Generic Challenge:. Martin a. Voet

$10.6 Amgen’s Enbrel for arthritis and psoriasis $6.6 AstraZeneca’s Crestor for lowering cholesterol $6.3 Sanofi’s Lantus for insulin injection $5.8

      Note only one (Crestor) is a conventional small molecule drug (and its basic patent expired in 2016 and Crestor became a generic). All the rest are new biotech drugs. This dramatic change of leading drugs from chemically manufactured conventional small molecule drugs to biologically produced large molecule biotech drugs is the most important new trend in the pharmaceutical industry.

      At the same time, the first U.S. “generic” for a biologic drug (called a “biosimilar”) was approved by FDA and launched by Novartis in September, 2015 as Zarxio, a biosimilar of Amgen’s white blood cell-boosting product Neupogen. Initial pricing was 15% below that of Neupogen. In April, 2016, FDA approved a second biosimilar Inflectra, Pfizer’s version of Janssen’s Remicade for treatment of arthritis. FDA has also accepted filings for approval of other biosimilars including a Sandoz biosimilar for Amgen’s Enbrel and an Apotex biosimilar for Amgen’s Neulasta, a long lasting version of Neupogen. Sandoz said in 2015 that it had a number of biosimilars in various stages of development and planned to make as many as 10 regulatory submissions by 2018. According to newspaper accounts there are 11 biosimilars in development to compete with AbbVie’s Humira.

      The European Union (EU) is well ahead of the U.S. in approving such biosimilars, as the legal framework for approval of biosimilars was in place by 2003, vs 2010 in the U.S. As a result, there are already 19 approved biosimilars on the market in the EU for the treatment of a number of important disease conditions including diabetes, anemia, cancer, psoriasis, chronic kidney failure and rheumatoid arthritis. European biosimilars sell for about 20-30% below the list prices of the name brand versions of these biologics.

      Wall Street expects U.S. biosimilars will have similar discounts once multiple biosimilars for the same product are on the market and discounts could go to 40 to 50% according to one major pharmacy chain manager. In addition, in 2015, the centers for Medicare and Medicaid Services issued new rules for biosimilars which will eliminate existing incentives for doctors to prescribe the more expensive brand name version of the drug instead of the corresponding biosimilar.

      Yet despite all the recent innovations and approvals of biosimilars in the U.S., there continues to be animosity towards drug companies and calls for government price controls for drugs, exacerbated by widely published stories of a few single source generics for rare conditions having been bought by unscrupulous parties who raised prices a thousand fold for those few unfortunate users who have no alternative but to pay the exorbitant asking prices for the life-saving drugs until new generics can be approved. Hopefully, the politicians of the day will not be moved by these egregious acts to throw the baby out with the bathwater.

      It is also my hope this Fifth Edition will be a useful update of the book as the laws and regulations and court decisions affecting this fascinating subject continue to evolve.

      Martin A. Voet

      October 1, 2016

      Preface to the First Edition

      A horse walks into a bar and the bartender says, “Why the long face?” Why indeed. The pharmaceutical industry should be on top of the world with innovative discoveries and development of so many fantastic new drugs for treating life-threatening illnesses, while often avoiding expensive surgeries. There are targeted new drugs for treating once deadly cancers and for preventing blindness; wondrous new life-saving biotech products for treating stroke and multiple sclerosis; amazing new lifestyle enhancement drugs from growing hair and erasing wrinkles to maintaining sexual vigor; yet the pharmaceutical industry is trashed nightly as being second only to the tobacco industry in the corporations-we-hate-most department.

      Politicians sensing this are quick to lay blame, announce conspiracies, demand lower prices and push for re-importation of low-priced drugs from foreign countries. African countries blame them as if they started the AIDS epidemic, instead of coming up with promising treatments. Generic drugs are thought to be the answer to what is wrong with healthcare, while innovators are viewed at best with a jaundiced eye. In this charged and decidedly unfriendly environment, why write this book?

      In fact there is nothing wrong with generics and they are a valuable and necessary part of a good health care system. However, there would be no generics without the innovators and I am worried that the public has lost sight of this truism. This book is intended to encourage the innovators to persevere in the face of this adversity and to redouble their efforts to innovate and to continue to see themselves as the valuable contributors to society that they are.

      Martin A. Voet

      December 3, 2004

      Introduction

      The Generic Challenge is about providing the necessary information to pharmaceutical executives, managers, regulatory, legal and business development professionals, those involved in strategic marketing and in research and development, among others in the pharmaceutical field, to deal with the increasingly aggressive tactics of generic companies designed to legally copy innovative drug products.

      Generic drugs offer significant benefits to society by providing good, low cost medicines at affordable prices. But people and their children also will need new and better innovative drugs in the future to treat a variety of unmet needs. If the generic industry is not kept in check, the balance between the goals of low-priced currently available drugs and innovative, life-saving and life-enhancing future drugs will not be maintained, and while we will continue to have available inexpensive older generic drugs, we will have fewer new, innovative drugs.

      Most people don’t understand that new, innovative drugs are invented and developed by the drug industry without any significant help from the government. Sometimes the basic concepts are discovered at Universities and are licensed to the pharmaceutical companies at a very early stage in development, and once in a while something comes from a government-sponsored research institute, such as the National Institutes of Health (NIH), but not very often. And even then, the long times and great costs and capital risks for development and approval by FDA are all on the pharmaceutical industry alone.

      A significant percentage of the profits made by the drug companies in marketing and selling their current drugs is invested in the research needed to discover and develop future new drugs. No profits on current drugs, no research on new drugs.

      Generic companies have no expense for discovery or development or marketing of drugs. They are legally allowed to copy an innovator’s drug after a relatively short time of exclusivity for the innovator, unless there is patent protection. If they can overcome the patent protection, they can legally obtain rights to use all the safety and efficacy data developed by the innovator and copy the drug. Then they only have to manufacture the drug and put it on the market. No payments are due to the innovator by the generic company for use of his property.

      A comparable situation would be you building a house and putting a lock on the door and then after a period of time, anyone who can pick the lock can legally use your house. Well, you say, that’s not fair. I built and paid for the house, no one should be able to use it just because they can pick the lock. You are right of course. No one would dream of that kind of legal process for houses. But that is precisely what happens in the wonderful world of pharmaceuticals where a generic company gets free use of your FDA drug file if he can pick the lock of your patent. In fact, current law actually gives generic companies an incentive to do so by providing a period of exclusivity for the first generic company that tries to pick a product’s patent lock!

      In the last 30 years since the Hatch Waxman Act fostered the generics industry, it has grown steadily, so that by 2016 it accounted for almost 90% market share of the prescription drugs sold in America, according