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Authorized Generics Practice and the Battle Over Generic Exclusivity in the U.S. Market

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Title: Authorized Generics Practice and the Battle Over Generic Exclusivity in the U.S. Market


1
Authorized Generics Practice and the Battle Over
Generic Exclusivity in the U.S. Market
  • Renita S. Rathinam
  • (rrathinam_at_sughrue.com)
  • Sughrue Mion, PLLC
  • Washington, D.C.

2
Lecture Overview
  1. Practice Overview
  2. Statutory Background
  3. Policy Debate
  4. FDA Position
  5. Challenging the Legality of AG Practice in U.S.
    courts
  6. FTC Involvement
  7. Legislation

3
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 holders exclusivity period
  • before generic competition or with the
    introduction of a generic version of the brand
    name drug

4
Authorized Generics Practice Overview
  • Historical Overview and Current practice
  • Practice can be traced back to the 1990s
  • -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

5
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

6
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 Mylans exclusivity
    period.
  • Mylan Pharm. Inc. v. FDA, 454 F.3d 270 (4th Cir.
    2006)

7
Authorized Generics Practice Overview AG
Arrangements contd
  • GlaxoSmithKline- Par Pharmaceutical Generic
    Paxil (paroxetine hydrochloride)
  • Apotexs expected sales of up to 575 million cut
    to 150-200 million
  • See CRS Report for Congress (Aug. 8, 2006)

8
Authorized Generics Practice Overview AG
Arrangements contd
  • Merck- Dr. Reddys 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)

9
Relevant Statutory Background
10
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.

11
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/innova
    tionrpt.pdf.

12
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).

13
Statutory Background
  • Competing Policy Goals
  • To expedite arrival of generic drugs to market
  • To induce name-brand pharmaceutical companies to
    invest in RD and develop new drug products

14
Policy Debate
15
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)

16
Policy DebateOpponent Views contd
  • 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

17
Policy Debate Opponent Views contd
  • 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)

18
Policy DebateOpponent Views contd
  • costs associated with generic drug development
    are no longer adequately recouped
  • evaluation of relevant IP, RD, 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

19
Policy DebateOpponent Views contd
  • 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.

20
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 holders
    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.)

21
Policy Debate Proponent Views contd
  • 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.

22
Policy DebateProponent Views contd
  • 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.

23
Policy DebateProponent Views contd
  • 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

24
Policy DebateProponent Views contd
  • 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)

25
Policy DebateProponent Views contd
  • 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/phar
    maceutical/Lutter.pdf

26
Policy DebateProponent Views contd
  • 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)

27
Citizen Petitions and FDA Positions
28
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 Tevas 180-day exclusivity
  • -Pfizers 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

29
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 filers exclusivity period

30
Mylan Petition contd
  • 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

31
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.
    2004P- 0075/CP1, and by Teva Pharmaceuticals,
    U.S.A., Docket
  • No. 2004P-0261/CP1).
  • AG, as currently defined by the FDA
  • any 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

32
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 pro-competitive practice
    permissible under the statute.
  • See FDA Response, Docket Nos. 2004P-0075
    2004P-0261, at 2, 13

33
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 Andrxs 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.

34
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

35
FDA Positions and Current Policy
  • still waiting for a response from the FDA

36
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)

37
Challenging the Legality of AGs in U.S. Courts
contd
  • 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.

38
Challenging the Legality of AGs in U.S. Courts
contd
  • "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)

39
Challenging the Legality of AGs inU.S. Courts
contd
  • 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.

40
Challenging the Legality of AGs inU.S. Courts
contd
  • 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

41
Challenging the Legality of AGs inU.S. Courts
contd
  • 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.

42
Challenging the Legality of AGs inU.S. Courts
contd
  • 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.

43
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)

44
Challenging the Legality of AGs in U.S. Courts
contd
  • 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 Pfizers 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

45
Challenging the Legality of AGs in U.S. Courts
contd
  • 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 Mylans 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.

46
Challenging the Legality of AGs in U.S. Courts
contd
  • Fourth Circuit response Prior agency
    interpretation (whether or not it supports
    Mylans reading) is irrelevant because the
    statute unambiguously forecloses that reading.
  • Mylan v. FDA, 454 F.3d at 276 (4th Cir. 2006)

47
FTC Involvement
48
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/P062105AuthorizedGen
    ericDrugStudyFRNotice.pdf

49
FTC Involvement contd
  • 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

50
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

51
Basis for Antitrust claims?
52
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. 104 cv 174(N.D. W. Va.) (filed
    Aug. 5, 2005 withdrawn without prejudice Aug.
    30, 2004)

53
Recent and Pending Legislation
54
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 filers 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

55
110th Congress, 1st Session S.438 (Fair
Prescription Drug Competition Act)
  • available at http//thomas.loc.gov/cgi-bin/query/
    D?c1102./temp/c110viu3Ng
  • Section 505 of the Federal Food Drug, and
    Cosmetic Act (21 U.S.C.) is amended by adding at
    the end the following

56
110th Congress, 1st Session S.438 (Fair
Prescription Drug Competition Act contd
57
110th Congress, 1st Session S.438 (Fair
Prescription Drug Competition Act contd
58
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/MYSA0
    30407.3R.sungenerics.23d3c33.html
  • FTC Report expect later this year will lend
    additional support

59
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

60
S.1932 Deficit Reduction Act of 2005 (DRA) contd
  • 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.

61
S.1932 Deficit Reduction Act of 2005 (DRA) contd
  • Some ambiguities, but overall effect of making AG
    arrangements less desirable for innovator
    companies.

62
Thank you.
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