[Pharm-policy] RE: [Ip-health] New argument in favor of Bolar-Roche provision

[Kasper, Toby]

Although I don't think that there's any dispute that Bolar-Roche =
provisions
facilitate generic competition, I'm not so convinced that the fear of =
losing
a monopoly on generic provisions is a major reason that the research
pharmaceutical industry opposes Bolar provisions (and hence another =
reason
for those of us interested in increasing access to medicines to support
them).  After all, if the first generic manufacturer to enter the =
market
after patent expiry was guaranteed high profits, and research
pharmaceuticals were assured of being the first in the absence of a =
Bolar
provision, then wouldn't one expect the lion's share of generics in the =
EU
(were Bolar provisions are absent) to be produced by the same companies =
that
held the licenses?  This is obviously not the case.  See for example, =
this
excerpt from "How Increased Competition from Generic Drugs Has Affected
Prices and Returns in the Pharmaceutical Industry" by the US =
Congressional
Budget Office:

	"Most generic subsidiaries [of brand-name firms] do not produce
copies of their parent company's drugs. Out of 112 multiple-source =
drugs in
the retail pharmacy data set, only 13 had a generic subsidiary of the
brand-name manufacturer selling more than 10 percent of the =
prescriptions
dispensed through retail pharmacies. In general, the incentives to =
lower
price in order to gain market share are the same for all generic
manufacturers, whether or not they are the subsidiary of an innovator =
firm.
But an important exception occurs when the generic subsidiary produces =
a
copy of the parent company's innovator drug. Though infrequent, in such
cases the subsidiary may have less incentive to lower price than other
generic producers because it does not want to take more sales away from =
the
parent company's drug. And when the generic subsidiary does lower price
dramatically, the innovator firm suffers."
(http://www.cbo.gov/showdoc.cfm?index=3D655&sequence=3D4)

So far as I understand the economic theory here, the reasoning for this =
is
pretty straightforward: because there is much less "brand-loyalty" to
generics and price competition tends to be intense among near-identical
products, first entry to the market is no guarantee of market control.
Thus, there is little risk of monopolization of a generic market, by =
the
company that holds the patent or anyone else.
Obviously, this is not a reason to oppose Bolar provisions, as they are
still crucial for bringing cheaper versions to market quickly (although
NERA's study of generics in the OECD estimated that the lag between =
expiry
of patents and entry to market of a generic in the absence of a Bolar
provision was six months to two years, and sometimes considerably less;
"Policy relating to generic medicines in the OECD countries: Final =
report
prepared for the European Commission DG III"; downloadable from
http://www.nera.com/practice/healthpraf.html)
<http://www.nera.com/practice/healthpraf.html)> .  However, it is not a
guarantee of affordable pricing for generics: the studies quoted in the =
CBO
study mentioned above all indicate that price is highly sensitive to =
the
number of market players, declining significantly as more generic =
products
are introduced.

Best,
Toby Kasper
Gay Men's Health Crisis
New York, NY USA
tobyk@gmhc.org


	-----Original Message-----
	From:	James Love [SMTP:love@cptech.org]
	Sent:	Friday, January 21, 2000 5:08 AM
	To:	pharm-policy@venice.essential.org;
ip-health@venice.essential.org
	Subject:	[Ip-health] New argument in favor of Bolar-Roche
provision

	forward from Jerome Dumoulin.  Jamie

	------------------
	From Jerome.Dumoulin@upmf-grenoble.fr Fri Jan 21 05:05:58 2000
	Date: Fri, 21 Jan 2000 10:57:36 +0100
	From: J=E9r=F4me Dumoulin <Jerome.Dumoulin@upmf-grenoble.fr>
	To: love@cptech.org
	Subject: New argument in favor of Bolar-Roche provision

	Jamie,

	I have just read a new article in Health Economics (Jorge Mestre
	Ferrandiz, The Impact of Generic Goods in the Pharmaceutical
Industry,
	Health Economics 8: 599-612 1999) which fuels a argument in favor of
	Bolar-Roche provision, This is a new argument I think.

	The author studied firm strategies about launching branded generics.
It
	is the same on the generics market as on many markets, the first
mover
	has an advantage to take market shares, so the innovative firm has a
	great advantage to produce the generic itself. Without Bolar Roche
	provision, the pionner firm can easily be the first mover on the
generic
	market (because they can prepare marketing generic drugs several
years
	before potential competitors) and can take a great advantage on
	potential competitors. So in many case, the only generic will be a
	branded generic marketed by the brand drug pionner firm. This firm
will
	lock in the market with its two products : the branded product and
the
	generic product. The result will be no actual competition.

	"The firm uses the generic as a means to increase the price of its
	branded good in order to obtain higher profits. Furthermore, this
firm
	can charge a higher price for the generic good compared with the
price
	that would otherwise be set by a third firm not producing producing
the
	generic alternative." (snip)  "The policy implications of these
results
	are that, since the promotion of generic drugs is coming from
different
	sides of the economy, from a social point of view, their entry
should be
	encouraged through firms not producing their own branded good, but
	rather through firms who specialise in the productyion of generics.
	Hence, entry barriers to these firms should be made as low as
possible."
	Bolar Roche provision is not only a mean to bring generics on the
market
	as soon as possible, as it is usually argued, but it is a mean to
make
	generic competition sustainable, preventing patent owner to
monopolise
	the generic drugs market.  We can suppose pharma companies are so
	strongly opposed to Bolar-Roche provision because they know this
	mecanism.

	   Yours Jerome

	J=E9r=F4me Dumoulin
	Institut de Recherche Economique sur la Production et le
D=E9veloppement
	Universit=E9 Pierre Mend=E8s-France
	BP 47
	F 38040 Grenoble Cedex 9
	tel : 33-(0)4 76 82 54 50
	fax : 33-(0)4 76 82 59 89
	jerome.dumoulin@upmf-grenoble.fr=20





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