Industry bracing for FTC study on authorized generics

August 7, 2006

Brand and generic manufacturers are equally anxious over what the Federal Trade Commission is going to say in its study of authorized generics, due next year.

Brand and generic manufacturers are equally anxious over what the Federal Trade Commission is going to say in its study of authorized generics, due next year.

With 75 drugs losing patent protection in the next two years-including blockbusters like simvastatin, Ambien (zolpidem, Sanofi-Aventis), and sertraline HCl-there has been a great deal of public noise about authorized generics. Pfizer recently announced that it would manufacture its own generic version of Zoloft, for example. And several brand companies have been discussing cutting deals with generic manufacturers, according to news reports.

Schering had paid the two companies $60 million and $15 million in settling the lawsuits and received pledges from the generic companies that they would keep their generic versions of K-Dur (a drug for low potassium) off the market until 2001 and 2004, respectively. Schering's patent on K-Dur expires on Sept. 1.

"Right now, there is no publicly available information on the short-term effects-what happens to competition during the 180-day rule-and long-term effects, which is whether the consumer is harmed," said Michael Wroblewski, the FTC assistant general counsel for policy studies heading up the study. He is referring to the 180-day exclusivity clause of the Hatch-Waxman Act, the 1984 law that created the $30 billion-a-year generic industry. Under the rule, the first manufacturer to receive Food & Drug Administration approval of a generic drug gets six months of market exclusivity. It is the period when a generic manufacturer recoups the cost of an Abbreviated New Drug Application (ANDA) to the FDA, and is usually the period of greatest profitability on a specific generic.

The FDA treats authorized generics as brand products and, therefore, allows the manufacturer to market them during another generic firm's 180-day market exclusivity period. This has led to questions by politicians, as well as consumer and trade organizations, about the effects of authorized generics on pharmaceutical pricing.

"So-called authorized generics are actually brand products masked as generics, marketed under a new label," said Kathleen Jaeger, president and CEO of the Generic Pharmaceutical Association. "They are anticompetitive, leading to fewer generic applications and fewer products on the market, which is bad for consumers."