Generic Pharmaceuticals 2007 · Indian company, Dr. Reddy’s Laboratories, made the list of top ten generic corporations by dollar volume. He pointed out that it was significant

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Generic Pharmaceuticals 2007: Critical Crossroads

Supported by Greenstone Limited.

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Robert W. Pollock, RPh, MS (Moderator)

Bob received his BS degree in pharmacy and his MS degree in pharmacy administration at the University of Rhode Islandwhere he studied as a Fellow of the American Foundation for Pharmaceutical Education. He is Senior Vice President ofLachman Consultant Services, Inc., which provides consulting and regulatory services for the pharmaceutical and alliedhealth industry. Formerly, Bob was Acting Deputy Director for the Office of Generic Drugs (OGD), Center for DrugEvaluation and Research, Food and Drug Administration.

Doug Long (Presenter)

Doug is Vice President of Industry Relations at IMS HEALTH, the world’s largest pharmaceutical information company,serving over 101 countries. He has been with IMS since 1989. Previously Doug was at Nielsen Market Research forsixteen years. Doug received a BA degree from DePauw University, and an MBA in Management from Fairleigh DickinsonUniversity.

Donald J. Dietz, RPh, MS (Presenter)

Don received a Bachelor of Sciences Degree in Pharmacy from Duquesne University and a Masters of Science in HumanResource Management from LaRoche College. He is the Vice President of PHSI (Pharmacy Healthcare Solutions, Inc.). Hisemphasis is in marketing program development, implementation, and measurement, delivering clients’ desired results. Hisfocus is on solutions that enable clients to effectively manage the appropriate use of both prescription and OTC products.

Kristen N. Reabe, PharmD

Kristen received her PharmD from the University of Wisconsin, School of Pharmacy. She is Vice President of Contracts forPharmacy Select, a contract entity representing over 6,000 community pharmacies across the U.S. Her responsibilitiesinclude contract negotiation, program development, and market analysis.

David Vucurevich, RPh

David did his undergraduate work at the University of Arizona and is a graduate of the University of New Mexico, Collegeof Pharmacy. David is Group Vice President Pharmaceutical Purchasing & Clinical Services for Rite Aid Corporation.David’s responsibilities include overseeing pharmaceutical purchasing, regulatory compliance, formulary management,compliance and persistence programs, medication therapy management, acute care clinics, and retail pricing.

Thomas E. Scono, RPh

Tom received his BS in Pharmacy from The Ohio State University. He is Vice President of Contracts for EPIC Pharmacies,Inc., a group purchasing organization of over 700 members. He is responsible for contracting and performance evaluation.

Sandy Greco

Sandy is currently President & CEO of Altro Pharmaceuticals, a privately held company that specializes in manufacturingproducts for both the human and veterinary markets. Prior to starting Altro Pharmaceuticals, Sandy was Vice President ofPurchasing and Marketing for wholesaler Kinray.

Paul Hines

Paul received a BS in Pharmacy from the University of Florida College of Pharmacy and an MS in Health Sciences from theUniversity of Central Florida. He has been with Publix Super Markets for 21 years and has held several positions includingresponsibilities for managed care, technology, and pharmacy supervision. Paul currently is the Manager of Procurement forthe pharmacy department.

Brian Jones

Brian is a 30-year veteran of the wholesale pharmaceutical distribution industry. In his current position as Vice PresidentProgram Operations at AmerisourceBergen Drug Company, Brian manages the company’s generics commercializationengine, PRxO Generics. PRxO Generics is a comprehensive product and service bringing value to all pharmacy providerchannels.

Steve Grossman

Steve is a registered pharmacist and owner of JE Pierce Apothecary in Brookline, MA.

Participants in Critical Crossroads

Copyright 2007 by Jobson Medical Information LLC, 100 Avenue of the Americas, New York, NY 10013-1678. No part of this publication may be reproduced or transmitted by any means, electronic ormechanical, or stored in any storage and retrieval system, without permission in writing from the publisher. U.S. PHARMACIST (ISSN 01484818; USPS No. 333-490) is published monthly by Jobson MedicalInformation LLC, 100 Avenue of the Americas, New York, NY 10013-1678. Periodicals postage paid at New York, NY and additional mailing offices. Acceptance of advertising by U.S. PHARMACIST does notconstitute endorsement of the advertiser, its products or services.The opinions, statements, and views expressed within this publication do not necessarily reflect those of Jobson Medical Informaion LLC or theeditors of U.S. PHARMACIST.

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T he generic drug industry isfacing some of its mostsignificant challenges and

opportunities in the more than twodecades since the passage of TheDrug Price Competition andPatent Term Restoration Act of1984, also known as the Waxman-Hatch Act. This single piece of leg-islation changed the complexion ofthe generic and branded drugindustries by essentially restoringeroding patent expiration dates on

innovator products while allowinggeneric pharmaceutical companiesto submit new drug applicationswithout duplicating the clinical tri-als of innovator companies. Underthis Abbreviated New DrugApplication (ANDA) schemeestablished by the Act, a genericmanufacturer must demonstratethat its drug is the same as that ofthe brand name drug, including ashowing of bioequivalence. As aresult, this act, which has thus far

stood the test of time, was largelycredited for a rebirth in the genericdrug industry and gave innovatorcompanies the ability to betterinvest in new chemical entities pro-viding new structure to patentexpirations. This has culminatedinto what has become today’sgeneric industry which has reacheda critical crossroad in what manyindustry experts are referring to asthe most competitive and challeng-ing generic marketplace in history.


While August 10, 2007 might have been a sunny and calm late summer day outside the Boston Westin Copley Place hotel, inside a panel of 10

distinguished pharmacy executives gathered around a conference table to discuss thechanging climate of the nation’s generic industry at the second annual U.S.

Pharmacist Dialogs in Generics meeting. Supported by Greenstone Limited, thisyear’s theme, Generic Pharmaceuticals 2007: Critical Crossroads speaks volumes

about the challenges and opportunities facing the generic pharmaceuticalsmarketplace. Participating in this year’s discussion were executives representing every

facet of pharmacy. They included: moderator Bob Pollock, RPh, MS, Senior VicePresident of Lachman Consultant Services, Inc; presenters and panel participants

Doug Long, Vice President of Industry Relations, IMS Health and Don Dietz, RPh, Vice President of Pharmacy Healthcare Solutions, Inc.; Panel

members Kristen Reabe, PharmD, Vice President of Contracts for Pharmacy Select;Brian Jones, Vice President of Generic Rx Product Development,

AmerisourceBergen; Tom Scono, RPh, Vice President of Contracts for EPICPharmacies, Inc.; David Vucurevich, RPh, Group Vice President of Pharmaceutical

Purchasing & Clinical Services, Rite Aid; Paul Hines, Manager of PharmacyProcurement, Publix; Steve Grossman, President of J.E. Pierce Apothecary;

and Sandy Greco, President & CEO, Altro Pharmaceuticals.


The path the industry takes todaycould determine its overall successor failure for years to come.

While sales of generic drugs haveincreased exponentially sinceWaxman-Hatch, so have the com-petition and other external market-place forces. Over the years genericcompanies have fought valiantly toincrease market share and sales oftheir products despite the innova-tive techniques used by brandedcompetitors to protect their intel-lectual properties. Moderator BobPollock of Lachman ConsultingServices and Past Acting DeputyDirector of the Office of GenericDrugs set the tone of the meetingduring his opening comments whenhe told the panelists “It’s a verydynamic time. We always thoughtthat when Waxman-Hatch passedin 1984, by now everything wouldbe resolved. But clearly, it has not.”

It is those market forces thatwere responsible for the lively dis-cussion at this year’s Dialogs inGenerics.

An Ambitious AgendaThis year’s meeting agenda was anaggressive one covering timely andimportant topics. Any one of themcould alter the course of the genericdrug industry. Topping the list was

the imminent implementation ofthe final Medicaid drug-pricing reg-ulations that arose out of the DeficitReduction Act of 2005 (DRA). Ifnot amended, these new regulationswill exert key changes in the wayprices are calculated for Medicaidprescriptions, which will have far-reaching consequences for genericmanufacturers and retailers alike.Pharmacy could be facing majorpressures on the pricing of Medicaidprescriptions as the Centers forMedicare and Medicaid Services(CMS) promotes three major initia-tives: a new pricing calculationbased on using the AverageManufacturer Price (AMP); a newdefinition for the Federal UpperLimit (FUL) on multiple sourcedrugs; and the publication ofAverage Manufacturers’ Prices gath-ered from a monthly CMS survey.

Other topics covered during thefull-day meeting included in-depthdiscussions on authorized generics,

biological equivalents, at-riskgeneric launches, and a close evalu-ation of today’s generic industryand where it could be heading inthe future.

The “Golden Age of Generics”

Doug Long of IMS Health kickedoff the meeting with a comprehen-sive presentation titled U.S.Pharmaceutical Market: Trends,Issues, Forecast. While Long set anoptimistic tone at the start of hispresentation by saying “it is theGolden Age of the generic business,”he quickly tempered his commentsof “record performance” by addingthat the overall prescription marketgot off to a “very fast start in 2007 –due to Medicare Part D” but itcould be a “very slow finish.” ButLong delivered good news to thegroup by saying that “if you’re in thegeneric business, [generic] prescrip-tions are very solid.” Long said heexpects the U.S. prescription marketto end up approximately 5% withmuch of that growth already takingplace in the first half of 2007. Heattributed a large part of thatincrease to the escalation of prescrip-tion utilization resulting fromMedicare Part D, “the availability ofhigh quality, low cost generics,” adecrease in brand name drugs as aresult of increasing co-pays, and alate flu season (TABLE 1).

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Table 1. Factors Affecting Growth in Generic Sales

• Medicare Part D

• Availability of high-quality, low-cost generics

• Increases in insurance co-pays

• A weak flu season in 2006; stronger in first quarter of 2007

“ It’s a very dynamic time. We always thought that whenWaxman-Hatch passed in1984, by now everythingwould be resolved. But clearly it has not.”Robert Pollock


Long’s forecast for generics wasalso bullish. He said one big reasonfor the upward sales trend is thelack of innovation on the part ofbrand manufacturers. “They’re not… able to replace what they are los-ing,” he said.

Long cautioned that while heforecasts solid generic growth poten-tial overall, he said the competitionwithin the generic industry is alsoexpected to remain strong.“Hypothetically, you have an indus-try that has very low barriers ofentry. Virtually anybody can get intoit.” He cited examples of genericcompanies from India and Chinastarting businesses in the U.S.“Eastern European players are think-ing about coming.” As an example,Long said, that as of the 2nd quarterof 2007, it was the first time that theIndian company, Dr. Reddy’sLaboratories, made the list of top

ten generic corporations by dollarvolume. He pointed out that it wassignificant to note that in the 12months ending with the 2nd quarterof 2007, the top 10 generic compa-nies did 70% of the total genericvolume, $30 Billion, in the U.S.,while the number one generic com-pany, TEVA Pharmaceuticals USA,had nearly a 20% share on its own.However it should be kept in mind,due to the significant price differen-

tial between generics and brands,the total generic dollar market repre-sents only 10.6% of the total phar-maceutical market (SEE TABLE 2).

Medicare Part DAccording to Long, as of August2007, prescriptions filled under theMedicare Part D program alreadyaccounted for 18% of all prescrip-tions dispensed. Much of that camefrom what were once Medicaid pre-scriptions, which was cut in half as aresult of Medicaid patients switch-ing to the Medicare Part D program(“dual eligibles”). This is expected toaffect some 270 million prescrip-tions. However, this transition fromMedicaid to Medicare Part D hassoftened the blow to retail pharma-cy. The move of dual eligibles fromMedicaid to Medicare Part D willreduce the impact of DRA asMedicare Part D claims are paid at arate in the pharmacy contractbetween the Medicare Part Dprovider and the pharmacy.

More fallout from Medicare PartD revolves around the fact that com-mercial third-party prescriptions willshrink as a result of some peopleabandoning their retiree programsin favor of one of the manyMedicare Part D prescription drugprograms being offered.

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Table 2. Generic Sales by Leading Corporations (12 months ending June 2007)

Company Name US $ bil % ShareTotal U.S. 30,141 100%

1. TEVA Pharm USA 5,866 19.5

2. Sandoz (Novartis) 2,910 9.7

3. Mylan Labs, Inc. 2,578 8.6

4. Watson Pharma 1,911 6.3

5. Greenstone (Pfizer) 1,884 6.3

6. Apotex Corp 1,871 6.2

7. Par Pharm 1,272 4.2

8. Barr Labs (incl. Pliva) 1,039 3.4

9. Roxane (BI) 968 3.2

10 Dr. Reddy’s Lab 882 2.9

Top 10 21,180 70.3%

Source: IMS Health, National Sales Perspective, June 2007

“It is the Golden Age of thegeneric business. If you’re inthe generic business,prescriptions are very solid.”Doug Long


Looking to the FutureOn the issue of generic biologicals(Long prefers to use the name“Biosimilars”), “the question thatcomes up at the end of the day, is: are[generic biologics] going to be similaror are they going to be equivalent?Equivalent means interchangeable (ie.generic biologic); similar means notnecessarily so (ie. biosimilar). It’s justone little word, but its impact is bigdepending on which way it goes,”said Long. “My guess is they’re morelikely to be similar than they are inter-changeable.”

It was Long’s estimates thatgeneric biologicals, whether they aresimilar or interchangeable with theinnovator product, would not be onthe market for another three years.“I’ve always said it’s going to takefive years, but I’ve been saying thatfor more than five years now. Theclock is going to start running onthis.”

According to Long, the pharma-cy marketplace will experience somegains and disappointments over thenext five years. On the positive side,many pharmaceutical companieshave robust pipelines that includenew chemical entities, specialtyproducts, biologics, and vaccines.The Medicare D drug benefit willcontinue to have a positive effect on

the marketplace, and the aging pop-ulation will keep prescription med-ications in demand. Some of thechallenges the brand/innovatorindustry will be facing are futurepatent expirations which will causea further proliferation of generics; arisk averse FDA will continue rais-ing safety concerns for many NDAsand existing medications; smallerpharmaceutical company detailingforces; and a continuation of thera-peutic substitution.

One of the biggest challenges fornew generic companies will be toovercome the trend of consolidationthat has been occurring over thepast several years. Smaller compa-nies are being consolidated in tolarger companies meaning the big

get bigger, and for others it is moredifficult to compete against. SandyGreco, who has formed AltroPharmaceuticals, a fairly new entryinto the generic manufacturingfield, said the key to success is to geta little bit of an edge over competi-tors. “You’ve got to get a productthat doesn’t already have multipleplayers in the market,” said Greco.“Then you have a chance.”

The Deficit Reduction Act of 2005

During discussions among the pan-elists, there was a clear consensusamong the group that topping theirlist of worrisome issues facing theindustry was passage and the imple-mentation of the Deficit ReductionAct (DRA) in 2007. The genesis ofthis law was a realization by the fed-eral government that it was payingtoo much for prescription drugs toMedicaid recipients. So legislatorsset out to pass a law that is expectedto save the federal government near-ly five billion dollars in prescriptiondrug payouts over the next fiveyears. That resulted in the passage ofthe DRA on February 8, 2006.

Since Medicaid is basically a state

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“Allowing the AMP to bepublished is going to have awidespread effect ontransparency and eliminate theconfidentiality of genericacquistion cost data.”Don Dietz

“It is easier to substitute an authorized generic for a brand name drug for certain classes of drugs. A good example would bethose drugs that have a narrow therapeutic index.”

Kristen Reabe


run program subsidized by the fed-eral government, pharmaciststhroughout the U.S. have becomeused to changes in Medicaid reim-bursement throughout the years.But arguably, those changes werenot enough to financially effectmost retail businesses since the wayreimbursements were calculated hadnot changed dramatically sinceMedicaid surfaced in 1965.Another reason for the somewhatcavalier attitude among pharmacistswas that a majority of drug storecustomers at that time still paid cashthus the risk to profitability was notas big an issue. Over time prescrip-tion employer drug programs thatwere offered to employees increaseddramatically, thus reducing cash-paying customers to all-time lows.But at least the formula for reim-bursement hadn’t changed andpharmacists were still able to ekeout a fair living. But all of that isabout to change.

For the past 40 plus years,Medicaid prescription reimburse-ments have been calculated on a for-mula that uses the AverageWholesale Price (AWP) of the drug

being dispensed. Originally theAWP was thought to be a fair andequitable way of calculating reim-bursements for Medicaid prescrip-tions. But AWP did not take intoconsideration many factors thatreduced the actual acquisition costto retailers. So while the calcula-tions were based on full AWP pric-ing, due to quantity discounts,rebates, prompt payments, and ahost of other built-in cost savings,most retailers were able to purchaseand make a profit on prescriptionproducts since in actuality they weregenerally purchasing at a percentagebelow the published AWP (especial-ly generics). Retailers felt this wasfair since the higher profit fromcash-paying customers was dryingup. However, it didn’t take third-party payors long to figure this outand start discounting the AWP toseriously low levels in calculatingtheir reimbursement formulas, cre-ating hardship for thousands ofretail stores. As bad as that mayseem, according to industry experts,it is about to get worse.

Because the federal governmentfelt that the AWP is a poor metric to

use in estimating drug costs, it hasincorporated a new benchmark forcalculating drug cost into the DRA,the Average Manufacturer Price(AMP). While it should be notedthat individual states are notrequired to use the AMP in its cal-culations, like the AWP, the AMP isslated to be a published number.But unlike AWP, the DRA requiresmanufactures to report their AMPmonthly, inclusive of rebatesincluding prompt pay discounts.“Allowing the AMP to be publishedis going to have widespread effecton transparency and eliminate theconfidentiality of generic acquistioncost data,” said panelist and presen-ter Don Dietz of PharmacyHealthcare Solutions. Dietz believesthat using AMP in pricing calcula-tions will create “continual down-ward pressure” on margins, includ-ing those of generic drugs. Dietz, aregistered pharmacist, believes thatthe entire industry needs to cometogether and be equitably paid fortheir respective services. “Whetherit occurs in the dispensing fee orwhether it incurs off the ingredientcost, it needs to happen in someway, shape, or form.” Dietz saidthat there are some states that arelooking at passing laws to increasethe dispensing fees to help offset theAMP calculations. And while it mayhelp, he said that it is really just a“goodwill gesture” and “certainlydoes not address the root of theproblem.”

Dietz noted that the issue ofAMP and all the negative connota-tions connected to it has not beenwell received in the industry. As aresult, some government officialsare looking for another, more equi-table methodology in calculating

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“We provide pharmacy servicesto some 32 million people…thisnew reimbursement formulamakes it financially difficult tooperate a publicly held companyin locations with a highMedicaid population.Unfortunately, at the end of theday on the 6 o’clock news, it’sthe company that’s going tolook like the bad guy leavingthose neighborhoods.”

David Vucurevich


Medicaid pricing. “There ought tobe a more appropriate metric forcalculating what pharmacies shouldbe paid,” commented Dietz.

The Fallout from AMP Will Be Widespread

So who ultimately will feel theeffects of the new Medicaid pricingstructure? According to Dietz, retailpharmacy will probably feel it themost. “Retail pharmacy is going tobe more visible in this because thatis where the public has a face. Ifphparmacies leave the market, stopfilling Medicaid prescriptions, itwill create service issues.”

But Dietz warned that the drugwholesaler is not immune from thenew pricing pressures. “I thinkthey’ve got a lot to lose because it’sbehind the scenes,” said Dietz.“Under the new law a manufacturerhas to post publicly what they soldtheir product for,” he explained. “Ifthat is not what the pharmacy paidfor it, they are going to go back tothe wholesaler looking for a lowerprice.” He said this will ultimatelyput greater pressure on wholesalers’already reduced margins on genericproducts — and potentially genericmanufacturers.

Brian Jones of AmerisourceBergen concurred. “Unquestionably

our livelihood depends on pharma-cies surviving. [AMP pricing] isgoing to change the profitabilitylandscape [at the retail level].Obviously, that’s going to translateback up the distribution channel.”To the extent it will change the prof-itability on generics, Jones believesthe new pricing structure will“change the whole dynamic of themarketplace.”

One fear is that the pressure onprofits at the wholesale level willhave an effect on their service lev-els, specifically the number ofdeliveries that are made to retailersfrom wholesalers. The dominoeffect of less deliveries means thatretailers will either have to carrymore inventory or partial fill moreprescriptions.

The topic drew similar reactions

from the retailer panelists. PaulHines of Publix Super Markets saidhe was trying to equate this situa-tion with the “old days” when hepracticed on a regular basis. “I gotpaid AWP plus a professional feefor Medicaid. That formularemained stable for the longesttime. Now the AMP formula canchange every quarter. So you canconceivably buy a product in onequarter and get paid less for it inthe following quarter.”

David Vucurevich of Rite Aidwas concerned about the effect theAMP calculations would have onthose stores that serve a primarilyMedicaid population. “We providepharmacy services to some 32 mil-lion people, 10% of which areMedicaid recipients. This new reim-bursement formula makes it finan-cially difficult to operate a publiclyheld company in those locations.Unfortunately, at the end of the dayon the 6 o’clock news, it’s the com-pany that’s going to look like thebad guy if it must leave those neigh-borhoods. So until access becomesan issue, we’re going to have a hardtime changing [the AMP pricingformula].”

Some of the panelists’ worst fearswere that the new pricing formula

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“I don’t perceive [at-risk]generics as a major issue. Ithink the customers havelearned over the years to trusttheir pharmacist for druginformation.”Tom Scono

Impact of AMP on Generic Manufacturers

• Posted AMPs on CMS Web site may create significant pricepressure

• Structure of AMP reimbursement metric drivespharmacies/wholesalers to seek lowest cost

• Continued consolidation of generic manufacturers expected

• Niche generic manufacturers may expand scope ofmanufacturing capabilities to seek profitable therapeutic areas.

Source: Pharmacy Healthcare Solutions, Inc.


will eventually extend beyondMedicaid and be applied to thethird-party private sector whichcould spell the ruin of retail phar-macy as we know it today.

Doug Long agreed that the newpricing schedule would have a neg-ative effect on the profitability ofgenerics. He pretty much summedup the panel’s feelings when he said“I think it’s the wrong place to cutspending. The government is tryingto take the savings out of generics,the best value proposition there is.”

At-Risk GenericsAnother topic of interest to the pan-elists was what is commonlyreferred to as “at-risk genericlaunches.” This is the term given togenerics that are launched before apatent case against the innovatorproduct is finally decided. Shouldthe generic company lose its patentchallenge against the branded ver-sion of the drug, the generic drugcould potentially be withdrawnfrom the market and the genericcompany would most likely be heldresponsible to pay damages forpatent infringement. With thosepossibilities in mind, panel mem-bers pondered the question ofwhether at-risk launches are a prob-lem for their business.

“I don’t perceive it as a majorissue,” said Tom Scono of EPICPharmacies. “I think the customershave learned over the years to trusttheir pharmacist for drug informa-tion. And there are some timeswhere there is a reversal of thecourt cases, and the product is nolonger available.” He said in thosecases he believes that pharmacistscan handle those kinds of ques-tions adequately. But until and ifthat happens, it is a big cost savingsto the consumer. “That’s the bot-tom line,” said Scono. “I’ve got itand I’ll get it to the customer. I canmake a profit and the customersaves money.”

“I think pharmacists are relyingon their wholesaler and buyinggroups to make sure that they getproper information about [at-risk]products,” said Kristen Reabe of

Pharmacy Select. Regardless of thefact that it is an at-risk product,third parties are dictating that youdispense a generic. In the end, it islikely you’re going to do what you’regoing to get paid for.”

The only independent pharma-cist on the panel had a somewhatdifferent take on the issue of at-riskgenerics. Steve Grossman, ownerand operator of J.E. PierceApothecary thinks that trying toexplain to a customer why an at-risk generic was pulled from themarket “ties up your bench. Thepharmacist is no longer talkingabout the clinical aspects of the pre-scription being dispensed.” He saidit becomes an issue of economicstrying to explain to a patient whyone month they paid nearly half theprice for a generic then had to paya higher price for the brand prod-uct when the generic gets with-drawn from the market. Grossmansaid in the end “it all takes awaytime that you spend with thepatient doing positive things tryingto explain the absurd.”

While pharmacists continue todebate the value of at-risk generics,authorized generics continue tomake their way to pharmacists’shelves creating what our panelistssee as an opportunity

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You’ve got to get a product that doesn’t already havemultiple players in the market.Then you have a chance.”Sandy Greco

“You can conceivably buy a product in one quarter and get paid less for it in the following quarter.”Paul Hines


The Impact of Authorized Generics

An authorized generic is describedas a generic distributed under anapproved new drug application(NDA). Authorized generics aregenerally distributed by the innova-tor company itself through a gener-ic subsidiary or an independentgeneric supplier. According to someof the industry participants, thereare several positive reasons whyauthorized generics should beembraced in today’s marketplace.These include a better availability ofthe product, increased generic com-petition that leads to lower genericprices overall, the ability to dispensea generic product that is the samecolor, shape, and/or size as the refer-enced brand product and an overallsavings for the consumer.

Other industry participantsaren’t so positive about authorizedgenerics. They say one major draw-back of authorized generics is theperceived impact they have on the180-day exclusivity. 180-day exclu-sivity is granted to the first genericcompany filing an ANDA that con-tains a challenge to the drug patent(the so-called Paragraph IV certifi-cation). There is fear that should

branded companies launch author-ized generics, it may discourageother generic companies from chal-lenging patents. This is due to thefact that an authorized generic forthe product being challenged mightalready be on the market, thusdiluting any financial benefitsderived from the 180-day exclusivi-ty period should the patent chal-lenge be successful.

Independent storeowner SteveGrossman thinks authorized gener-ics are good for his business. “It’s agreat time saver,” said Grossman.“There is no question that theauthorized generic is exactly thesame as the branded product and itonly costs customers who are onprescription benefit programs ageneric co-pay instead of that of abranded product. Everyone is happy

and it avoids a lot of questions andproblems.”

Kristen Reabe also sees an advan-tage in using an authorized genericfor certain classes of drugs. “It is eas-ier to substitute an authorizedgeneric for a brand name drug forcertain classes of drugs. A goodexample would be those drugs thathave a narrow therapeutic index.”

From a legal perspective BobPollock explained to the panel that“there is nothing in the statutes orthe regulations that precludes anNDA holder from distributing itsdrug product the way it sees fit.”Pollock said that while petitionshave been submitted to the FDA toban authorized generics, “FDA’sposition is that it doesn’t getinvolved with the business of deal-ing with competition. The courtshave supported FDA’s position.”

Kristin Reabe speculated thatauthorized generics may not neces-sarily deter the larger generic com-panies from filing Paragraph IV cer-tification, but they could have animpact on the smaller companieswho are not financially able to chal-lenge a patent.

Given the fact that Medicaid cal-culations will in all likelihood bebased on AMP, Pollock asked thegroup what they thought theimpact of authorized generics

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Unquestionably ourlivelihood depends onpharmacies surviving. AMP is going to change theprofitability landscape at theretail level. That is going totranslate back up thedistribution channel.”

Brian Jones

Key Issues Driving Future of Generics

• Continued consolidation and expansion among U.S.generic manufacturers

• DRA and its AMP calculations likely to have a negativeimpact

• An increase in the proliferation of foreign markets

• The development of a User Fee Act


would be on AMP. “That’s a tough one,” said Don

Dietz. “The ability to garner lowercosts is better with an authorizedgeneric during the 180-day exclu-sivity period, but the real impact onAMP will be seen following theexclusivity period with the entry ofadditional competitors.”

The Debate over Generic Biologics

The main issue surrounding genericbiologics is that there is more vari-ability in developing a biotech drugthan there is in developing oral solidproducts. Doug Long alluded to theissue early on during his presenta-tion. As you remember, he said inthe end, the question remains, it iseither similar or it is identical? Theconsensus among the panelists wasthere might be a liability issue indispensing a product that is similarto the brand name biologic insteadof an AB-rated equivalent.

“If we look at how the debate hasbeen handled in Europe to date,officials in many European coun-tries said if they are biosimilar weare not calling them interchange-able,” said Bob Pollock. “What thebiologics industry is saying is that

some of these protein products areso large that we’re dealing withcomplex issues like protein foldingand other factors that could have animpact on immunogenicity.”Pollock said that on one side of thedebate is the question of how doyou show a side effect profile with-out doing clinical studies?

He continued the discussion byexplaining that although the tech-nology today is more advancedfrom even a few years ago, it still ishow can anyone really be sure that ageneric biologic is exactly the sameas the innovator product? Pollocksaid that in government circles thedebate is being waged between theFDA and Congress. “FDA is veryrisk averse. Who is going to makethe decision to give a B-rated drugover the innovator drug? “It won’tbe the pharmacist or the physician.

There may not be a traditionalcost savings but Pollock remindedthe panel that biologics can some-times cost hundreds of thousands ofdollars a year. “So, if there is even a10% reduction in their cost that is alot of money. It’s not like saving fivebucks a month. It could be a possi-ble savings of ten’s of thousands ofdollars over the course of a year.”

The consensus from the meetingparticipants was that generic biolog-icals are still some years away anduntil the technology reaches a pointwhere it can be used to producebioequivalent generics of these hightech drugs, the debate will continue.

A Snaphot of the FutureSumming up the day’s discussions,the distinguished participantsoffered their view of the key issuesdriving the generic industry’s future.Several common threads emergedfrom the discussion. Overall themeeting panelists were in agreementthat there would be more consolida-tion and expansion among genericmanufacturers in the U.S.; DRAand its AMP calculations willchange the landscape of the phar-maceutical marketplace and arelikely to have a negative effect onthe profitability of generics in thenear term. However, many alsobelieve that this law is likely to beamended in the future to offer reliefto retailers, wholesalers and manu-facturers who would be most affect-ed by it. There were feelings thatforeign companies will continue toproliferate in the U.S., particularlyamong generic manufacturers; andthe development of a User Fee Actfor generic companies is inevitable.

There is no question that thegeneric industry is at a critical cross-roads in its development. The view-points expressed by this panel ofexperts will hopefully help to guidegeneric industry executives downthe right path to a successfulfuture.

The viewpoints expressed in this document arenot those of U.S. Pharmacist, GreenstoneLimited, or Pfizer.

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“When pharmacists have toexplain why an at-risk genericwas pulled from the market, itties up your bench. The pharm-acist is no longer talking aboutthe clinical aspects of theprescription being dispensed.”

Steve Grossman


Supported by Greenstone Limited.

A Roundtable DiscussionPictured in photo above (l to r): David Vucurevich, Sandy Greco, Kristen N. Reabe, Paul Hines,

Robert W. Pollock, Thomas E. Scono, Donald J. Dietz, Steve Grossman, Brian Jones, Doug Long



Documents

Generic Pharmaceuticals 2007 · Indian company, Dr. Reddy’s Laboratories, made the list of top ten generic corporations by dollar volume. He pointed out that it was significant