US Pharm. 2014;39(6)(Generic suppl):31-35.

Since the 1980s, the generic industry has had an increasingly profound effect on healthcare, both as an industry and as a public health issue. This is not surprising, as 80% of all retail prescriptions were filled using a generic product, which accounted for 27% of total spending on retail prescription drugs in 2011.1 Although the generic industry has progressed quite far over the past three decades, further changes in the players involved, the rules followed, and the incentives sought will continue to influence our healthcare system. Consequently, one is left to wonder which players, rules, and incentives will become the biggest influencers over the next three decades.

Though it is difficult to precisely predict what the generic industry will look like in the future, some light can still be shed on emergent issues that are affecting the industry. This article will focus on the policy implications of the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act), the Biologics Price Competition and Innovation Act (BPCIA) of 2009, and generic innovation. In particular, several policy concerns and issues that the pharmacy community should be closely following will be identified.

GENERICS AND INNOVATION

Innovation has been flatlining recently due to decreased productivity and research and development (R&D) funding. The pharmaceutical industry steadily increased investment in R&D at an average of 9% per year from 1980 to 2008 ;2 however, investment has decreased among Pharmaceutical Research and Manufacturers of America ( PhRMA) members by 2.4% in 2011 when compared to the previous year.3 In fact, many companies are using the “string of pearls” business strategy to purchase and acquire small-to-midsize R&D companies in an attempt to keep their patent portfolios robust.4 Additionally, pharmaceutical R&D productivity has been decreasing in spite of a steady increase in R&D funding since the 1980s.5

Given that the cost of developing one medication from R&D to marketing has doubled to $1 billion from levels in the 1980s ,6 research leading to new and novel uses of existing generic medications may provide a much needed injection of innovation into the industry. Two major examples of such generic innovation are metformin and allopurinol. In 2011, the Joslin Diabetes Center won a grant of $24.3 million dollars from the National Institutes of Health (NIH) to study the renal-protective characteristics of allopurinol during a 5-year multicenter study using volunteers with type 1 diabetes.7 This study stemmed from research suggesting a correlation between high uric acid and kidney function loss in type 1 diabetic patients. As a small pilot has already shown promise, this study may result in a low-cost treatment option that would effectively slow down the progression of kidney dysfunction. Likewise, research has also suggested a possible role for metformin in cancer prevention. By acting on a wide array of tissues as it does on insulin cells, metformin has shown antigrowth properties, especially in breast cancer cells.8 Researchers are now looking for ways to incorporate this into practical use.

Though finding new possible uses for metformin and allopurinol took several decades, innovative oversight practices to speed up this much-needed process should be developed. Essentially, the solution will likely take shape as any combination of the following imperatives. First, funding of basic science research in generic drug pathways as well as of population studies on those taking generic medications must be increased. Second, an expedited pathway for approving new uses for existing medication must be established. Lastly, incentives need to exist to entice manufacturers to pursue such research.

REGULATORY AND LEGISLATIVE CONCERNS

Regulation and oversight of generic drugs have raised concerns over balancing proliferation of the pharmaceutical market and innovation with the protection of public health and the public good. Pursuant to those concerns, questions of where the line should be drawn when regulating the industry are inevitably raised. Some of these concerns will be discussed in the following section.  

Branded Generics

The Hatch-Waxman Act: The Hatch-Waxman Act has transformed the pharmaceutical industry, resulting in generic drugs being used in a drastically different way than they were before the Act. For example, in 1980, a generic product was dispensed only 13% of the time when a generic version was available.9 This is a marked difference from 94% in 2011. In fact, 80% of all retail prescriptions are dispensed using a generic product.1 This evolution was driven by direct changes to how the FDA approves generic products, which was mainly done by offering an experimental-use exemption from patent infringement to generic manufacturers enrolled in a specialized certification process.

However, the policy behind the Hatch-Waxman Act was essentially a proposal to balance two needs—competition and pharmaceutical patent protection. By offering the incentive of a 180-day exclusive marketing period to the first generic manufacturer who successfully challenged a brand manufacturer’s patent, the Act promoted competition through easier generic product entry. The incentive for this was that the successful challenger would recoup litigation costs incurred while challenging the patent and exclusive profits. Additionally, allowing generic manufacturers to work on approval of their product before the brand patent expired significantly decreased the time for generics to enter the market. Compared to the 1980s, the time to entry decreased from years to immediate availability after patent expiration.9 The net effect of these changes was to provide affordable access to medication therapy. For instance, if the manufacture of a generic product is relatively easy, generics enter the market at as low as 80% below brand-product prices.10

Alternatively, the Act protected the interest of innovators by offering a patent restoration of a portion of the time lost during FDA approval of the drug. The law allows for a term extension equal to half of the time elapsed between filing of the Investigational New Drug Application (INDA) and the New Drug Application (NDA) to the FDA plus the amount of time the FDA takes to approve the NDA.11 There is also a grant of data exclusivity over proprietary safety and efficacy data of 3 years regularly or 5 years if the medication is a new chemical entity (NCE), which was never previously approved in an NDA. However, there are concerns that these extra provisions are not enough to assure brand profitability in light of the increased costs and decreased productivity of pharmaceutical R&D.  

Concerns Over Branded Generics: A branded generic product (also called an authorized generic) is a generic version of a brand product that is usually marketed by a subsidiary of the brand company or a generic manufacturer authorized to do so by the patent holder (e.g., Dyazide, Nolvadex, Ventolin). Here, timing of product entry is key. Since branded generics are usually marketed either slightly before or right after patent expiration, this is a problem for any generic company that has won a 180-day period of exclusivity. Examples include branded generic products marketed by the companies Barr Laboratories (for Allegra) and Eon Labs (for Wellbutrin SR) .12 However, this practice of reducing the value of the exclusivity period reduces or even eliminates the incentive to challenge a brand drug’s patent, through significantly reduced profits. For instance, instead of having the dominant share of the paroxetine (Paxil) market during the first “exclusive” year of marketing, the generic manufacturer Apotex ended up with only 40% of the market; another 40% was held by an authorized generic version of paroxetine.13

One can argue that this practice goes against the Act’s legislative intent of encouraging introduction of generic products. In fact, that particular argument was used on two occasions, in front of the Court of Appeals of the DC Circuit in 2005 (over gabapentin)14 and the 4th Circuit in 2006 (over nitrofurantoin),15 with both cases yielding the same results. Both courts allowed the practice by reasoning that branded generics did not render the 180-day period of exclusivity meaningless. In support, the courts cited that all other generic versions were in fact excluded during the first 180 days. Additionally, both courts stated that the Act’s silence on branded generics simply precluded any grant of authority to the FDA from prohibiting branded generics during the period of exclusivity. Since these two cases represent the prevailing law, the practice of marketing branded generics during the exclusivity period will likely continue to expand, which may lead to a decrease in successful patent challenges by generic manufacturers.

Regulation of Follow-On Biologics

Follow-On Biologics: A follow-on biologic is the off-patent version of the brand biologic product, although it is not truly a generic version according to how we normally understand “generic.” One of the criteria for judging a generic is “sameness.” Here, three barriers exist for sameness with a brand biologic: 1) the highly complex structure of biologics (amino acid chains making up a peptide or protein with secondary and tertiary structural intricacies); 2) the structure’s intricate relations to its function in the body; and 3) the often proprietary methods used to grow genetically modified microbes that manufacture biologics.16 In fact, some alternatives called biobetters may have better clinical profiles than the original brand product.17  

Biologics Price Competition and Innovation Act of 2009: Congress addressed concerns about the inability to regulate the biologics industry under the Hatch-Waxman Act. The BPCIA hit three main points.18 ,19 First, Congress acknowledged the difficulty of obtaining “sameness” when establishing two categories of follow-on biologics: “ biosimilars” and “interchangeable biologics.” The difference lies in whether prescriber consent is required for substituting one for the branded product. A biosimilar requires prescriber consent, but an interchangeable biologic does not. Second, new terms of marketing (4 years) and data exclusivity (12 years) are established to benefit brand manufacturers. Third, a new dispute resolution pathway was created and mandated before litigation for patent disputes.

The BPCIA also gives the FDA a large role in fleshing out the details of the Act. In general, the FDA seems to be proposing a flexible process for approving biosimilars. For example, clinical data gathered while obtaining approval with the European Union’s regulatory body could be used to support approval of a biosimilar.18 Also, an applicant could extrapolate the clinical data obtained for one indication to all indications that a brand biologic is approved for so long as safety (but not efficacy) is shown.19 However, note that the FDA has not yet released final guidelines for approval, though draft guidelines were released in mid-2012.18

Concerns Over Regulations

Some concerns have been raised about the BPCIA and the ensuing regulations. First, the FDA has not yet finalized the draft guidance on biologics, creating uncertainty in the market. Second, the lack of an Orange Book for biologics has caused a lack of transparency in the dispute resolution process.19 Unlike the Hatch-Waxman Act, the BPCIA does not require that the brand manufacturer initially disclose patents claimed in the NDA. The dearth of such reporting would lead to difficulty (and ultimately reluctance) in identifying the patent to be challenged.

Finally, even if a challenge is made, there is no disclosure requirement for settlements made between the patent holder and the challenger. The lack of such a requirement promotes the use of a “pay-to-delay” strategy, where the patent holder pays the challenger to postpone introduction of a competing product until a future time, regardless of validity of the patent.20 Though recent Supreme Court precedence has increased the judicial scrutiny for such agreements, the practice is still not illegal per se.21 ,22 Additionally, many states have already passed regulations over biosimilars and interchangeable biologics, usually to add restrictions on prescribing and dispensing of biologics in an effort to protect the public’s health. As more states pass such restrictions into law, a patchwork of different requirements surrounding the dispensing and prescribing of biologics is likely to develop.23 Hence, concerns over the BPCIA are diverse and varied, cut deep, and hit on crucial policy points;
they also pose a barrier to the public’s access to biologics—the opposite of the legislative intent.

CONCLUSION

Generic drugs may not often be identified as important policy forces, but they have nevertheless greatly influenced the public’s health and the pharmaceutical industry. Though much in the way of public good has already been generated (i.e., better access to generics through lower cost and greater competition), generic drug policy will remain an important aspect of our healthcare system. For example, strict tort liability for generics and drug shortages are ongoing issues that are still developing. Additionally, the continually changing incentives and rules regulating the generic market will likely produce unforeseeable issues. Hence, it is imperative that we keep a keen policy eye on generic drugs to identify such changes in time to adequately respond to them.  

REFERENCES

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