If you’re familiar with the drug industry, it should come as no great shock that the Generic Pharmaceutical Association (GPhA) disagrees with a report put out by the Pharmaceutical Research and Manufacturers of America (PhRMA).

According to a recent report commissioned by the Pharmaceutical Research and Manufacturers of America (PhRMA), wholesale price discounts off brand prices on average were 15.8% greater in markets with authorized generics than in those without them.

The GPhA released its own analysis of authorized generics that concluded that the practice of introducing authorized generics (AGs) “significantly reduce incentives for independent generic firms to challenge invalid brand name patents and to develop non-infringing processes.” This analysis also raised questions about the validity of the PhRMA study. The study concluded that, despite PhRMA’s claims to the contrary, “the long-term effect of allowing authorized generics on the market during the 180-day generic exclusivity period will be less competition and reduced access to cheaper drugs.”

The GPhA study of the PhRMA study concluded that the prices consumers pay will be virtually unchanged by the presence or absence of authorized generics (the GPhA claims that much of PhRMA’s alleged “discount” associated with authorized generics is accounted for by higher brand name drug prices). It should be no big surprise that the GPhA also claims that allowing authorized generic entry during the 180-day exclusivity period harms the incentives generic firms have to challenge invalid patents or develop products.

An authorized generic is the brand’s product repackaged and marketed either through a subsidiary or third-party. Because the brand is selling part of its inventory as a generic, it can currently compete with the true ANDA generic during the exclusivity period.

In creating the Hatch-Waxman Act, Congress determined that it was in the best interest of consumers to create the 180-day incentive to encourage generic companies to challenge questionable or frivolous brand pharmaceutical patents as part of the complex, intellectual property-based U.S. generic drug approval process. The 180-day exclusivity provision of the patent challenge process provides the check and balance in the drug patenting process, while also providing generic companies with a mechanism to recoup the significant costs of litigation and provides incentives to challenge more questionable patents in the future.

When authorized generics are marketed during the Act’s 180-day exclusivity period for first generic entrant, they reduce incentives for independent generic firms to challenge brand name patents and to develop non-infringing processes. Supporters argue that authorized generics offer significant consumer benefits.

The Drug Price Competition and Patent Term Restoration Act, known as the Hatch-Waxman Act, added section 505(j) to the Food, Drug, and Cosmetic Act. This created the Abbreviated New Drug Application (ANDA) process. The Hatch-Waxman Act, and specifically the ANDA process, were designed to provide independent generic firms a strong incentive to develop and introduce lower cost generic drugs to consumers. To implement this policy goal, Congress provided that the first generic ANDA filer that challenged an invalid brand name firm patent on which the brand name product relied, or that developed a non-infringing means to produce the same drug, would be granted a 180-day marketing exclusivity period. This process is known as the paragraph IV certification process.

The brand name firm may challenge the generic firm’s paragraph IV certification, claiming that the generic product violates the brand name firm’s patent rights. If a patent infringement action is filed within 45 days by the brand name firm, the FDA may not approve the ANDA for 30 months, or until the patent dispute has been resolved, whichever is sooner.

An ANDA applicant whose ANDA contains a paragraph IV certification is protected from competition from subsequent generic versions of the same drug product for 180-days after either the first marketing of the first applicant’s drug or a decision of a court holding the patent that is the subject of the paragraph IV certification to be invalid or not infringed.

Don’t look for this sparring over authorized generics to end soon. This political football is hotly contested by the generic and brand-name drug companies, due to the billions of dollars at stake. The fact is that the number of authorized generics produced by the name brand companies has increased considerably over the past few years, and the issue will only get hotter. Where brand name drug pipelines are not as full as they could be, these companies will do whatever it takes to hold on to market share.

See the GPhA Report here.

For more on the FTC’s investigation into the matter, see here.

For the bill introduced to limit authorized generics, see here.

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