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
The Mechanics of an Authorized Generic
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
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
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
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 firstname.lastname@example.org. Christopher J. Worrell, principal of The Worrell Group LLC, can be reached at email@example.com