“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 to IMS Health. Not satisfied with that enviable track record, during recent years, the generic drug companies have adopted a “take no prisoners” attitude and are challenging virtually all new drug patents at the earliest possible time. Branded pharmaceutical companies today have virtually all of their current products under attack by generics.
One of the main reasons for the on-going consolidation of the pharmaceutical industry is the shortening of product life-cycles caused by generics entering the market at earlier times in the product life-cycle. As the innovative product life-cycle gets shorter, simple economics suggests that the pharmaceutical industry must recover its long term investment over the shorter time period. This inevitably results in higher drug prices, which leads to further political pressures for Canadian re-importation of lower priced drugs, price controls, excise taxes on new drugs, etc.
Under such conditions, it would not be wise to take the survival of the innovative pharmaceutical industry for granted. An interesting example of this is the drug policy in Canada which has now come full circle.
The Canadian government decided many years ago that it preferred to reimburse inexpensive generic drugs to more costly innovative branded drugs and established governmental policies to achieve that. There was no data protection in Canada for drug dossiers and the only thing preventing a new pharmaceutical product becoming generic almost from day one was a patent. Even there the law was not very friendly to innovators and it was the policy of the health authorities and even the courts to officially favor the generic industry.
The net result was that there is virtually no innovative drug industry in Canada and like Blanche in A Street Car Named Desire; it depends on the kindness of strangers for future innovative drugs. Interestingly, because of price controls for branded drugs, innovative drugs are cheaper in Canada than in the U.S., but generic drugs are more expensive. If all countries took Canada’s approach, eventually, there would be no innovative pharmaceutical industry and no new innovative drugs.
To Canada’s credit it has now recognized the negative aspects of its drug policy and has implemented new regulations to provide for up to eight years of regulatory exclusivity for new drugs approved after June 17, 2006. This will encourage innovation by insuring a minimum of eight years of exclusivity for a new drug before it can be made available in Canada as a generic drug. Further details on the new Canadian drug rules can be found in Chapters 5 and 6.
The purpose of this book is to familiarize the reader with both the strategic and tactical aspects of enhancing pharmaceutical product life-cycles utilizing a variety of interactive tools including patents and regulatory exclusivities, together with an understanding of applicable laws including the Hatch Waxman Act for conventional generic drugs and the corresponding Biologics Price Competition and Innovation Act (BPCIA) for biologic generics or so-called biosimilars.
However, this is not as easy as it may sound. Patent law tends to be an arcane specialty with its own jargon like “prior art”, “terminal disclaimer” and “102 reference”; while FDA law, with its dense
