It seems that more and more generic drug companies are popping up and are developing more and more low-cost drugs, putting pressure on makers of name-brand drugs and raising fears of an FDA bottleneck. Generics already make up 54 percent of the prescription market, which should increase when Medicare offers more drug discounts on Jan. 1, 2006.

The Food and Drug Administration’s Office of Generic Drugs is expecting to receive 771 applications for generic drugs this year, a one-third jump from 563 the year before — and more applications are on their way. Teva Pharmaceuticals Industries alone has more than 200 applications being processed by the FDA.

This could mean that the FDA will become overburdened by the application process (although it has been trimming the process — getting the approval process for generic applications to 15.7 months from 17 months in 2004. A single new drug application comprises up to 200,000 pages bound into 400 volumes, although abbreviated new drug applications (ANDAs) for generic drugs are not nearly as large.

About $100 billion worth of name-brand drugs will lose patent exclusivity in the next five years, with $21 billion going off-patent in 2006, according to WR Hambrecht & Co., the biggest-selling drug losing exclusivity in 2006 is Zocor, the cholesterol-reducing drug from Merck & Co. that had $5.2 billion in 2004 sales.

Another closely watched patented drug is Pfizer’s Lipitor, which could become an unprecedented $14 billion blockbuster by 2007, or could take an $8 billion hit to sales, depending on the outcome of its multiple patent lawsuits with Indian generic drug maker Ranbaxy Laboratories over Pfizer’s two patents for Lipitor, which are scheduled to expire in 2010 and 2011.

Another worry for the name-brand companies is that Indian generic drug firms may be eclipsed by China if enters the market with its own cheap copies of drugs. China has already established itself as a source of raw materials, known as Active Pharmaceutical Ingredients (API). Taking the next step to create packaged drugs seems inevitable.

China is expected to seek US Food and Drug Administration approval for its first generic drug by 2006, introducing even cheaper generics into the market and adding further pricing pressure. This could be good news for consumers and insurance companies (not to mention the federal government) who will benefit from lower prices.

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