Patents hold no guarantee new generics marketplace

Drug Store News, Nov 17, 2003 by Michelle L. Kirsche

Fewer branded drugs lost their patent protection this year, but more aggressive efforts by genetic drug makers to develop and market their products early kept the spigot open on generic growth.

Global sales of generic drugs should hit $29 billion by year's end, with sales estimated to rise an additional 20 percent next year, according to market research firm IMS Health. Drugs coming off patent present myriad opportunities for generic drug makers in 2004 and beyond, but also may signal a new crop of roadblocks on the road to multisource drug competition in the form of litigation and court costs.

For 2003, the flood of new generics has receded somewhat from the prior year, but remains a strong source of new sales for generic firms. Major branded drugs that lost patent protection sales of $5 billion, down from $12 billion in 2002 and $8.5 billion in 2001. According to Standard & Poor's latest industry survey, "Healthcare: Pharmaceuticals," the branded pharmaceutical sector received some respite in 2003 from the "generic onslaught" following patent expirations in 2001 and 2002.

Looking forward, the Food and Drug Administration projects that more than 200 brand-name medications will come off patent over the next several years. Said Ajit Baid, pharmaceuticals and biotechnology industry analyst for Frost & Sullivan, What we will definitely see is a speedup in the generic drug approval process."

Blockbuster drugs due to lose patent protection between now and 2006 include such brand names as Flovent, Flonase, Cipro, Diflucan, Lamisil, Xenical, Zocor, Prevacid, Zoloft, Pravachol and Zithromax, according to government and industry sources. "All markets that have blockbuster products will eventually be affected, especially cardiovascular, diabetes, some [central nervous system] areas and pain management," Bald reported.

Early patent challenges pay off

To the "innovative and intelligent generic companies" will go the spoils of those patent expirations, the analyst added, Their strategy, he added, is to target blockbuster products where they can gain significantly, where there is a high demand, and a higher price threshold.

The more aggressive generic houses also increasingly are learning how to exploit opportunities. Lists of major patent expirations do not take into account litigation issues or business models of genetic drug makers. Some drug makers ramp up their product while a case is still in litigation.

"There are many factors that go into when a generic drug enters the market," said Christine Simmon, vice president of public affairs and development at the Generic Pharmaceutical Association. "Many generics come out months or even years before a patent expires."

According to Simmon, generic drug makers win 73 percent of all court-decided infringement cases, the majority of which are early patent challenges.

In July, Canadian drug maker Apotex, with its U.S. arm TorPharm, introduced the first generic version of GlaxoSmithline's blockbuster depression drug Paxil--three years before it went off patent.

Between now and 2005, Apotex said it will launch 36 generics, including first entrants like generic Paxil, onto the market. The company now makes more than 210 generic drugs, from Ativan to Zoloft, that are sold in more than 115 countries. In 2004, the company expects to bring to market me-too versions of Abbott's bipolar drug Depakote and the anti-clot drug Plavix, co-promoted by Sanofi-Synthelabo and Bristol-Myers Squib. Both, however, are still in litigation.

Not only are generic drug makers shoring up for litigation costs, an increasing number of them are shelling out big bucks for research and development. Apotex was ranked 13th out of the top 100 Canadian corporate R&D spenders in 2003, dedicating 20.4 percent of its generic revenue and 21.3 percent of its biotech sales to those efforts. By comparison, Pfizer Canada put forth 12.3 percent of its revenue toward R&D.

Generic maker Barr Laboratories, whose oral contraceptive portfolio includes 15 products with a 21 percent total market share, dedicated more than $75 million to R&D in 2003 and will commit more than $100 million in 2004, noted company spokeswoman Carol Cox. We currently have 30 applications pending at the FDA, including tentative approvals that represent brand sales of $10.7 billion," Cox said.

The quest to cut approval times

Driving the outlook for me-too drug makers--and for the drug retailers and third party plans that promote generic switches--are the FDA's stepped-up efforts to overhaul and streamline its review and approval process. The agency's Office of Generic Drugs is making an effort to cut the approval time for abbreviated new drug applications to an average of 18 months or less from the current average of 21 months.

Along those lines, the Bush administration's 2004 budget includes a request from the Department of Health and Human Services for an extra $13 million in funding to handle the growing number of generic drug ANDAs.

New regulatory processes to reduce the time and cost of generic drug approvals include early communications with generic drug makers to discuss ANDAs, increases in the amount of guidance information available for generic manufacturers regarding their drug applications and regularly scheduled meetings with generic trade associations, such as the GPhA. The FDA also will conduct more studies of generic drugs where adequate bioavailability methods have not been developed and will enhance safety monitoring of generics currently on the market.