Retail pharmacy may be winner in generic Prilosec decision

Drug Store News, Nov 18, 2002 by Bruce Buckley

NEW YORK -- Consumers and third-party payers will not be the only groups to gain from the agreement that brings a generic version of the top-selling gastrointestinal drug Prilosec to market for the first time. Chain and independent pharmacies also will benefit.

While pharmacy dollar sales should decline when Prilosec becomes available as a generic, retailer acquisition costs also will tumble and margins will improve--especially after the first generic Prilosec loses its 180-day marketing exclusivity and competitors move in and cut prices.

Retail pharmacy was one interest group that hadn't received much attention in the Prilosec battles. The media had focused on consumer and managed care financial savings and on the bottom-line impact on various manufacturers when Prilosec, a $6 billion product worldwide, was finally challenged by a generic rival.

That was supposed to happen within a year after the October 2001 patent expiration on Prilosec's active ingredient, omeprazole. But Prilosec maker AstraZeneca, defending its multibillion-dollar flagship product in court, managed to stave off generic competition for a year, and it looked for a while as if that time could extend well into 2003.

Now, however, three generic companies have hammered together an unusual arrangement that will soon bring generic Prilosec to retail pharmacy shelves. The deal, which involves Andrx, Genpharm and Kremers Urban Development, or Kudco, came about because Kudco had approval from the Food and Drug Administration for the only version of the product that did not infringe Astra-Zeneca's patents, while Andrx and Genpharm held the 180-day exclusive marketing rights as the first to file for FDA approval.

Andrx and Genpharm, the Canadian affiliate of Germany's Merck KGaA, agreed to give up those exclusive rights in exchange for a 30 percent share in Kudco's profits, which they will split. Kudco will now be free to ship 10 mg and 20 mg extended-release omeprazole capsules.

Health and Human Services secretary Tommy Thompson said the agreement would mean savings for those who already are taking the medication and "greater access" to those who have not been able to afford it.

AstraZeneca's court victory

In early October, AstraZeneca had gained a partial victory in federal court. District Court Judge Barbara Jones ruled that the Anglo-Swedish company's patent on omeprazole had expired, two other patents covering the method of enclosing an active ingredient in a protective coating remained valid until October 2007. Three generic companies, Andrx, Genpharm and a Dr. Reddy's Cheminor Drugs Ltd. affiliate, were found to have infringed on those patents. A second wave of generic Prilosec applications, including one submitted by Eon Laboratories, also was covered by the decision.

But the judge also said Kudco's version did not infringe AstraZeneca patents because the company used a different method to enclose the core ingredient. Schwarz Pharma, Kudco's German parent company, immediately began to explore avenues for marketing the product in the United States. The agreement with Andrx and Genpharm was the result of those explorations.

While generic Prilosec will have a negative impact on AstraZeneca, the additional year, in addition to what it gained by delaying generic competition, has not only benefited its bottom line, but also helped establish a stronger position for two products that the company hopes will preserve some of the dominant market share it has held with Prilosec in the GI category.

The first is Nexium, the proton pump inhibitor AstraZeneca introduced last year to offset the anticipated loss of Prilosec patent protection. Nexium's sales have been growing rapidly. In the third quarter, total sales rose to $493 million, up from $168 million the prior year. The second is the anticipated launch of an OTC-version Prilosec, which will be marketed under license by Procter & Gamble. The introduction of the OTC product, which will have a lower price and perhaps a lower strength than the prescription version, is being held up while P&G resolves FDA concerns about consumer labeling. The launch of OTC Prilosec is expected by fall 2003.

So chain and independent drug stores will in a short time have not only a lower-priced prescription omeprazole, but also a nonprescription Prilosec, which will provide a strong boost to retail OTC sales in 2003.