In the United States, generic drugs account for about 12 percent of the nation’s $250 billion a year in drug spending and more than 53 percent of prescriptions filled. Compared to their brand-name counterparts, generics usually cost much less. According to the FDA, the average price of a brand-name drug is $72, whereas the generic version costs $17. Over the years, the demand for generic drugs has steadily increased. Reasons for the increase in demand include consumers becoming more accepting of generics, the high price of branded products, the push by insurers and the government to encourage generic usage and an influx of cheap medicines made by overseas manufacturers. In fact, many consumers have come to expect the availability of generics and are often disappointed when generic alternatives are not available. However, getting a generic drug on the market is not a trivial undertaking. This article highlights the basic steps and considerations for bringing a generic drug to market.
The marketing of generic drugs is governed by the Drug Price Competition & Patent Term Restoration Act, commonly known as the Hatch-Waxman Act, or simply Hatch-Waxman. Passed in 1984, Hatch-Waxman gave the generic drug industry a huge boost by creating the Abbreviated New Drug Application (ANDA). The ANDA allowed generic manufacturers an opportunity to get approval of their generic products through a shorter and less-costly route than the process for branded drugs. In addition, Hatch-Waxman allowed generic companies to obtain data required for their ANDAs, even when the brand product was still protected by patents.
To file an ANDA, a generic manufacturer must basically show that its product has the same active pharmaceutical ingredient, is administered in the same manner and is bioequivalent to brand. The generic manufacturer must also show that it uses the same quality manufacturing standards and product labeling as brand.
When filing an ANDA, the generic manufacturer must make one of four certifications, referred to as paragraph I, II, III and IV certifications with respect to any brand patents. Patents for brand drugs are listed in an FDA publication called the Orange Book. A paragraph I certification is made when no patent is listed in the Orange Book for the brand drug; a paragraph II is made when a listed patent has expired; a paragraph III certification is made when a generic does not seek FDA approval until the listed patent(s) expire; and a paragraph IV certification is made when the generic manufacturer believes that the listed patent(s) is invalid, unenforceable or not infringed by the generic. Thus, a paragraph IV certification allows a generic manufacturer to challenge the patents listed by the brand company in the Orange Book, even if the patents are not due to expire for many years.
When a generic manufacturer files an ANDA with a paragraph IV certification and receives notice of acceptance of the ANDA by the FDA, the generic must notify the brand company of its ANDA filing. This notification is referred to as “the notice letter”. Upon receipt of the notice letter, the brand company has 45 days to sue the generic company for patent infringement. This action automatically triggers a 30-month stay, during which the FDA may not approve the ANDA.
Although the cost of patent litigation is high, 30 additional months of market exclusivity is well worth the expense for many brand companies. Often, a lengthy litigation ensues. If the generic drug-maker is ultimately successful in the litigation, and the FDA approves the ANDA, the generic drug can finally enter the market.
Generic drug companies generally aim to be the first to file ANDAs with Paragraph IV certifications to enjoy a 180-day period of marketing exclusivity. During the period of marketing exclusivity, the FDA may not approve other ANDAs for the same product and a generic drug can be sold at good profits. However, once the 180-day period of exclusivity expires, many generics may enter the market causing the price of the generic drug to drop drastically.
As expected, brand-name companies often develop strategies to retain their market share. In some cases, brand companies have settled litigations with generics to prevent competition, potentially violating antitrust laws. In other instances, companies have brought their own “authorized generic” on the market, enabling them to maintain the higher price for the brand drug. Oftentimes, to prevent paragraph IV filings and effectively leave the generic companies in limbo, brand companies do not list their patents in the Orange Book.
As far as generic biologics or biogenerics go, there is at present no route similar to the ANDA procedures in place for small-molecule drugs. The FDA is developing guidelines to approve biogeneric applications and Congress is considering a formal regulatory approval system for biogenerics.
Gaby L. Longsworth, Ph.D, Esq., is an associate with the law firm of Sterne, Kessler, Goldstein & Fox P.L.L.C. She concentrates her practice in patent law. [This article reflects the present thoughts of the author, and should not be attributed to Sterne, Kessler, Goldstein & Fox P.L.L.C. or any of its former, current or future clients. The content is for purposes of discussion and should not be considered legal advice.