Transcript Tim Gilbert presentation

Hatch-Waxman:
Upsetting the Balance
Tim Gilbert
Hatch-Waxman: A Delicate Balance
Innovation
Access
Background on the Generic Drug Industry
The Need for A Strong Generic Industry:
•
Generics cost, on average, 30% to 80% less than their brand
counterparts.
•
Generics accounted for 56% of all prescriptions dispensed in
2005, according to IMS Health data, but less than 13.1% of every
dollar spent on prescription drugs.
•
According to a 1998 study by the Congressional Budget Office,
generic drugs save consumers between $8 billion and $10 billion each
year.
Branded products coming off patent are valued at over
$27 billion in 2007, and $29 billion in 2008.
Exploding the Myth on Copying:
Generics Innovate
Bringing generics to market involves more than
copying
• Innovation by generic sector can involve
developing new forms of the active ingredient,
new processes and new formulations
• Along the way, generic companies often get
their own innovative patents on a more efficient
manufacturing process, new formulations or
new forms of the active ingredient
Generic Drug Development Cycle
Time from Initial Product Selection to Market:
5 - 7 years
General Steps in Process
Intellectual Property Hurdles
1
Assess Patent Landscape
Evaluate all IP Hurdles
2
Product Selection & Sourcing
API
Non-infringing API / process or invalidate
patent
3
Formulation Experimentation
Non-infringing formulation / process or
invalidate patent
4
Testing for Pharmaceutical
Equivalence & Bio
Equivalence
5
Submission
Non-infringement of use patent / invalidate
patents
6
Preparation of certification
Address all listed patents
7
Litigation
Continue to monitor for new IP
Why Do We Need 180-day Period?
The Free-Rider Problem:
•
First-filer does all the heavy lifting to get a
generic to market (R&D, litigation etc.) Subsequent
entrants “piggy-back” on first-filers efforts. 180-day
period creates incentive for first filer to incur risk, but
not only recouping litigation costs, but also creating
a “war chest” for future development.
•
Just like brand companies need a “war chest” from
blockbuster drugs to develop new products
The Promise: 180-day Exclusivity Period
21 U.S.C. 355(j)(5)(B)(iv)
(iv) 180-day exclusivity period.—
(I) Effectiveness of application.— Subject to subparagraph (D),
if the application contains a certification described in paragraph
(2)(A)(vii)(IV) and is for a drug for which a first applicant has submitted
an application containing such a certification, the application shall be
made effective on the date that is 180 days after the date of the first
commercial marketing of the drug (including the commercial marketing
of the listed drug) by any first applicant.
Why Was 180-day Period Granted
by Congress?
What the FTC Said
“Through this 180-day provision,
Hatch-Waxman provides an incentive
for companies to challenge patent
validity and to ‘design around’ patents
to find alternative, non-infringing forms
of patented drugs. The 180-day
marketing exclusivity provision was
intended to increase the economic
incentives for a generic company to
be the first to file an ANDA containing
a paragraph IV certification and get to
market.”
How the 180-Day Exclusivity
Should Work: Generic Prozac®
•
•
Barr Labs. launches generic Prozac® (fluoxetine) in
August 2001
After the 180-day exclusivity ends, 4 generic
applicants enter the market
Effect on Barr Labs.:
• During the 180-day exclusivity, Barr earns a return
on investment following its successful patent
litigation and development of a new drug product
• Barr invalidated the patent on Prozac®  Generic
came to market 3 years early (Commissioner
Leibowitz, FTC)
How the 180-day Exclusivity Should
Work: Generic Prozac
100%
Generics
90%
Generic Exclusivity
(Q3 2001 to Q4 2001)
80%
70%
60%
Market
Share
50%
40%
30%
Barr Pharmaceuticals, Inc.
(1st Generic)
20%
10%
Eli Lilly and Company (Brand)
0%
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
What Congress Did Not Intend
20-year patent term
5-year data exclusivity for NME’s
3-year data exclusivity supplement
for clinical trials
6-month pediatric exclusivity
30-month automatic stay
Up to 5 year patent term
extension
Brand
Innovation
180-day exclusivity
Generic Access
How the 180-Day Exclusivity Should
Not Work: Generic Paxil®
•
•
Apotex launches generic Paxil® (paroxetine) in Sept. 2003
On same day, Par launches an authorized generic Paxil®
Effect on Apotex:
•
Apotex had expected to earn revenues of ~$530-575 million,
but actually earned revenues of ~$150 million
•
Apotex lost revenues of ~$400 million in the first 180 days
alone
•
During the 180-day exclusivity, Par achieved generic market
share of 65%, and Apotex of 35%
•
GSK and Par had combined market share of over 70% during
the 180-day exclusivity
How The 180-day Exclusivity Should
NOT Work: Generic Paxil
100%
90%
80%
Brand and Authorized Generic
70%
60%
50%
Par Pharmaceutical, Inc. (Authorized Generic)
Market
Share
40%
Apotex Inc.
30%
20%
10%
0%
GlaxoSmithKline PLC (Brand)
Jul-03
1
Aug-03
Sep-03
Oct-03
2
3
4
Nov-03
5
Dec-03
Jan-04
6
7
Feb-04
Mar-04
8
9
Apr-04
1
May-04
11
The Authorized Generic Attack Unveiled
“The idea was somebody has a six month exclusivity, but
we are king maker; we can make a generic company
compete during a very profitable time… We are not a
generic company, and do not wish to become one. If we
acquired the most successful generic company in the
world, it would barely move the needle on profit.”
-
Statement by J.P. Garnier, CEO, GlaxoSmithKline, Q4 2003
Earnings Conference Call and Presentation, Feb. 13, 2004
The Authorized Generic Attack Unveiled
“For this [strategy] to really work, you’d have to have the
whole industry do that systematically each time a patent
expires so that you truly eliminate the incentive in the
calculation that generic companies would make. We
cannot agree to do that as an industry [because of antitrust
concerns, but] it’s a very interesting and intriguing idea.
Food for thought.”
-
Statement by Sidney Taurel, CEO, Eli Lilly, The Pink
Sheet, Dec. 8, 2003
Number of Products
The Rising Tide of Authorized Generics
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0
1998
1999
2000
2001
2002
2003
Number of Authorized Generics Released/Threatened
During 180-Day Exclusivity – 1998 to Present
2004
2005
The Authorized Generic Attack Unveiled
“If the generic, the true generic is run out of the
market because they can’t recoup their costs of
developing the drug and filing the ANDA and possibly
undergoing years of litigation, isn’t it in point of fact
that the ultimate winner there would be the brand and
this would have the deleterious effect of driving the
generics out of the market?”
-
Judge Keeley in Mylan v. FDA (N.D.W.Va. Aug. 27,
2004)
The Case Against Authorized Generics
(1) PRICING
Do authorized generics lower
prices for consumers?
(2) INCENTIVES
Do authorized generics undermine
incentives for generics to innovate?
The Case Against Authorized Generics
But authorized generics
increase competition, so
doesn’t that mean lower
prices for consumers?
But do authorized
generics actually
lower prices?
The Case Against Authorized Generics:
Impact on Prices
PhRMA-Sponsored Report
• Conducted by IMS Consulting;
• Looked at effect on generic drug prices when authorized generics
were released during 180-day exclusivity period, using IMS data for
18 drugs;
Findings:
• Concluded that the wholesale price discounts off brand prices on
average were 15.8% greater in markets with AGs than in those
without them.
BUT The PhRMA Report looked at wholesale prices,
not retail prices that consumer actually pay
The Case Against Authorized Generics:
Impact on Retail Prices
Liang/Hollis Report
• Replicated the PhRMA Study, but looked at effect on retail generic
drug prices when authorized generics were released during 180-day
exclusivity period, using IMS data for the same 18 drugs;
Findings:
• Discounts off retail brand prices were on average 0.6% less in
markets with AGs than in those without them when weighting by
sales revenues;
• Discounts off retail brand prices were on average 5% more in
markets with AGs when not weighting by sales revenues;
The Case Against Authorized Generics:
Impact Incentives
Authorized generics gut
the incentive to invent
around and challenge
brand patents by
capturing critical market
share and reducing
returns during that
period by at least 50%
The Case Against Authorized Generics:
Impact Incentives
But Aren’t the Number of ANDA’s Filed Increasing?
• There is an increasing number of “me-too” ANDA’s,
Para. III ANDA’s and ANDA’s for products which
already have a generic version;
• Impact of authorized generics on Para IV ANDA’s
will be seen in several years – decision to pursue
development of a generic drug is made 5-7 years
before ANDA is filed.
The Case Against Authorized Generics:
Possible Impact of Diminished Incentives
•
Continuance of invalid brand patents
•
Reduced incentive to invent around
patents
•
Slower generic entry
•
One month delay in true generic entry =
enormous losses to consumer.
The Case Against Authorized Generics:
It’s All Brand Tactic
BOTTOM LINE:
No authorized generic would ever come to market
unless a generic was already there – A brand will
only release an authorized generic if it has to in
order to undercut true generic competition
A Word On Patent Settlements
Increasing number of brand-generic patent settlements.
Why?
•
Coincides with an increase in authorized generics
•
Negotiating power in settlement discussions has
shifted: Generic is faced with the release of an
authorized generic even if the generic wins in litigation.
•
Generic is faced with choosing to incur cost and risk of
continuing the patent challenge and facing at least
50% fewer returns during the 180-day period, or settle.
The Ideas for Reform
(1) Elimination of Authorized Generics – Rockefeller,
Leahy, Schumer bill;
(2) Creation of an Effective Declaratory Judgment
Provision – Remove potential for patent settlements to
bottleneck market entry by allowing subsequent filers to
trigger exclusivity period;
(3) Possible Limitation on Reverse Payments in Patent
Settlements – Kohl bill?
Hatch-Waxman: Restore the Balance
Innovation
Access
Thank You
Tim Gilbert
phone:
email:
416.703.1100
[email protected]