Generics: FDA initiative to speed up introduction of generic drugs faces opposition

The US Food and Drug Administration has this week indicated its desire to implement a faster approval process for generic drugs. The move has stirred up the long-standing debate in the pharmaceutical industry over how much market exclusivity an individual drug should hold before cheaper copycat versions can be introduced. Petitions against the initiative have already been lodged, including one from the leading drug maker, Pfizer.

The FDA's new 'back-door' process could see years cut off the time taken for generic drugs to reach the market. With the major companies already using litigation spoiling tactics to delay the impact of generic drugs it is therefore unsurprising to see a tide of opposition to the proposed process.

This faster approval process could be considered particularly controversial because of the existing market conditions. The generic industry is currently experiencing massive growth whilst conversely, the leading drug makers are facing decreasing profits with fewer blockbuster drugs expected in the future. The industry has suggested that an increased threat to revenues will only serve to limit future pharmaceutical innovation, with less funding available for research and development programs.

Significant opposition

The alternative process, known as 505(b)(2), will speed up the regulatory process for generic drug manufacturers by removing the need for original proof of safety and effectiveness studies. The companies involved, will therefore have far less clinical trial data to produce in order to gain positive recommendations.

If implemented, the 505(b)(2) amendment could be used to approve the first generic biotechnology drugs, such as human growth hormone and insulin. Indian generic drug manufacturer, Dr Reddy's Laboratories, is reported to have already used the new regulatory route by submitting an application to market a copycat version of Pfizer's blood-pressure drug Norvasc, the world's top-selling hypertension medicine.

Unsurprisingly then, Pfizer is one of the leading voices opposing the FDA interpretation of the rule. Immediately after the FDA's plans became public, the agency was having to deal with petitions from various sources, including Pfizer and the industry association that represents biotechnology companies.

The Biotechnology Industry Organization has argued that a quicker process would produce insufficient safety and efficacy testing on drugs which use living organisms. Currently biotechnology products have no competition from generics.

A growing generic industry

The companies that develop innovative therapies will feel particularly threatened because of the growing success of the generic industry. In 2001, the global generics market was valued at $27 billion, up 11.6% from the previous year. According to Datamonitor figures, this market is forecast to grow at a CAGR of 13.3% from 2001 to 2007, reaching sales of $57 billion in 2007.

Despite being the largest market in the generics industry, making up 48.1% of the total market in 2001, the US continued to show strong growth, with sales increasing 12.1% to $13 billion.

This growth looks likely to continue. Current blockbuster drugs with global sales of almost $82 billion will have lost US patent protection by 2007. The problem facing pharmaceuticals groups is exaggerated by their growing reliance on blockbuster products. Unless companies successfully address their blockbuster deficit or reduce reliance on blockbuster revenue their long-term performance is at risk.

A massive loss of patent protection could fund the expansion of generics companies into fully-fledged pharmas. This will present a significant competitive threat to research-based companies, particularly those lacking innovative portfolios. Generics companies able to maximize market penetration while focusing on innovation and globalization will be the winners in 2007.

Its down to interpretation

Such industry evolution could however, hold consequences for the future of new treatments. Less revenue for the leading drug companies will inevitably lead to decreased expenditure in research and development.

Will companies like the R&D giants of Pfizer and GlaxoSmithKline continue to spend in the realms of $2 million per day on their drug programs when they cannot be guaranteed the reward at the end of the process?

The FDA has nevertheless, defended its interpretation of section 505 (b)(2). With considerable power and resources, the major companies will question whether the FDA is allowing infringement of patent protection by applying its discretion under 505(b)(2). In such a complicated dispute it appears entirely possible that the courts and even Congress will be forced to bring some kind of resolution.

If you found this week's Expert View useful, you may be interested in Datamonitor's reports:

• Global Generics Guide: Capitalizing on an $82 Billion Opportunity priced $10,800
• Strategic Perspectives: Impact of the Cancer Generics Market - A Coming of Age priced $6,100
• Anti-hypertensives: Patent Defense Strategies - Combating Generic Competition Through Lifecycle Management priced $1,400

To order these reports contact peter.barfoot@bioportfolio.com or telephone +44 1300 321501 or +1 415 680 2472 and a representative will get back to you.