Authorized Generics Practice and the Battle
Over Generic Exclusivity in the U.S. Market
Renita S. Rathinam
(rrathinam@sughrue.com)
Sughrue Mion, PLLC
Washington, D.C.
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Lecture Overview
Practice Overview
Statutory Background
Policy Debate
FDA Position
Challenging the Legality of AG Practice
in U.S. courts
VI. FTC Involvement
VII. Legislation
I.
II.
III.
IV.
V.
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Authorized Generics Practice Overview
Authorized Generics (AGs) Defined
Generally: pharmaceuticals marketed by or on
behalf of an innovator drug co., but sold under a
generic name
*a.k.a- “branded.” “pseudo” or “flanking” generic
Typical timing of AG market entry:
– end of the NDA holder’s exclusivity period
before generic competition or with the introduction
of a generic version of the brand name drug
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Authorized Generics Practice Overview
Historical Overview and Current practice
Practice can be traced back to the 1990’s
-CRS Report for Congress (Aug. 8, 2006) (“CRS Report”)
Authorized generics practice did not become
prominent until recent years
-Id; see also FDA Response, Docket Nos. 2004P-0075 &
2004P-0261, at 6-7
Today, AG practice for extending brand name
drug life cycles is significantly more widespread
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Authorized Generics Practice Overview
Bradley Pharmaceuticals- Pamine® (methscopolamine Bromide)
"While Pamine ®represented approximately 7% of Bradley Net
Sales, during the nine months ended September 30, 2006, we
proactively planned for this introduction and are pleased to be
in a position to successfully execute our strategy of extending
the life cycles of our established brands. The introduction of the
Pamine® generic expands the A. Aarons line of generic products
offered to the wholesale and chain pharmacy distribution channels.
The A. Aarons subsidiary was launched in January of 2006 and its
presence in the generic market is beginning to grow both in volume
and acceptance. Consistent with other products that have
experienced generic competition in our portfolio, we will continue to
manufacture and distribute branded Pamine®."
Statement by Bradley Pharmaceuticals Chairman,
President and CEO, Daniel Glassman (January 2007),
emphasis added
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Authorized Generics Practice Overview
Examples of AG Arrangements
Proctor & Gamble –generic Macrobid ®:
– Mylan Pharmaceuticals reportedly lost tens of
millions in generic sales when NDA holder
Proctor & Gamble licensed a third party to sell
an authorized generic version of Macrobid
(nitrofurantoin) during Mylan’s exclusivity
period.
– Mylan Pharm. Inc. v. FDA, 454 F.3d 270 (4th Cir. 2006)
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Authorized Generics Practice
Overview: AG Arrangements cont’d
GlaxoSmithKline- Par Pharmaceutical: Generic
Paxil ® (paroxetine hydrochloride):
Apotex’s expected sales of up to $575
million cut to $150-$200 million
See CRS Report for Congress (Aug. 8, 2006)
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Authorized Generics Practice
Overview: AG Arrangements cont’d
Merck- Dr. Reddy’s: Generic Zocor® :
– Teva Pharmaceuticals Industries Ltd.
attributed 9.5% drop in shares to concerns its
generic version of Merck & Co. Inc.'s
cholesterol drug Zocor.
MarketWatch Inc., Dow Jones Online
Network (June 21, 2006)
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Relevant Statutory Background
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Statutory Background
180-day Exclusivity Under Hatch Waxman
21 U.S.C. 355(j)(5)(B)(iv)- 180-day exclusivity period
Effectiveness of application.— Subject to subparagraph (D), if
the application contains a certification described in paragraph
(2)(A)(vii)(IV) and is for a drug for which a first applicant has
submitted an application containing such a certification, the
application shall be made effective on the date that is 180
days after the date of the first commercial marketing of the
drug (including the commercial marketing of the listed drug)
by any first applicant.
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Statutory Background
"increases the economic incentives for a generic
company to be the first to file, because the generic
applicant has the potential to reap the reward of
marketing the only generic product (and, thus, to charge
a higher price until more generic products enter [the
market])."
Federal Trade Commission, To Promote Innovation: The Proper
Balance of Competition and Patent Law and Policy, Ch. 3, at 12
(Oct. 2003),
– available at http://www.ftc.gov/os/2003/10/innovationrpt.pdf.
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Statutory Background
Exclusivity benefit motivates "generic
manufacturers to challenge the validity of
listed patents and to 'design around'
patents to find alternative, non-infringing
forms of patented drugs" so that they can
be the first to file paragraph IV ANDAs.
-Teva Pharms. USA, Inc. v. Pfizer, Inc., 395
F.3d
1324, 1328 (Fed. Cir. 2005).
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Statutory Background
Competing Policy Goals
To expedite arrival of generic drugs to
market
To induce name-brand pharmaceutical
companies to invest in R&D and develop
new drug products
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Policy Debate
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Policy Debate
AG Opponent Views
Congressional Intent
“core purpose of Hatch Waxman... is to expedite
and maximize the introduction of cost-saving
generic drugs, while protecting all legitimate
patent rights of drug product innovators...but
without unintended windfalls to crafty companies”
-See Teva Citizen Petition, Docket No. CP004P-0261
(June 9, 2004)
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Policy Debate:
Opponent Views cont’d
Exclusivity provisions represent the key
mechanism for achieving this goal
Congress did not intend for brand-name
companies to benefit from the 180
exclusivity provision
only qualified ANDA applicants are entitled
to market and sell generic versions of a
branded product prior to expiration of a
180-day exclusivity period
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Policy Debate:
Opponent Views cont’d
AG practice represents a strategy devised to
destroy the incentives offered by 180-day
exclusivity provisions
brand name companies market AGs as if they are ANDA
approved generic products, at times pricing them
substantially lower than the competing generic version
and causing customer confusion
Generic firms unable to recoup substantial costs
-Generic Drug Entry: Prior to Patent Expiration,
An FTC Study (July 2002)
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Policy Debate:
Opponent Views cont’d
costs associated with generic drug development are
no longer adequately recouped
evaluation of relevant IP, R&D, equivalence testing, FDA
submissions and certifications, litigation
reduction in returns of 180-day exclusivity profits
discourage generic companies from filing paragraph IV
challenges
reduced incentive to incur risk associated with patent
challenges
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Policy Debate:
Opponent Views cont’d
*intrusion of branded generics during
180-exclusivity destroys Hatch
Waxman incentives and threatens the
entire existence paragraph IV generic
drug approval process.
→→→ irreparable harm to first ANDA
filers and the public.
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Policy Debate
AG Proponent Views
Congressional Intent:
a central goal of Hatch Waxman is to promote
price competition in prescription drugs upon
expiration or resolution of an NDA holder’s
patent rights
- Comments of Pfizer Inc on Docket No. C1 2004P-0261 (June
23, 2004); See also In re Barr Labs. Inc., 930 F.2d 72, 76 (D.C. Cir.)
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Policy Debate:
Proponent Views cont’d
Congress intended that first ANDA filers would receive a
limited competitive advantage over subsequent ANDA
filers but would be forced to compete with the approved
NDA product.
- Id.(505(j)(B)(iv) imposes no limitations on NDA holders)
Congress intended to encourage generic firms to filed
ANDA and challenge existing patents, but did not intend
to give FDA authority to regulate competition between
ANDA and NDA Holders
-Id.
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Policy Debate:
Proponent Views cont’d
AGs do not discourage patent challenges
An authorized generic is only one of many
possible competitors
21 U.S.C. § 355 (j)(5)(B)(iv)(II)(bb) provides
for multiple first applicants.
First ANDA applicants already choose to bear
litigation costs, with no guarantee of monopoly
profits during the 180-day period of exclusivity.
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Policy Debate:
Proponent Views cont’d
AG Practice promotes competition and
consumer welfare
AG arrangements promote early introduction of multiple
competitively priced products an provide consumers with
faster access to lower priced drugs consistent with
Congressional intent underlying Hatch Waxman
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Policy Debate:
Proponent Views cont’d
absent authorized generics, during 180 day
exclusivity periods, generic drugs are typically
priced substantially higher than after subsequent
generic products enter the market.
See FDA Supports Broader Access to Lower Priced Drugs,
FDA Talk Paper (July 2, 2004).
Opponents seek to insulate generic companies from
competition altogether
See e.g. Comments of Pfizer Inc on Docket No. C1 2004P-0261
(June 23, 2004)
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Policy Debate:
Proponent Views cont’d
AG Practice permits brand-name firms to recoup the
costs of drug development and may fuel innovation
process of bringing a pioneer drug to market takes about
12 years
average associated costs associated with new drug
development have been estimated at $802 million
“Policy and New Drug Development “ (December 2006) available
at http://www.ftc.gov/be/workshops/pharmaceutical/Lutter.pdf
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Policy Debate:
Proponent Views cont’d
revenue from authorized generics may support additional
pharmaceutical innovation
settlements resulting in authorization of an ANDA
applicant to produce and AG may allow brand name
firms to stabilize risk associated with litigation, also
supporting future innovative activity
-CRS Report for Congress (Aug. 8, 2006)
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Citizen Petitions and FDA
Positions
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Citizen Petitions
Teva Citizen Petition, Docket No. 2004P-0261
(June 9, 2004)
Teva petitioned the FDA to prohibit Pfizer Inc. from
marketing a generic version of Accupril (R) until after
Teva’s 180-day exclusivity
-Pfizer’s launch of its own AG would undermine
congressional intent of the 180-day exclusivity
provisions
-“FDA is authorized, and indeed compelled, by
current law, regulations, policy to take the action
requested herein.”
Ruling: Denied
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Citizen Petitions
Mylan Citizen Petition, Docket No. 2004P-0075
(February 7, 2004)
Mylan petitioned the FDA to prohibit marketing
and distribution of AGs until the expiration of the
180-exclusivity period.
urged that the FDA implement an approval
requirement for AGs which would prevent the
sale of an authorized generic until the expiration
of an ANDA first filer’s exclusivity period
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Mylan Petition cont’d
The FDA has viewed authorized generics as generics
and acted in prior rulings to convert an NDA into and
ANDA.
FDA has ample authority to prohibit marketing of AGs.
-All AB-rated generic drugs must be approved by the
FDA as bioequivalent to the reference listed drug
prior to marketing (21 U.S.C. 355 (j))
-though AGs lack the AB -rating, they are permitted
to be marketed in the same manner as an AB-rated
generic and marketed as such
Ruling: Denied
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FDA Positions and Current Policy
to deny petitions to prohibit the sale of an AG during 180
day exclusivity periods.
- FDA Response, Docket Nos. 2004P-0075 & 2004P-0261 (2 July
2004), denying petition by Mylan Pharmaceuticals, Docket No. 2004P0075/CP1, and by Teva Pharmaceuticals, U.S.A., Docket
No. 2004P-0261/CP1).
AG, as currently defined by the FDA:
“[a]ny marketing by an [New Drug Application (NDA)] holder or
authorized by an NDA holder, including through a third-party
distributor, of the drug product approved under the NDA in a
manner equivalent to the marketing practices of ANDA applicants
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FDA Positions and Current Policy
Hatch Waxman gives the FDA authority to delay entry
into the market of ANDA generic drugs but not branded
generic drugs.
– See Teva Pharms Indus. v. FDA, 355 F. Supp. 2d 111, 115
( D.D.C. 2004)
No statutory basis for imposing approval requirements
for the marketing of authorized generics as a means to
prevent their marketing during 180-day exclusivity.
– Id. at 117 (D.D.C. 2004)
Marketing of an authorized generic during the 180-day
generic exclusivity period is a long-standing procompetitive practice permissible under the statute.
– See FDA Response, Docket Nos. 2004P-0075 & 2004P-0261, at
2, 13
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FDA Positions and current policy
In 2004, Andrx Pharmaceuticals, Inc. petitioned the FDA to
reexamine its policy with respect to authorized generics in general
and particularly with respect to the marketing of an AG version of
Concerta (R) during Andrx’s exclsuivity period, by Patriot
Pharmaceuticals, Inc., an affiliate of NDA holder, McNeil Speciality
and Consumer Pharmaceuticals.
–
See Andrx Citizen Petition, Docket No. 2004P-0563 (23 December 2004), available at
www.fda.gov/ohrms/dockets/dockets/04p0563/04p-0563-cp0000-01-vol1.pdf
Andrx also presented an additional statutory based
argument
– FDA authority has authority to prevent misbranding
under section 502(a) of the FDCA.
– labeling and marketing of branded drugs as generic
version is fundamentally misleading.
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FDA Positions and current policy
FDA has failed to adequately consider the
potential short-term and long-term effects on
competition associated with the use of
authorized generics to undermine the availability
of actual generics
Further, FDA has acknowledged lack of
expertise with respect to competition and related
economic analyses.
– Andrx requested that FDA seek comments from FTC
and Department of Justice
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FDA Positions and Current Policy
…still waiting for a response from the FDA
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Challenging the Legality of AGs in
U.S. Courts
Hatch Waxman provisions exclude
generics, authorized or not, from the
market during the 180-exclusivity period
awarded to first to file ANDA applicants
– Literal interpretation cannot defeat the
statutory purpose to grant the first ANDA
filers complete exclusivity for 180 days
Teva Pharmaceutical Industries, Ltd., v Crawford, 410
F.3d 51 (D.C. Cir. 2005)
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Challenging the Legality of AGs in
U.S. Courts cont’d
– Court said:
“nothing in the statute provides any support for the
argument that the FDA can prohibit NDA holders
from entering the market with a generic drug
during the exclusivity period”
Hatch Waxman does not specify the manner in
which and NDA holder must market its drug.
Pre Hatch-Waxman, the FDCA did not prevent an
NDA holder from marketing an authorized generic.
– what basis exists for declaring a previously
lawful practice unlawful when Congress in
passing Hatch Waxman, remained silent with
respect to this practice.
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Challenging the Legality of AGs in
U.S. Courts cont’d
"brand-generic intrusion [into the exclusivity
period] developed only recently as a routine
brand-company business strategy . Congress
had not anticipated the practice and thus
remained silent. literal interpretation of the
statute renders the exclusivity granted by Hatch
Waxman meaningless against later ANDA filers
as opposed to a commercially effective
exclusivity against NDA holders as well.
Teva Pharmaceutical Industries, Ltd., v
Crawford, 410 F.3d 51, 54 (D.C. Cir. 2005)
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Challenging the Legality of AGs in
U.S. Courts cont’d
D.C Circuit:
– Hatch Waxman may have created incentive to
challenge brand-drug patents but the Act does
not provide that that incentive is without
limitation.
– Rather, Congress sought to strike a balance
between incentives, on the one hand, for
innovation, and on the other, for quickly
getting lower-cost generic drugs to market.
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Challenging the Legality of AGs in
U.S. Courts cont’d
Striking that balance is matter of legislative
judgment. Accordingly, the Court must attend
closely to the terms in which the Congress
expressed that judgment.
the FDA may not revise the specific statutory
incentive that Congress enacted or ... alter the
means chosen by Congress to implement its
purpose by offering a different incentive
The statute is unambiguous
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Challenging the Legality of AGs in
U.S. Courts cont’d
means that Congress "deemed appropriate, and
prescribed" to give generic drug makers an incentive to
challenge brand-drug patents is unambiguous:
– That is....
The FDA may not approve a second or later ANDA containing a
paragraph (IV) certification until 180 days after the first filer with
such a certification begins commercially marketing the drug or wins
a court decision against the patent holder. There is simply no way to
read that limitation upon what the FDA may do in such a way as to
prevent the holder of an approved NDA, which does not need to file
an ANDA and certainly would not challenge its own patent, from
marketing a brand-generic product.
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Challenging the Legality of AGs in
U.S. Courts cont’d
Further, reading the Act as it is written does not
render "meaningless" the "specific statutory
incentive that Congress enacted."
– For 180 days the generic market belongs to a first ANDA
filer and the NDA holder; absent an agreement of the sort
by which Teva itself entered the market for generic
gabapentin, no other firm may enter and take any part of
either company's market share.
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Challenging the Legality of AGs in
U.S. Courts
authorized generics are generic drugs and thus,
subject to prohibitions against marketing generic
drugs during the exclusivity period awarded to a
first ANDA applicant
branded generics are legal and functional equivalents of
ANDA generics for purposes of applying and enforcing the
180-day exclusivity period under Hatch Waxman
– Mylan Pharm. Inc. v. FDA, 454 F.3d 270 (4th Cir. 2006); see
also Mylan Pharm. Inc., Citizen Petition 2004P-0075/CP1
(February 4, 2004) citing Mylan v. Thompson, 207 F. Supp. 2d
476 (N.D.W. Va 2001)
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Challenging the Legality of AGs in
U.S. Courts cont’d
But are brand generics actually legal and functional equivalents of
ANDA generics for purposes of applying and enforcing Hatch
Waxman exclusivity provisions?
– Mylan Pharm Inc.v. Thompson, 207 F. Supp, 2d 476 (N.D.W. Va
2001)
First ANDA filer, Mylan began marketing a brand generic
version of Pfizer’s Procardia (nifedipine) pursuant to an
agreement with Pfizer.
Mylan had not actually sold the product that was subject of its
ANDA
Mylan asserted that branded generics are not the specific
subject of an approved ANDA. Accordingly ANDA generics
are legally and functionally distinct in the context of
exclusivity under Hatch Waxman
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Challenging the Legality of AGs in
U.S. Courts cont’d
Mylan argued: marketing of a branded generic did
not constitute “commercial marketing” of a
generic drug for purposes of triggering its 180-day
exclusivity period.
Subsequent ANDA filer, Teva petitioned the FDA to
rule that marketing of a branded generic
constituted commercial marketing of Mylan’s
own ANDA product.
The FDA agreed, “permitting Mylan to market
nifedipine without triggering the beginning of the
exclusivity would be inconsistent with the intent of
the statutory scheme.”
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Challenging the Legality of AGs in
U.S. Courts cont’d
Fourth Circuit response: “Prior agency
interpretation (whether or not it supports
Mylan’s reading) is irrelevant because the
statute unambiguously forecloses that
reading.
Mylan v. FDA, 454 F.3d at 276 (4th Cir. 2006)
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FTC Involvement
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FTC Involvement
“introduction of an authorized generic will likely
diminish the incentives for generic firms to
challenge patents and incur substantial
development and litigation costs.”
FTC Commissioner, Jonathan Liebowitz quoted in Chain Drug
Review (June 2005)
FTC recognition of:
– occurrence of authorized generic
arrangements in increased frequency; and
– absence of comprehensive economic study
http://www.ftc.gov/os/2006/03/P062105AuthorizedGenericDrugStudyFRNotice.pdf
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FTC Involvement cont’d
March 29, 2006 FTC announced it Authorized
Generic Drug Study: FTC Project P062105 to
evaluate short and long term effects of
authorized generics practice and clarify
competitive impact of AGs
Id
Comments were due June 5, 2006
Id
Report expected at some point during 2007
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FTC Involvement
Study will include examination of
Actual wholesale prices (including rebates and
discounts, etc) for brand name and generic drugs,
with and without AG competition;
Business decisions that support AG entry;
Factors relevant to generic firms as to whether to
seek entry prior to patent expiry;
Licensing agreements for AGs
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Basis for Antitrust claims?
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Antitrust claims?
If pricing of AGs can be deemed
“predatory pricing” and such is found
to destroy competition, public policy
articulated by the Sherman Antitrust
Act may be violated.
–
See Judge Keeley comments, Mylan Pharm. Inc. v.
FDA, Civ. No. 1:04 cv 174(N.D. W. Va.) (filed Aug. 5,
2005; withdrawn without prejudice Aug. 30, 2004)
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Recent and Pending
Legislation
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Pending Legislation
July 24, 2006: Senators Rockefeller, Leahy
and Schumer introduced a U.S. Senate bill, S.
3695 to amend the Federal Food, Drug, and
Cosmetic Act to prohibit the marketing of
authorized generic drugs during an ANDA filer’s
180-day exclusivity period.
January 30, 2007: The bill, co-sponsored by
Senator Kohl was reintroduced as S. 438, "The
Fair Prescription Drug Act."
February 5, 2007: Companion bill, H.R. 806
was introduced in the House of Representatives
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110th Congress, 1st Session S.438
(Fair Prescription Drug Competition Act)
available at
http://thomas.loc.gov/cgibin/query/D?c110:2:./temp/~c1
10viu3Ng::
“Section 505 of the Federal Food
Drug, and Cosmetic Act (21
U.S.C.) is amended by adding at
the end the following:
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110th Congress, 1st Session S.438
(Fair Prescription Drug Competition Act cont’d
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110th Congress, 1st Session S.438
(Fair Prescription Drug Competition Act cont’d
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Pending Legislation
Opponents expect greater chances of success
for the proposed legislation this year.
Generics firms, Mylan and Barr have met with
lawmakers on Capitol Hill for purposes of
educating them on authorized generics practice
– http://www.mysanantonio.com/business/stories/MYSA
030407.3R.sungenerics.23d3c33.html
FTC Report expect later this year will lend
additional support
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Recent Legislation: S.1932 Deficit
Reduction Act of 2005 (DRA)
Enacted February 8, 2006, text available at
http://www.cbo.gov/ftpdocs/70xx/doc7028/s1932conf.pdf
Includes changes in calculation and reporting obligations
with respect to pricing data for determination of Unit
Rebate amounts (URA) under the Medicare Drug Rebate
Statute
– URAs for NDAs are largely calculated based on the difference in
between Average Manufacturer Price and “best price” to any
commercial customer.
NDA holders have previously excluded authorized
generics from the best price or AMP
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S.1932 Deficit Reduction Act of 2005
(DRA) cont’d
DRA definition of “best price” requires
brand manufacturers to include all prices
at which it sells its NDA product including
prices to AG distributors.
– Likely to see increase in URA due to lower
“best price”
DRA definition of AMP is inclusive of the
average paid by wholesalers for drugs
distributed for retail, reducing the AMP.
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S.1932 Deficit Reduction Act of 2005
(DRA) cont’d
Some ambiguities, but overall effect of
making AG arrangements less desirable
for innovator companies.
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Thank you.
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