New Dynamics and Challenges in the Generics Market 2007
Informa Healthcare, January 2007, Pages: 308
Discover how the emerging global generics market has advanced over the last 18 months and what this means for the pharma industry.
This report updates you on the key political, legislative, regulatory, operational and commercial developments affecting generic drugs in the major markets over the last 18 months, enabling you to respond to the opportunities and challenges this emerging market presents.
Use this report to:
- Gain insights into the continuing global debate over patents, market exclusivity, drug pricing and compulsory licensing in light of the TRIPS agreement and Doha Declaration
- Learn about the key issues affecting the industry such as tensions over authorised generics and “reverse” settlements, and how these impact your market
- Assess EU harmonisation of the generics market, usage patents, cost-containment and new pricing paradigms and use this knowledge to plan accordingly
- Evaluate the potential impact of biosimilars on your market and what the current trend for consolidation amongst generics manufacturers means for the future.
CHAPTER 1 INNOVATION AND ACCESS: THE LEGACY OF THE TRIPS
AGREEMENT 17
1.1 The origins of TRIPS 17
1.2 What TRIPS did 17
1.3 Before and after TRIPS 18
1.4 The consequences of TRIPS 19
1.4.1 Proprietary rights and public health 19
1.4.2 Brazil - conflicts 20
1.5 Data exclusivity 21
1.5.1 Article 39.3: open to interpretation 22
1.6 The patent effect 23
1.6.1 India and AIDS therapies 24
1.6.2 Other countries and therapies 25
1.7 What’s in the box? 27
1.7.1 Generics concession 28
1.8 Novartis’ legal challenge 29
1.9 A step further 30
1.10 Difficult comparison 33
1.10.1 Unravelling AIDS drug prices 34
1.11 Different priorities 35
1.12 Sanofi-Aventis’ ASAQ concession 38
1.12.1 Control strategy? 39
1.13 The bigger picture 39
CHAPTER 2 THE ROAD TO DOHA 41
2.1 The Bolar exemption 41
2.2 Compulsory licensing draws blood 43
2.2.1 Compulsory licensing: already exploited 46
2.2.2 The South African AIDS case 47
2.3 TRIPS Agreement and Public Health 48
- Parallel imports 48
- Compulsory licences 49
- Differential pricing 49
- Protection of test data 49
- Transitional arrangements 50
2.3.1 The US and EU’s view 50
2.4 The Doha Declaration 52
- Parallel imports. 52
- Transition periods 52
- Compulsory licensing 52
2.4.1 Declaration on the TRIPS Agreement and Public Health 53
CHAPTER 3 TROUBLE WITH PARAGRAPH 6 55
3.1 Back to the barricades 55
3.1.1 The Motta text 56
3.2 The 30 August decision 57
3.3 The 30 August provisions 58
3.3.1 Conditions for compulsory licensing 58
3.4 Double trouble 60
3.4.1 Anti-diversion efforts 61
3.5 Economies of scale 62
CHAPTER 4 IN THE WAKE OF DOHA 65
4.1 Loose ends 65
4.1.1 Rwanda sets the precedent 66
4.2 Mixed result in Canada 67
4.2.1 Canada’s limited list 68
4.3 The EU regulation 69
4.3.1 Parliament’s response 70
4.4 The political debate over ratification 71
4.4.1 Parliament dissents 72
4.5 The FTA threat 74
4.5.1 Contrary to Doha? 75
- Delayed approval of generic drugs 75
- Required patent extensions 75
- Linked drug approvals to patent status 75
- Restricted compulsory licensing 75
- Prohibited parallel imports 76
- Expanded patent protection 76
4.6 US generic resistance 76
4.6.1 Pressure on Guatemala 77
4.6.2 New Trade Policy for America 77
4.6.3 Industry responses 78
4.6.4 Newly signed FTAs 79
4.6 More clashes over compulsory licensing 80
4.6.1 Thailand and compulsory licensing 80
4.6.2 A political rift in Europe 82
4.6.3 Brazil and compulsory licensing 83
4.6.4 A “chilling signal” 83
4.6.5 The Philippine situation 84
4.7 Living with patents 84
- in China 85
- in India 86
4.8 India abroad 87
4.9 Tough enough for the US? 89
4.9.1 Dr Reddy’s AmVaz setback 89
4.9.2 Staying power? 90
CHAPTER 5 NEW OPPORTUNITIES, NEW RESTRAINTS IN THE US MARKET 93
5.1 A solid foundation 93
5.2 Consolidation abounds 93
5.3 Increasing sales 94
5.4 Pricing issues 95
5.4.1.1 Vertical integration 97
5.4.2 Optimism about US pricing 97
5.5 A healthy future? 97
5.6 The generic rationale 99
5.6.1 The impact of Medicare 100
5.6.2 Muted effect 101
5.6.3 Generics will benefit 102
5.7 Drug pricing debate persists 103
5.5 Wal-Mart’s $4 generic offer 104
CHAPTER 6 HOW MEDICARE REFORM EASED GENERIC ACCESS IN THE US 107
6.1 Modernising for generics 107
- The 180-day marketing exclusivity 107
- The 30-month stay 107
6.1.1 Strategic alternative 108
6.1.2 The FTC’s findings 111
6.1.3 The FTC’s recommendations 112
6.2 Legislative responses 112
6.3 The FDA steps in 114
6.3.1 The FDA’s final rule 115
6.3.2 Speeding up generic approvals 116
6.4 Legal back-up 116
- 30-month stays 117
- Declaratory judgments 117
- 180-day exclusivity 117
- Counterclaims 118
- Notification of settlements 118
- Bioequivalence 118
- Anti-bundling 118
6.4.1 FDA’s guidance for industry 118
6.5 Widening the gap 119
- Try again 120
CHAPTER 7 BAD MOON RISING: NEW STRATEGIES TO SLOW GENERIC
ENTRY IN THE US 123
7.1 Looking at Medicaid 123
7.2 The patent bounty 124
7.3 Case study: simvastatin 126
7.3.1 Enter Sandoz… 128
7.3.2 Enter Dr Reddy’s… 128
7.3.3 “Legal bribes”? 128
7.4 US battle not over 129
7.4.1 Medicaid again 130
7.4.2 Final rule on drug price reporting 130
7.4.3 Pharmacists hit 131
7.5 Authorising authorised generics 132
- Accelerating trend 133
7.5.1 Playing both sides of the fence 134
7.5.2 Undermining the 180-day exclusivity 135
7.5.3 The FTC’s study of authorised generics 136
7.5.3.1 Delayed action 137
7.5.4 Pricing impact 137
- GPhA begs to differ 138
7.5.5 A legal remedy? 139
- No legal basis 140
7.5.6 Bills S. 438 and H.R. 806 141
7.6 Not so exclusive 141
7.6.1 Multiple first applicants 141
7.6.2 The Paxil judgement 142
7.7 The first-to-file system - Apotex calls for an overhaul 143
7.8 Patent settlements under the spotlight 144
7.8.1 The reverse-payment investigation 144
- No headway for the FTC 146
7.8.2 The Preserve Access to Affordable Generics Act 146
7.8.3 More Congressional action 147
- Not in your interests 148
- A lenient view 149
7.9 Case study: Plavix 150
- An unusual series of events 150
7.9.1 A tentative agreement 150
7.9.2 Strategic blunder 151
- Valid and enforceable 152
7.10 More about Citizen Petitions 152
7.10.1 A bifurcated system 153
7.10.2 The FDA Revitalization Act 153
7.11 More trouble with patents 154
7.11.1 First to invent or to file? 155
7.11.2 Best mode requirement 156
7.11.3 Start with the USPTO 156
7.12 The perils of biodefence 157
- Strong reservations 158
7.12.1 A comfortable compromise 159
7.13 Clearing the backlog 160
7.13.1 API suppliers - choose carefully 161
7.13.2 The benefits of user fees 161
7.14 Towards a generic drug user-fee programme 162
7.14.1 Not a magic bullet 163
7.14.2 OGD is “overworked”; “overwhelmed” 163
7.14.3 No programme yet 164
7.15 On the fast track for ‘first generics’ and others 164
CHAPTER 8 MORE QUESTIONS THAN ANSWERS IN EUROPE 165
8.1 Everything changes 165
8.2 The EU: a singular not single market 165
8.3 Factors for growth 166
8.3.1 Critical outcomes of the pharmaceutical review 166
8.3.2 The impact of an aging population 167
8.3.3 The cost saving effect 168
8.3.4 The impact of patent expiries 168
8.4 More on cost-containment and pricing pressure 168
8.4.1 A new pricing paradigm 169
8.5 Back to the pharmaceutical review: a fair compromise? 170
8.5.1 Advances for the generics industry? 170
8.5.2 Data exclusivity provisions: a difficult birth 171
CHAPTER 9 EUROPE: HOW IT ALL WORKS 175
9.1 Data exclusivity 175
9.1.1 Explaining eight plus two plus one 175
9.2 Defining “significant clinical benefit” 176
9.3 The cost of the eight plus two plus one compromise 179
9.4 Against data exclusivity 179
- Who owns the data? 180
- Back door to market protection 180
9.5 Compensations of the legislation 182
9.5.1 Derogations from eight plus two plus one 182
9.6 More ‘plus ones’ 183
- What is ‘well-established’? 183
9.6.1 Data exclusivity for OTC switches 184
9.6.2 National complications 185
9.7 Global Marketing Authorisation - a win for generics 185
9.7.1 Court back-up 186
9.8 Defining generics 187
9.9 The European Reference Product 189
9.9.1 The ECJ’s verdict on Generics UK/Losec 189
9.9.2 Creative product removal 190
9.9.3 Backdating European Reference Products 191
CHAPTER 10 EUROPE: HOW IT ALL WORKS (PART 2) 193
10.1 What Bolar allows 193
10.1.1 The experimental-use exemption 193
10.1.2 Disparity with the US Bolar clause 194
10.1.3 Europe’s Bolar variations 194
10.1.3.1 UK Bolar 195
10.1.3.2 German Bolar 195
10.1.3.3 Italian Bolar 196
10.1.4 Stockpiling - another grey area 196
10.2 Bolar: a back door to patent linkage? 197
10.2.1 Isolated case 198
10.3 A European patent solution? 199
10.3.1 The EPLA solution 199
10.3.2 An integrated approach 200
- The language barrier 201
10.4 Some harmony in SmPCs 201
10.4.1 Usage patents 202
10.4.2 ‘Carving out’ 203
10.5 The name game 204
10.5.1 Different generic names 205
10.6 Marketing Authorisation: which route to take? 206
10.6.1 The European Commission’s draft guideline 206
10.6.2 The EMEA’s draft guidance 207
10.6.3 The ‘old’ and ‘new’ MRP 207
10.6.4 Guideline on “serious risks to public health” 209
10.6.5 What the decentralised route offers 209
- “Exceeded all our expectations” 210
10.7 Case study: Zalasta goes central 211
10.8 The ‘sunset clause’ 211
10.9 What’s more… criminal measures and paediatric use 212
10.9.1 IPRED II 212
- One size fits all 213
- Catching dolphins in tuna nets 214
10.9.2 Patents excluded 214
10.9.2.1 Excessive patenting and the decline of innovation 215
10.9.3 Medicines for children 216
10.9.3.1 Six-month extension 217
10.9.3.2 Safeguarding against ‘double rewards’ 218
10.9.3.3 Access to data 218
10.9.3.4 Funding for paediatric use of off-patent medicines 219
CHAPTER 11 EUROPE: ON THE GROUND 221
11.1 After the review 221
11.1.1 Call for more aggressive incentives 221
11.1.1.1 The Portuguese example 221
11.2 The impact of P&R 222
11.2.1 Automatic reimbursement 222
11.2.2 Degrees of switching 223
11.2.3 Price linkage 224
11.3 Market conditions 225
11.3.1 Generic pricing and reimbursement 225
11.3.2 Patient co-payments 225
11.3.3 Generic prescribing 226
11.3.4 Generic substitution 226
11.3.5 Marketing Authorisation 226
11.4 Sustaining generics medicines markets 227
11.4.1 The need for demand-side measures 228
- The advantages of (relatively) free pricing 228
11.4.1.1 Germany 229
11.4.1.2 France 230
11.4.1.3 Italy 231
11.4.2 KUL recommendations for a competitive generic medicines market 232
- Introduce a coherent generic medicines policy 232
- Encourage price differentiation/competition within existing regulatory frameworks 232
- Disseminate pricing information to the relevant players 233
- Increase confidence in generic medicines 233
- Provide incentives for doctors to prescribe generic medicines 233
- Remove financial disincentives for pharmacists to dispense generic medicines 233
- Provide incentives for patients to demand generic medicines 233
11.5 Mixed messages for the generics industry 233
11.5.1 The Portuguese campaign 234
11.5.2 Denmark questions safety benefits 234
11.5.3 Hungary: little interest in generic substitution 234
11.5.4 Germany: opportunities squandered and health reforms 235
11.5.5 AOK discounts criticised 236
- Stada to win 236
- A template for markets worldwide 237
CHAPTER 12 THE JAPANESE LAG 239
12.1 A positive future for generics? 239
12.1.1 Dispelling doctors’ concerns 239
12.1.2 Corporate optimism 239
12.1.3 Remaining challenges 240
12.1.4 A breakthrough on substitution 241
12.1.5 Pricing progress 241
12.1.6 Data protection concessions 242
12.1.7 Squeezing research- based companies 242
12.1.8 More positive signals 243
CHAPTER 13 BEYOND COMPARE? - CLEARING A PATH FOR BIOSIMILARS 245
13.1 Biogenerics: uncertainty rules 245
13.1.1 Debate over definitions 245
13.1.2 An uncertain regulatory pathway 245
13.1.3 Other counties lead the way 246
13.2 Market potential - varied predictions 246
13.2.1 The drivers of biogenerics 246
13.2.2 The US market potential 247
13.2.3 The issue of cost 248
13.2.3.1 Potential - but only in the long term 248
- “Petrified of the biotech lobby” 249
13.3 EPO and the emerging EU biosimilars market 249
13.3.1 The importance of the INN 250
13.3.2 Looking back… a bumpy ride for Alpheon 251
13.4 Comparatively difficult 252
- Product and process 252
13.4.1 The power of analytical tools 253
13.5 Data: how much is enough? 254
- A hybrid approach 255
- ‘Essential similarity’ put to bed 255
13.5.1 ‘Top ten’ conclusions on the EU comparability guidelines 256
13.6 The interchangeability debate 257
- A matter of clinical practice 258
13.7 What’s in a name? (INNs) 259
13.7.1 Reviewing the nomenclature 259
13.7.2 Similar but not identical? EFPIA and EBE’s approach 260
- Under the guise of safety 261
13.7.3 FDA rejects distinct INNs for biosimilars 261
13.7.4 Biotech and generics both claim victory 261
13.7.5 No immediate threat to the use of common INNs 262
13.8 The US: a regulatory void 263
13.8.1 Problems with Section 505 (b) (2) 263
- An “uncompensated taking of property” 264
13.8.1.1 The FDA delays on Omnitrope 264
- Waxman calls for action 265
13.9 Case study: looking back at the Omnitrope conundrum 267
13.9.1 Omnitrope in Europe… 267
13.9.2 And in the US… 268
13.10 The push for US legislation 270
13.10.1 The long wait for guidelines 270
13.10.2 The FDA’s white paper 272
- FDA: waiting for legislators 272
13.10.3 A biosimilars solution? 272
- Echoes of Hatch-Waxman 273
13.10.4 A platform for negotiations 274
13.10.5 Political compromise in sight? 275
13.10.5.1 The lack of clinical studies requirements 276
- Inappropriate assumptions of “sameness” 277
- A balanced position 277
13.10.5.2 The Patient Protection and Innovative Biologic Medicines Act / The Affordable Biologics for Consumers Act of 2007 278
13.10.5.3 An acceptable compromise: The Biologics
Price Competition and Innovation Act 278
- “Better than the European biosimilar language” 279
- 12 years’ protection 280
13.10.5.4 No mention of biosimilars 280
- The impact of the presidential election 281
13.11 What’s next for biosimilars? 281
- Reined in 282
CHAPTER 14 NEW GENERIC PARADIGMS: CHALLENGES AND OPPORTUNITIES 285
14.1 Research-based companies on the defence 285
14.1.1 The obsolescence of biotechnology products 285
14.1.2 New formulations and novel combinations 285
14.1.3 Patent defence strategies 285
14.1.3.1 The Pfizer example 286
14.1.4 Rx to OTC switching - on both sides 286
14.2 Less to copy: the R&D productivity issue 287
14.3 Doing it for themselves: R&D companies move into generics 288
14.4 Supergenerics and more 289
14.4.1 Teva’s NCEs 290
14.4.2 Apotex’s NCE 291
14.4.3 Mixed success for Andrx and Mylan 291
14.5 Consolidation bites 291
14.5.1 Tapping into APIs 292
14.5.2 Teva, Sandoz and after 292
14.6 Consolidation case studies 294
14.6.1 Barr/Pliva 294
14.6.2 Mylan/Merck 296
14.6.3 Actavis privatisation 297
14.7 Looking to the future 298
LIST OF TABLES
Table 1.1 CDER New Drug Applications approved in calendar years 1990-2004 by therapeutic potential and chemical type
Table 2.1 Generic- and cost-friendly provisions in the TRIPS Agreement
Table 5.1 US patent expiries, 2007-2009
Table 5.2 Health, education and defence spending as a share of US GDP, 1995-2005
Table 7.1 Top ten US generic products by sales, 2004
Table 8.1 Generic market shares in Europe by value and volume, 2006
Table 8.2 Sales volumes for newly available generics in the four largest European markets, 2008-2012
Table 10.1 Bolar implementation status in Europe as of February 2006
Table 13.1 Blockbuster biotechnology products that faced patent expiry before 2007
LIST OF FIGURES
Figure 1.1 Price impact of switching to improved first-line combinations for HIV/AIDS
Figure 5.1 Impact of consolidation in the US generics market
Figure 5.2 Change in price of average generic drug prescription, 2002-2004
Figure 5.3 Prescription drugs as a share of US healthcare spending, 1960-2005
Figure 6.1 ANDA patent certification options
Figure 6.2 Paragraph IV certification options
Figure 7.1 Average annual sales of branded drugs losing patent protection, 2005-2009
Figure 7.2 Dollar value of drugs losing patent protection in the US, 1995-2010
Figure 9.1 How data exclusivity rules affect generic medicines
Figure 11.1 Time delays for pricing and reimbursement approval in Europe after the granting of a Marketing Authorisation
Figure 13.1 US pharmaceutical market by product type, 1999-2009
Figure 14.1 Differentiating factors for hard-to-make generics
Generic drugs (generics) are now an established part of pharmaceutical markets and healthcare policies around the world. According to IMS Health data, they already account for 63% of all prescriptions dispensed in the US, the world’s largest single pharmaceutical market.
The European Generic Medicines Association, the EGA, has predicted that, by the end of the decade, generics could account for 75% by volume of all pharmaceuticals sold in an expanded European Union (EU), with a total market value of €21 billion.
This forecast takes into account both new Member States such as Poland and the Czech Republic that have a strong heritage of generic production from previously nationalised pharmaceutical industries, as well as Western European countries, such as France, Spain or Portugal, in which ballooning healthcare costs have finally persuaded governments to take more aggressive action to encourage the use of generics.
Seen in value terms - and generics remain very much about lower prices - the advances are less dramatic. In the fiercely competitive US market, for example, IMS Health estimated generic penetration by value to be around 11% in 2005. In the UK, the country with the highest value share that year - about 24%, excluding discounts - branded and unbranded generics made up 64% of the overall market by volume.
There is clearly plenty of room for further expansion of the generics sector, albeit in an environment where low-cost generics manufacturers from countries such as China and Brazil are remorselessly dragging down prices and some important markets, such as Japan, are still lagging significantly in their efforts to stimulate sales of generics.
IMS Health is forecasting generics sales growth of 13-14% worldwide in 2007, compared with 5-6% for the pharmaceutical market as a whole. Such growth would increase the value of the global generics market to $60-65 billion.
Two key factors are particularly fuelling this growth: European governments’ efforts to slow the rise of healthcare costs and the string of patent expiries on key pharmaceutical brands in the US and other major markets.
Prescription drugs with aggregate sales of $51 billion faced patent expiry in the five years to 2006, IMS Health notes; the figure for the period between 1996 and 2000 is only $17 billion.
Last year, products with combined sales totalling more than $18 billion lost their patent protection in seven key markets. The US market alone accounted for more than $14 billion of that total, according to IMS. This trend has continued in 2007, with more than $16 billion worth of marketed products expected to come up for grabs to generics manufacturers. Releasing its top-line data for global pharmaceutical sales in 2005, IMS Health reported that sales of generics in the eight leading markets (the US, Canada, France, Germany, Italy, Spain, the UK and Japan) exceeded $55 billion.
Generics growth in the top seven markets (excluding Japan) was 13%, compared with 5% for original brands and 6% for pharmaceuticals overall. The US market saw generic sales increase by 15%.
IMS is expecting double-digit sales growth in the generics sector for at least the next five years. That would make generics the largest segment of the pharmaceutical market in volume terms by the end of the decade. The forecast compound annual growth rate for the total pharmaceutical market over the same period is 5-8%.
This growth will come, however, from an industry in the throes of rapid transformation. The last few years have seen enormous upheavals in the operating environment for generic drug companies around the world.
These have included:
- new and more stringent patent regimes in countries that have grown into powerhouses of generic development and supply, coupled with pressure through international trade channels for further consolidation of intellectual property rights (IPRs);
- legal and regulatory advances and reversals for the US generics industry, in a climate of brutal price competition, as well as multiple challenges to vulnerable brands and short-circuiting of market exclusivity by ‘authorised’ generics;
- a hard-fought review of pharmaceutical legislation in the EU that has both eased and stiffened conditions for generics manufacturers in Europe;
- a complex and contentious debate over approval pathways for generic versions of biotechnology products, that has produced a viable regulatory framework in the EU -and a virtual stalemate in the US; and
- consolidation and diversification in the generics industry as pricing pressures and intensifying competition from low-cost markets take their toll.
These trends present both opportunities and challenges. Opportunities take come from diversification and vertical integration into ingredient manufacture, over-the-counter (OTC) products, more sophisticated branded generics, niche drugs, biosimilars or even research-based proprietary medicines - and offer relief from an undifferentiated market for commodity generics in which prices are driven lower and lower. Consolidation and partnerships open the door to economies of scale and leverage of expertise in non-infringing processes, marketing strategies, value-added formulations and biotechnology.
On the other hand, the challenges faced by generics players are numerous:
- how to retain price advantages and profit margins for biosimilars, whose development and approval requirements align them more with ‘me-toos’ than traditional generics;
- how to ensure that new incentives, such as the ‘Bolar’ provisions and data exclusivity trade-off in the EU’s pharmaceutical review, are implemented to the industry’s best advantage; and
- how to fend off the growing influx of low-cost generics from burgeoning markets such as India, China and Brazil.
This report traces these and other key legal, regulatory and business developments of recent years and offers some pointers to the generics industry of the future.
It begins by discussing the political, economic and ethical debate at the hub of the generics market: how to ensure access to needed medicines while balancing the competing interests of research-based and generics manufacturers.
It ends by looking at an environment in which the fundamentals for robust generics growth are in place, but one in which the generics industry faces the prospect of increasing polarisation - both drawing closer to, and posing a more urgent threat to the research-based manufacturers that are its main adversary, its lifeblood and, perhaps increasingly, its proprietor.
In the future, we could see, rather than a generics industry, a number of parallel or interlocking industries under the broad umbrella of generics. It is clear, for example, that the business model for the manufacture of biosimilars will be quite radically different from the one that has supported a thriving commodity generics sector.
Against such a background, it seems likely that the generics industry of the future will be less homogeneous, less stable and more flexible, offering a range of options tailored to customer needs in the pharmaceutical sector. Whatever form they take, though, generics will remain essential to the healthcare equation and a defining feature of the pharmaceutical industry worldwide.
- Novartis
- Sanofi-Aventis
- Wal-MarT
- Sandoz
- Dr Reddy’s
- Pfizer
- Teva
- Apotex
- Barr/Pliva
- Mylan/Merck
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