Whose Afraid of Authorized Generics - Pharmaceutical Executive

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Whose Afraid of Authorized Generics
Losing a patent challenge lets a generic competitor grab market share and slash branded profits. Sound scary? Ignoring authorized generics is worse.


Pharmaceutical Executive



The Mechanics of an Authorized Generic
Even before Teva, some of the industry's largest firms, including Bristol-Myers Squibb, Johnson & Johnson, GlaxoSmithKline, and Abbott, entered into authorized-generics arrangements with generics marketers. But many other companies that could profit from such business partnerships remain on the sidelines. After Teva cleared the legal objections to authorized generics, the biggest remaining obstacles may be common myths about the generic marketplace.

Here are three that brand companies still cling to, but that must be dismissed:

MYTH #1: If we release an authorized generic, our brand share will erode faster than it would if just one generic was on the market.

Brand companies have grown accustomed to how quickly generics erode their brand shares. While there are some rare exceptions to typical share-erosion curves (e.g., when a brand is priced like a generic, has a narrow distribution channel or is a true Narrow Therapeutic Index drug) erosion is a simple function of supply and demand. If there is enough generic supply priced lower than the brand, the erosion will occur at about the same rate whether one, two, or more companies supply the generic product.

MYTH #2: We can wait and see what happens in the generic market before we enter an authorized-generics contract.

Long before generics enter the market, generic manufacturers meet with major retailers and others in the distribution channels to finalize sales agreements. Just as a pharmacy benefits manager prefers one brand in a class, distributors of generics typically purchase just one generic. So first-mover advantages apply in the generic market just as in the brand market. If an authorized-generic product launches after the ANDA generic, it can have a difficult time gaining market share, since distributors are locked into the competing generic product. A brand team needs to commit to an authorized generic months before the first generic enters the market.

MYTH #3: Authorized-generics partnerships are complicated and divert brand resources.

On the contrary, authorized-generics arrangements are simple. They typically need few brand resources. The brand company must ask the business development group to arrange the deal, and it must allocate some resources for follow-up activities, such as accounting, finance, and supply-chain forecasting. The authorized generic can be beneficial to manufacturing. In many circumstances, the entry date of the authorized generic will be uncertain since the Paragraph IV case will be working its way through the legal system. The authorized-generics partner can facilitate manufacturing planning and smooth the ramp-down of the brand product.

Strategy and Practicality

Once a brand team commits to the authorized-generics strategy, a few issues remain:

Choosing a generic partner Just like brands, generic companies are not alike. Matching the brand product with the right generic company is a key consideration. Some generic companies have strong alliances with certain distributors or within certain channels, while others have operational advantages or a better understanding of how to market and distribute an authorized-generic.

Timing the launch Because authorized generics go to market after a patent challenge, timing the generic launch is difficult. The ANDA-generic company has to win the court case, including the appeal. But it can still launch "at-risk" before a final court decision. For example, Teva launched the 80-mg generic version of OxyContin (oxycodone) before the final Court of Appeals ruling.

Scenario planning Timing isn't the only factor to consider when it comes to launch date. Many scenarios affect the authorized generic, including number of ANDA filers, seasonality of some products, regulatory filings, and supply issues. The brand team must prepare for various possibilities and map the end of the product life cycle with a simple scenario-planning tree. This enables management to approve responses before events occur.

Managing the generic partner The brand company must build a strong management team to oversee the generic partner. Once committed, the brand team wants to maximize the success of the authorized generic against the exclusive-generic competitor. Stronger management resources will help drive profits.

Gregory Glass is the principal member of Gregory Glass Associates, and edits The Paragraph Four Report. He can be reached at comments@gregoryglass.com. Christopher J. Worrell, principal of The Worrell Group LLC, can be reached at cworrell@comcast.net


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