[Ip-health] Wall Street Journal: FDA Declines to Curb a Tactic Of Drug Firms Against Generics

[thiru@cptech.org]

FDA Declines to Curb a Tactic
Of Drug Firms Against Generics

By LEILA ABBOUD
Staff Reporter of THE WALL STREET JOURNAL
July 6, 2004; Page C3

The Food and Drug Administration declined to curb a new, but increasingly
frequent, tactic that branded-drug makers use to cut into their generic
rivals' profits.

The agency, refusing to step into the latest battle between brand and
generic foes, rejected separate petitions filed by generic-drug makers
Mylan Laboratories Inc. and Teva Pharmaceutical Industries Ltd. The
generic-drug companies had asked the FDA to limit "authorized generics"
deals in which the branded company licenses its drug to a selected
generics maker to undermine a rival generics maker that plans to copy the
drug. Branded-drug makers Pfizer Inc. and Johnson & Johnson lodged their
opposition to such a change.

Authorized generic deals usually involve a drug that is soon to lose
patent protection, often because a generic competitor challenged it in
court. The big pharmaceutical company allows another generics company to
sell an "authorized copy" of the drug -- sometimes even made by the
brand-name company itself. Normally, a generics maker that challenged a
patent would be granted six months of exclusive sales under a federal law
designed to spur generics. But the "authorized" copies are able to skirt
such restrictions and they immediately cut into the rival generic makers'
sales.

The six months of exclusive sales for the first generic to market is a
major windfall for generic-drug makers and can account for a large portion
of their annual revenue. But they have to split the profits with
branded-drug companies and their generic partners when an authorized
generic hits the market at the same time as the first generic through the
regular channels.

In their petition to the FDA, Teva and Mylan argued that the deals were
illegal and would result in fewer generics getting to market in a timely
way. Branded-drug makers Pfizer and Johnson & Johnson disagreed, saying
the deals helped the consumer because more competition meant lower prices.

The FDA sided with the branded-drug companies. In a statement, the FDA
said it "sees no reason to interfere with the marketing of authorized
generics and waiving 180-day exclusivity, two long-standing,
pro-competitive business practices."

The issue of authorized generics has roiled the generics industry in
recent months. Wall Street analysts of the sector, which has been wildly
successful in recent years, have said the deals could make the generic
companies less profitable.

The companies, branded and generic, couldn't be reached to comment.

Write to Leila Abboud at leila.abboud@wsj.com