Say "generics" to a roomful of biotechnology profiteers and watch the anxiety spread like a drop of ink in water. The threat has been a long time coming, but it's almost here. Already the FDA is trying to figure out how to manage generic biotech, or biogenerics - that is, whether such drugs will follow the same, long regulatory pathway as new compounds - and interests on both sides are lining up for a fight.
To figure out the newly signed-into-law Medicare bill is one thing. Firms with marketed drugs are just getting to know the happy complexities of patient reimbursement for their products. It's something else again for regulators to determine under what conditions biogenerics, not foreseen by the generic-drug laws passed in the 1980s, ought to be allowed. But most observers concede they will be, eventually.
The worldwide market for generic drugs is expected to reach sales of $57 billion by 2007, and blockbuster drugs with global sales of almost $82 billion will lose patent protection by 2007 - about $10 billion of them classified as biopharmaceuticals.
Novartis AG already is making moves to cash in. The company disclosed its plan to break the ice in Europe by offering a generic human growth hormone called Omnitrop for approval. In the U.S., threatened by generics overseas is the lucrative erythropoietin (EPO) franchise of Amgen Inc., with patents expiring this year. SG Cowen said in a research report that at least seven European firms are working on generic versions of EPO, and overseas regulatory guidelines (though also in a state of uncertainty) still are comparatively loose.
If the generic EPOs are to be priced at a "modest discount," the Cowen report speculates, then "first-generation products would lose 20 percent to 50 percent market share to biogenerics in oncology indications and 50 percent to 80 percent share in dialysis indications," reducing Amgen's 2007 EPS by a range of 19 cents to 37 cents.
Others worldwide are preparing for the biogenerics market. Israel-based generics giant Teva Pharmaceutical Industries Ltd. completed a merger last month with U.S.-based Sicor Inc., in which Teva paid $1.4 billion to Sicor in the form of stock shares and another $2 billion in cash.
In November, Teva and Savient Pharmaceuticals Inc. ended merger talks. Teva had said it would pay $365.3 million in cash for all of Savient's outstanding shares at about $6.14 apiece, probably in a bid to gain manufacturing capability for biogenerics.
Another major player seeking a piece of biogenerics is Barr Laboratories Inc., which is entangled in a U.S. legal skirmish. Barr has developed a generic version of Cephalon Inc.'s Provigil (modafinil) for excessive sleepiness, and a trial in the case is scheduled for January 2005. The patent doesn't expire until 2014, and the generic drug could not be marketed until then, but Cephalon filed a lawsuit in April against Barr, Teva, Mylan Pharmaceuticals Inc. and India-based Ranbaxy Pharmaceuticals Inc., after those firms filed abbreviated new drug applications filed for generic versions.
Barr is a busy firm. In January, it gained tentative approval from the FDA for its generic modafinil in the 100-mg and 200-mg doses. Also recently, Barr gained tentative approval of a generic version of Bristol-Myers Squibb Co.'s Glucophage XR (metformin) for Type II diabetes, although the approval was then withdrawn. The FDA blamed concerns regarding the raw material supplied to Barr by a third party and used to manufacture the submission batch. Barr said it was "evaluating options," such as finding a new supplier.
Cephalon's battle with Barr and others over generics is hardly the first, nor is it the highest profile case. At issue in U.S. federal appeals court is an FDA application process known as 505(b)(2), which lets generic drug makers file for approval without doing their own original studies on the compound in question. Though the generic firms might have to offer safety and efficacy data for the small differences between its product and the branded product, they would not have to jump the same hurdles that the original drug maker did.
India-based generics drug firm Dr. Reddy's Laboratories Ltd. made use of 505(b)(2) in filing for approval of its version of Pfizer Inc.'s calcium channel blocker Norvasc (amlodipine besylate), the world's largest-selling treatment for hypertension. Those companies are in a legal war, and the U.S. Court of Appeals for the Federal Circuit is slated to render a decision - one that would have implications for biogenerics in the U.S. - this year.
Meanwhile, Amgen (and probably others) have overseas to worry about.
"We believe barriers to adoption of biogeneric EPOs is low," the Cowen report on Amgen states, noting that customers would likely jump at, say, a 25 percent discount. Most investors "have chosen to ignore or downplay the potential impact of biogenerics" to Amgen's Aranesp franchise in the European Union, the report declares. Aranesp is the second generation of Amgen's red-blood-cell booster Epogen (epoetin alfa), first approved for chronic renal failure.
"Biogeneric EPOs are a big deal," according to the report, noting that EPO products are expected to sell $9.6 billion in 2003 in the U.S. and Europe (2003 totals are not yet known), with about $3.3 billion of the amount coming from the European Union.
Warns Cowen: "The substantial profitability of [EPO] has not been lost on generic companies," which have been eyeing the upcoming December expiration of EPO's patent in the European Union "for some time."
Another analyst told BioWorld Financial Watch that Mark McClellan, the FDA's commissioner, "has a lot on his plate. What he's trying to do is prioritize all the things he has, and he's going down the list of things. Obviously, he's not opposed [to biogenerics]" and could offer some guidance soon, "if he doesn't end up over at [Centers for Medicaid & Medicare Services], as has been rumored."
Published reports indicate McClellan is being considered to head the CMS, a move that would deprive the FDA of a leader for whom many in the industry had high hopes - and a move that could delay decisions about biogenerics, as the expirations near of patents such as those held by Amgen.