800 drug patents backlogged at the FDA
In my last post about Seroquel's future, I mentioned the Hatch-Waxman Act (PDF), which was passed in 1984. The Act was supposed to speed up the adoption of generic drugs when the patents behind name-brand drugs ran out. This happened at first, but as pharmacy has expanded, the Act has created a bottleneck at the FDA. It is speculated that the bottleneck is Big Pharma itself: creative lobbying seems to have resulted in a reduction in the budget for the Office of Generic Drugs — which in turn has limited its capacity to approve generic drugs to some 400 per year.
Unfortunately, I can't seem to find which drugs' patents will expire without a generic equivalent to take its place — I suspect that none of them are massively profitable by themselves — but all told, the market value of these 800 drugs is a whopping $78 billion per year for their manufacturers. For comparison, the entire generic drug industry is only worth just over $22 billion — even though it accounts for over half the prescriptions dispensed each year in the United States. Broken down, that's almost $100 million per drug, ceteris paribus. Regardless of the specifics of each case, the aggregate dollars involved are huge.
If a creative generic manufacturer like Teva can squeak a few generic approvals by, they will effectively have a six-month monopoly on those drugs. The Hatch-Waxman Act allows the first generic manufacturer to produce and sell their generic equivalent with no competition — save from its brand equivalent. These first six months are crucial. During this time, a generic drug usually undercuts the brand-name competition by about 6%. This is a hugely profitable time, because once other generic manufacturers are allowed to start selling their own equivalents, the price drops to some 80% less than the brand-name drug, so in theory, that first-to-market manufacturer can make more in those first six months than they could in the 4-5 years after their monopoly ends.
Big Pharma sometimes combats this by paying off the first generic manufacturer to continue their monopoly for another 180 days — which in the case of a huge drug like Zoloft or Zocor could be in the billions of dollars of additional revenue. And sometimes they roll out a lower priced "generic" version themselves, which is really just the name-brand med without the name. (One of these days I'll give you an example of how convoluted — and silly — the whole brand-generic wars can be. It's actually kind of funny, but with billions of dollars in revenue at stake, it's a game well-worth playing.)
[tags]patent protection, FDA, generic drugs, pharmacy[/tags]
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[...] It's a clear victory for Big Pharma, and a loss for consumers and any company that's not Sanofi-Aventis or BMS. Plavix was #2 on the top 200 list in 2005, with sales totaling $5.2 billion. Had Apotex been successful and not settled out of court, there would have been a generic Plavix available relatively quickly. Unfortunately they settled for the guaranteed money, and exclusive rights for 8 months. As I've said before, the value of the generic drug market is tiny compared to Big Pharma — by taking the settlement BMS, S-A, and Apotex all win. (Personally if I was Apotex, I'd have pushed for a higher figure, just because Plavix is so valuable.) [...]
Pingback by OnThePharm » Generic Plavix shenanigans — May 28, 2006 @ 4:29 pm
[...] Teva will not be able to sell their generic Cozaar until April 2010, when Merck's patent expires, but they are the first to get this FDA Good Housekeeping Seal of Approval, so it looks like they're going to get that six-month lock on sales of the generic forms of the drug provided Merck doesn't do some wheeling-and-dealing. Predicting what Merck will do in 2010 is impossible: will they have a successor to Cozaar by then? Will Cozaar even be a super-profitable at that time? These are the biggest two questions that will determine whether Merck will buy themselves that extra six months when the time comes. [...]
Pingback by OnThePharm » Teva’s potential windfalls: Cozaar and Zocor — May 30, 2006 @ 1:54 pm
[...] Teva has gotten its generic finasteride tablets approved by the FDA. They will begin shipping the new generic for Merck's Proscar immediately. They have a 6-month monopoly on the sale of the new generic, and I wouldn't be surprised to hear about them filing the ANDA for Propecia as well, assuming they haven't already. (Propecia is a low-dose finasteride (1mg) used to treat male pattern baldness that also lost patent protection today.) [...]
Pingback by OnThePharm » Generic Proscar approved; Propecia loses patent protection today. — June 19, 2006 @ 11:14 pm
[...] This would allow them to skip creating an "authorized" generic if they chose. Authorized generics are exactly the same as their brand-name drugs, and can be sold during that 180 day window — which of course drives the generic manufacturer batty because they don't quite have that total monopoly. This, of course, cuts into their profits, for reasons I've elucidated before. [...]
Pingback by Novartis as the next-gen pharmaceutical company? …It’s possible. :: OnThePharm — June 26, 2006 @ 2:22 pm
[...] On the other hand, you wonder why one of the parties has to be a spoil-sport and ruin the party by trying to bend the rules to their further benefit. Given that any single member of the one group has more resources than all the opposition put together*, this often makes for a pretty lobsided game. Especially when one party begins exploiting safeguards put in place by the government to work on behalf of the People. Some at the FDA, as well as leaders in the generic drug industry, complain that "citizen petitions" — requests for agency action that any individual, group or company can file — are being misused by brand-name drugmakers to stave off generic competition. [...]
Pingback by OnThePharm — July 7, 2006 @ 10:01 pm