US Pharm. 2011;36(6)(Generic Drug Review suppl):32-33.
Authorized generics (AGs) are not your typical generic drug. AGs have been the subject of controversy and litigation for many years. The goals of this article are to define AGs, elucidate both sides of the controversy and litigation surrounding them, and enable the reader to take an informed stance on the topic.
Definition of an AG
The Federal Food, Drug, and Cosmetic (FD&C) Act officially defines an AG as “a listed drug (as the term is used in subsection (j)) that—(A) has been approved under subsection (c); and (B) is marketed, sold, or distributed directly or indirectly to retail class of trade under a different labeling, packaging (other than repackaging as the listed drug in blister packs, unit doses, or similar packaging for use in institutions), product code, labeler code, trade name, or trade mark than the listed drug.”1
Essentially, the FD&C Act is saying that an AG is a drug that is marketed under the brand manufacturer’s initial New Drug Application (NDA) but is sold with different labeling, packaging, and so on, as a generic version of the brand.
Some of the most easily recognizable examples of AGs are Protonix, Ocella, and Yasmin. An abbreviated version of the FDA’s list of AGs is given in TABLE 1.
Opposing Positions on AGs
The position of the Generic Pharmaceutical Association (GPhA) is that the introduction of an AG during the 180-day generic exclusivity period violates the Hatch-Waxman Act, the intent of which is to encourage the quick entrance of lower-cost generic medication to the market.3 According to the GPhA, brand companies typically raise the brand drug’s price when the AG is introduced, which results in an even higher cost for the consumer. The GPhA supports H.R. 573, a bipartisan bill introduced by Representative Jo Ann Emerson (R-MO) and cosponsored by Representatives Marion Berry (D-AR), Zach Wamp (R-TN), and Dennis Moore (D-KA), which would prohibit an AG from being marketed during the 180-day exclusivity period following a patent challenge.
Apotex submitted a brief to the FDA in June 2004 in support of a citizen petition filed by Mylan that asked the FDA to prohibit marketing of AGs during the 180-day exclusivity period. This brief lists a number of common objections to AGs: (1) AGs violate the right of a first applicant to the 180 days of marketing exclusivity; (2) they are inconsistent with the purpose of the Hatch-Waxman Act; (3) they undermine the incentives Congress created for true generics; (4) they are anticompetitive; and (5) they give brand-name companies the unilateral right to do away with the 180-day exclusivity period.4
In July 2004, the FDA denied both Mylan’s citizen petition and a petition submitted by Teva that challenged AGs. The FDA has asserted that AGs increase competition and that current law does not support restriction of their marketing.5 In December 2004, the U.S. District Court of the District of Columbia noted that current statutes did not support the argument that the FDA has the authority to prohibit marketing of an AG, thereby ruling in favor of the brand manufacturers. This ruling was upheld by the U.S. Court of Appeals for the District of Columbia Circuit in June 2005. Generics manufacturers have also tried unsuccessfully to stop the marketing of AGs through challenges based on individual state laws.
The enactment of the Deficit Reduction Act (DEFRA) of 2005 was a small victory for generics manufacturers that oppose AGs.5 DEFRA requires that drugs marketed under an NDA be included in the calculation of the quarterly rebates the manufacturer must pay to each state Medicaid program. The Medicaid drug rebate statute requires manufacturers to pay this rebate for all units of covered outpatient drugs reimbursed by the state Medicaid program.6 Approximately 550 pharmaceutical companies currently participate in the program. Forty-nine states (Arizona excluded) and the District of Columbia cover drugs under the Medicaid Drug Rebate Program.
AGs: Benefit or Detriment to Patients?
A study published by the GPhA in 2006 stated that consumers pay more for medications when an AG is marketed.7 A report by Hassett and Shapiro in 2007, however, indicated that AGs benefit consumers by way of increased competition and reduced prices.8 Hassett and Shapiro noted that AGs are not the only source of competition in the 180-day exclusivity period. During this period, a generics manufacturer may face competition from other generics manufacturers marketing a different dosage.
An interim report by the Federal Trade Commission (FTC) in 2009 analyzed the impact of AGs on competition in the prescription drug marketplace.9 The FTC found that retail prices were an average of 4.2% lower when an AG entered the market during the 180-day market exclusivity period. Wholesale prices also were found to be lower. However, the profits of generics manufacturers were lower when an AG was available during the exclusivity period.
To prevent loss of revenue, many generics manufacturers are willing to enter into settlements delaying the introduction of a generic product to the market in return for the brand manufacturer’s agreement not to launch an AG during the 180-day exclusivity period. Consumers may be harmed by this type of agreement because of the delay in the introduction of the generic product and the lack of price competition during the exclusivity period.
Pharmaceutical Research and Manufacturers of America, which represents its member pharmaceutical research and biotechnology companies, issued a statement on AGs in June 2009 after the FTC’s interim report on AGs was issued.10 It agreed with the FTC’s assessment that AGs help provide value for patients.
An opinion poll conducted by Roper Public Affairs & Media in June 2005 revealed that 87% of Americans wanted to have the option of taking an AG (48% of them agreeing strongly). 11 Eighty percent of respondents agreed that “having different versions of the same drug is good for consumers.” This preference for having an AG available does not seem to be driven by a distrust of standard generic products, as only 12% of respondents stated that they were not comfortable using generic drugs. Consumers want to know when AGs are available, with 90% of respondents stating that they would like to be informed specifically by their pharmacist when an AG is available (69% agreeing strongly).
It is necessary to consider not only patients’ preferences and cost, but also patients’ needs. Some patients have serious allergies that limit the drug products they can take. If such patients are already stabilized on a brand medication, AGs allow them to receive generic pricing without risking a serious allergic reaction to a different drug. AGs also can benefit patients taking drugs with a narrow therapeutic index, as they would be able to pay generic pricing for medications without having to undergo additional testing to ensure that they are responding the same to the generic product as to the brand product. Arguments concerning the impact of generic drug costs on consumers also must consider whether the consumers being studied are insured; insured patients generally pay the same copayment for an AG as they would for other available generic drugs.
1. FDA. FD&C Act Chapter V: Drugs and Devices, SEC. 505. [21 USC §355] New Drugs. www.fda.gov/
2. FDA listing of authorized generics as of March 25, 2011. www.fda.gov/downloads/
3. Generic Pharmaceutical Association. Authorized generics: GPhA position. www.gphaonline.org/issues/
4. Gilbert’s LLP. Comment of Apotex Corp. in support of citizen petition docket No. 2004P-0075/CP1. www.fda.gov/ohrms/dockets/
5. Wasserstein JN, Karst KR. New law reins in “authorized generics” despite generic industry court losses, but leaves several ambiguities. RA Focus. 2006;June:9-12.
6. Centers for Medicare & Medicaid Services. Medicaid Drug Rebate Program: overview. www.cms.gov/
7. Hollis A, Liang BA. An assessment of the effect of authorized generics on consumer prices. Authorized Generics and Consumer Prices. www.cwsl.edu/content/news/
8. Hassett KA, Shapiro RJ. The impact of authorized generic pharmaceuticals on the introduction of other generic pharmaceuticals. http://188.8.131.52/
9. Authorized Generics: An Interim Report. Washington, DC: Federal Trade Commission; June 2009.
10. Pharmaceutical Research and Manufacturers Association. PhRMA statement on authorized generics. www.phrma.org/media/releases/
11. Roper Public Affairs & Media. More than eight in ten Americans want the option of choosing authorized generic prescription drugs. www.authorizedgenerics.com/
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