Biotech Values

[DewDiligence]

More on authorized generics:

[The judge in the Mylan case clearly gets the problem, but does she have the authority to fix what appears to have been an oversight by Congress?]

http://biz.yahoo.com/ap/040829/mylan_fda_2.html

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Judge to Rule on 'Authorized Generics'

Sunday August 29
By Vicki Smith, Associated Press Writer

Judge to Rule on Companies Who Exploit Loophole by Marketing 'Generic' Versions of Their Drugs

CLARKSBURG, W.Va. August 29 (AP) -- Congress left "a gaping black hole" in federal prescription drug laws by apparently failing to anticipate the advent of so-called authorized generics, a development that a federal judge said could undermine fair competition in the marketplace.

U.S. District Judge Irene Keeley will likely rule Monday in a dispute between the U.S. Food and Drug Administration and generic drug giant Mylan Laboratories Inc. that has major financial implications for generic drug producers.

Generally, the first generic company to successfully challenge a brand-name patent enjoys 180 days of marketing exclusivity, meaning its product is the only generic sold during that time. Congress created the provision as an incentive for generic companies and to get lower-cost drugs to market more quickly.

Since September 2003, however, brand makers like Procter & Gamble Co. have been introducing authorized generics, renaming their own product and selling it through a licensed distributor. The product is the same as the brand name but sells at a cheaper price.

Mylan contends the practice is designed not only to help brand producers keep a portion of the market but also to punish the generic producers.

The Generic Pharmaceutical Association, which sides with Mylan, argues the practice threatens the industry's existence by giving brand-name producers total control of the market.

Mylan's case centers on nitrofurantoin, first developed by Procter & Gamble to treat urinary tract infections. Mylan learned shortly before the launch of its generic version in March that P&G had licensed Watson Pharmaceuticals Inc. of Corona, Calif., to sell an authorized generic during the time Mylan expected to enjoy exclusivity.

Now Mylan, with headquarters in Canonsburg, Pa., and a lab in Morgantown, wants an injunction that would force Watson to stop selling for what's left of that 180-day period. It expires Sept. 19, and Mylan stands to lose millions.

Mylan had sought relief from the FDA, but the agency declined to intervene, saying it lacks authority to stop a brand company from marketing its own product at a price competitive with generics.

P&G attorney Pete Safir argued in court Friday that recalling the product now would cause chaos in the market and damage the reputations of both P&G and Watson. "Mylan's beef is really with Congress," he said.

But the judge said Mylan's case is "extremely compelling and strongly suggests there needs to be a fix -- and a fast one."

Under the Hatch-Waxman amendment to the Food, Drug and Cosmetics Act, "any brand can go out and market its product as a generic at any time because it's not covered in the law," she said. "Authorized generics look to me like a gaping black hole that's been ignored or avoided. ... For whatever reason, it's not been added."

Keeley did not indicate how she might rule, saying Mylan may have remedies short of "asking a court to perhaps legislate by reading into the code something that doesn't seem to be there."

"It strikes me that perhaps Congress didn't think about this at all," she said.

Drake Cutini, an attorney with the Justice Department's Office of Consumer Litigation, acknowledged authorized generics could have an anticompetitive effect but said that hasn't happened yet.

"It strikes me that the agency has sort of got its head in the sand about this issue," Keeley replied. "If one can foresee these problems, I wonder about the reasoning of saying, `We don't have to address it 'til the tsunami hits.'"

In Mylan's case, Cutini said, the public benefits because there is more than one drug on the market.

But Arthur Tsien, a lawyer for the Generic Pharmaceuticals Association, said the second drug would never have appeared if Mylan hadn't developed its own.

If the FDA's ruling stands, he said, "Consumers might win the battle with lower prices in the short term, but we think consumers would lose the war."

Mylan attorney William Rakoczy said his client expected $41 million in revenue in the first 180 days. Now that it's competing with Watson, it may not even hit $9 million. With two competitors, Mylan would make $3.1 million or less.

That's not even enough to mount a patent challenge, which costs three to four times that much.

"Eventually, there will not be any gain -- no gain whatsoever -- and we will be left with no patent challenges," Rakoczy said. "You're talking about an industrywide change."
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