers are examining new methods for testing generic drugs, such as the effects of excipients on bioavailability and new sequential designs for testing highly variable drugs.

The National Institute of Neurological Disorders and Stroke at the National Institutes of Health is studying pharmacokinetic results of patients who have reported problems with generic epilepsy treatments to assess whether generic anticonvulsants do pose safety problems for some patients.

In addition, payers and PBMs seek information to support coverage and prescribing decisions for newly approved generics. In anticipation of generic versions of the anti-clotting drug clopidogrel (Plavix), for example, Medco has launched a large observational study comparing deaths and heart problems of patients prescribed clopidogrel to those using the newer drug prasugrel (Effient). The study will identify patients able to metabolize clopidogrel normally through pharmacogenetic assessment. The aim is to determine whether certain patient populations could fare well on low-cost generic clopidogrel when it appears in 2 years, while a smaller group that does poorly on clopidogrel should be allowed to stay with the more expensive brand prasugrel.

Ms Wechsler is a Washington-based reporter specializing in federal and state healthcare issues.