When a Brand Drug Goes Generic
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When a Brand Drug Goes
Generic
Laura Barrows, FSA
Coventry Health Care
Joel Shalowitz, M.D., MBA, FACP
Professor and Director, Health Industry Management
Kellogg School of Management, Northwestern University
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Agenda
I How a Drug Comes to Market
II Generic Releases
III Physician Perspective – 9 Key Questions
IV Actuarial Considerations
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericPart I: How a Drug
Comes to Market
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How a Drug Comes to Market
Preclinical Phase (optional): at least two animal species
Determines toxicity and a safe starting dose for human trials
Investigational New Drug Application (IND) & Approval (not public)
Phase 1: 20-100 subjects (not people with disease)
Determines safety; common side effects; absorption by/elimination from body
Phase 2: 100-500 subjects
Determines efficacy on particular indication(s) (certain diseases or conditions)
Phase 3: 1000-5000 subjects
Confirms safety and effectiveness; tests different dosages and populations; determines
effectiveness in drug combinations
New Drug Application (NDA) and FDA Approval (10-15% rejected)
Marketing
May launch within a few weeks or several months of approval; difficult to predict
Phase 4 “Post-marketing” (may not be required): 300-3000 subjects
Explores long-term safety/side effects; new dosaging, populations, and indications
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericDrug Timeline
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Patents
Patents – encompass a wide range of claims
Can be granted anytime along the development lifeline of a drug
Expires 20 years from date of filing
Factors can affect patent duration
Exclusivity
Exclusive marketing rights granted by the FDA for first to file or
challenge patent
Runs independently from, and can run concurrently with a patent
Different types of exclusivities have different expiration times
Pediatric exclusivity: 6 months
Orphan drug (incentive for treatment of rare diseases): 7 years
Drugs can have a patent, exclusivity, both, or neither
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericPatent Expirations and Extensions
Because patents are normally filed long before the drug is marketed, they
tend to be effective for only 7-12 years
If a patent has less than 14 effective years from the product’s approval
date, the patent can be restored to 14 years or a max of 5 years, whichever
comes first
Applications for patent extensions must be filed within 60 days of NDA approval
Tradename of Original Extended
Extension
Approved Product Expiration Date Expiration Date
Actos 18-Jan-06 5 years 18-Jan-11
Lipitor 30-May-06 1,213 days 24-Sep-09
Paxil 23-Oct-06 67 days 29-Dec-06
Prograf 16-Jan-07 448 days 08-Apr-08
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Brand Lifecycle Management
Legitimate life extension strategies
Authorized Generic
Brand relabeled, marketed and sold by a generic manufacturer
under generic name
Brand manufacturer can compete with the generic manufacturer
that is awarded 6-month exclusivity
Recent Development: The “Preserve Access to Affordable
Generics Act” proposed to Congress in Jan 2007
Prohibit brand companies from compensating generic drug companies to
delay entry of generic drug into the market
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericBrand Lifecycle Management
Legitimate life extension strategies (continued)
Pediatric study extensions – 6 month exclusivity
Multiple patents in force – use, disease state, chemical,
delivery
Extended release formulations – extend brand name, not
patent
Additional uses
Combination drugs
Citizen petitions – citizen groups say not comfortable with
generic
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Part II: Generic Releases
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericWhen Can Drugs Go Generic?
The brand-name drug’s patent must expire
If a manufacturer makes a generic version before the patent
on the brand expires, the brand’s manufacturer can sue
Manufacturers of a potential generic drug must submit
an Abbreviated New Drug Application (ANDA)
Brands have already completed the important safety and
effectiveness research; generics can skip the preliminaries
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FDA Requirements for Generic Drugs
Drug has same active ingredients and labeled strength as brand
Same dosage form (tablets, liquids, etc.) as brand
Bioequivalence – delivers same amount of active ingredients into a patient's
bloodstream in the same amount of time as brand
Essentially same drug labeling as brand
Must remain potent and unchanged until the expiration date on the label
Full documentation of drug chemistry, manufacturing steps, quality control
measures
Raw materials and finished product meet specifications of the U.S.
Pharmacopoeia
Firm complies with federal regulations for good manufacturing practices and
provides the FDA with a full description of facilities used to manufacture,
process, test, package, and label the drug; the FDA inspects manufacturing
facilities to ensure compliance
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericBrand/Generic Crossover
Pfizer’s subsidiary Greenstone makes generic versions
of Pfizer brands
Gabapentin (generic Neurontin)
Novartis has its own generic subsidiary – Sandoz
Merck – plans to release Simvastatin (generic Zocor)
with Dr. Reddy’s Laboratories
Because Merck made Zocor, no ANDA is needed for the
approval of a name change to Simvastatin
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Patent Expirations: 2007
Brand Drug Common Use Notes Patent Expiration
Zofran Nausea Q1 2007
Norvasc Blood Pressure Mylan with exclusivity Q3 2007 (March 23)
Ambien Sleep Disorders Mulitple generics Q2 2007 (April 21)
Omnicef Antibiotic Q2 2007 (May 7)
Lotrel Blood Pressure Teva/Dr. Reddy with exclusivity Q3 2007
Coreg Blood Pressure Q3 2007
Lamisil Infection OTC topical possibility Q3 2007
Pulmicort Asthma Q3 2007
Allegra-D Allergy Questionable – Due to Litigation Q3 2007
Zyrtec Allergy OTC possibility Q4 2007
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericPatent Expirations: 2008-2010
Brand Drug Common Use Notes Patent Expiration
Fosamax Osteoporosis Q1 2008
Concerta ADHD Q1 2008
Risperdal Schizophrenia Q2 2008
Wellbutrin XL Depression 300mg strength generic Q4 2006 Q2 2008
Depakote/ER Epilepsy Q3 2008
Advair Asthma Q3 2008
Imitrex Migraine Q4 2008
Topamax Epilepsy Q1 2009
Valtrex Anit-viral (Herpes) Q4 2009
Lipitor Cholesterol Q1 2010
Effexor XR Depression Q3 2010 15
Specialty Drugs
Are Generics on the Horizon?
Over 250 biotech drugs on the market, 1000 in pipeline
Expired patents include:
Avonex, Intron-A, Procrit, Neupogen, Epogen
No FDA Framework
Hatch-Waxman doesn’t apply to specialty
Legislation introduced this year to grand authority to FDA
When will it pass? 2008? 2009?
Much more complex, processes are trade secrets
Generics may require clinical trials
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericPart III: Physician Perspective
– 9 Key Questions
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Question 1:
Why do we care about generics?
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2007 Health Spring Meeting, Session 97: When a Brand Goes Generic19
Can we afford all these drugs?
Drug Est. Ave. Annual Cost
Erbitux $100,000
Avastin 54,000
Tarcena 31,000
Thalomid 25,000
A Genentech study of colon cancer patients showed that a combination of Avastin and
standard drug therapy extended the life of the average patient less than 5 months -- to
20.3 months from 15.6 months -- compared with the standard treatment. With the notable
exception of Gleevec, from Novartis, which has been widely praised for prolonging the
lives of leukemia patients, most other drugs show even smaller improvements in survival.
Source: NY Times July 12, 2005 20
2007 Health Spring Meeting, Session 97: When a Brand Goes GenericQuestion 2:
What is a generic?
Generic bioequivalence means:
That with 90% confidence,
the generic’s Cmax and AUC will be within
80-125% of the branded drug.
GOT IT?
21
Source:http://www.thebody.com/content/art13513.html
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericQuestion 3:
Given the previous definition, can
generics theoretically be used for all
medications?
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Example: Levothyroxine
“ For most generic drugs, [bioequivalence and therapeutic equivalence]
are interchangeable, but because of the narrow therapeutic index of
levothyroxine, even small differences between formulations in
bioavailability might result in clinical hypo- or
hyperthyroidism…Given the multiple sources of variation in the
effects of a dose of the drug, there is no good reason to introduce
another one by substituting a generic that could be switched without
the prescriber’s knowledge from one refill to the next.”
Source: The Medical Letter September 27, 2004
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericQuestion 4:
Are generics always cheaper?
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Total Pharmacoeconomic Costs
Approximate Cumulative Cost Per Year ($)
Acquisition Cost Supplemental Drugs Labs Clinic Visits Side Effects
Benazepril n= 16
Ramipril n=16
Quinapril n=17
Fosinopril n=18
Lisinopril n=15
n=13
Enalapril
Captopril n=24
0 250 500 750 1000 1250 1500 1750
Comprehensive costs of antihypertensive therapy in 232 patients initiated on ACE inhibitor therapy. P=0.01.
Source: D.E. Hilleman, et al., “Cost Minimization Analysis of Initial Antihypertensive Therapy in Patients with Mild-to-Moderate
Essential Diastolic Hypertension,” Clinical Therapeutics, Vol 16 (1), 98, 1994. 26
2007 Health Spring Meeting, Session 97: When a Brand Goes GenericQuestion 5:
At least we all know drug prices are
highest in the U.S., right?
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Average Foreign-to-Canadian Price Ratio of Drug Market Segments at Market Exchange Rates, by Bilateral
Comparator, 2005
Country Generic Non-Patented Branded Patented
Australia 0.85 0.81 0.78
Finland 0.49 0.75 0.88
France 0.71 0.76 0.85
Germany 0.84 0.91 0.96
Italy 0.76 0.73 0.75
Netherlands 0.80 0.72 0.85
New Zealand 0.23 0.64 0.79
Spain 0.58 0.59 0.73
Switzerland 0.99 1.34 1.09
United Kingdom 0.80 0.87 0.90
United States 0.65 2.46 1.69
Source: PMPRB 28
2007 Health Spring Meeting, Session 97: When a Brand Goes GenericQuestion 6:
What are the implications of generics
for pay-for-performance?
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Pay for Performance Issues
Assume a 3 tier benefit with $5, $10 and $20 copays
Physicians are incentivized to prescribe generics
A patient with high cholesterol requires 2 drug therapy and is a candidate
for Vytorin (Zetia + simvistatin)
If the physician prescribes Vytorin, she gets credit for 0/1 generic and
the patient pays $10
If the physician prescribes Zetia and simvistatin, she gets credit for ½
generic and the patient pays $10+$5= $15
WHERE ARE THE ALIGNED INCENTIVES?
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericQuestion 7:
What about generic biologicals?
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What are biologicals?
Complex protein molecules
Called “similar biological medicinal product” in the EU and
“follow on proteins” in the U.S.
Because of complexity it is difficult to tell if medications are
equivalent or have same potential to cause allergic reactions
Due to high testing costs to prove equivalence as well as high
manufacturing expenses, some experts believe that there will
not be much savings
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericNevertheless…
LIFE SCIENCES: BIOTECH
European decision presages era of generic biology drugs
By Stephen Heuser, Globe Staff | February 13, 2006
A key European health authority has signed off on the first-ever generic
biotechnology drug, opening a crack in one of the most secure and lucrative niches in
the business world.
In a long-awaited decision, the European Medicines Agency recommended approval
of a new drug called Omnitrope, which copies an existing growth hormone
prescribed for undersized children. If given final OK by the European Commission,
Omnitrope could be on the market later this year.
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Question 8:
What are the obstacles to implementing
generic utilization?
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericWhat are the obstacles to generic substitution? An assessment
of the behaviour of prescribers, patients and pharmacies
during the first year of generic substitution in Sweden
Karolina Andersson, Christian Sonesson, Max Petzold, Anders Carlsten, and Knut Lo¨nnroth
SUMMARY
Purpose The aim of the present study was to investigate obstacles to generic substitution and
savings achieved during the first year after Sweden introduced generic substitution in October 2002.
Results: The [1] prescriber opposed substitution in 1–8% of the dispensed prescriptions,
varying between the indicator drugs. [2] Patients declined substitution more frequently when
the average saving per substitution was low. Substitution occurred most frequently in
indicator drugs where the average saving per substitution was high. The actual saving
achieved by substitution was on average 60% of the total possible savings and was largely
dependent on the extent to which the [3] pharmacies kept the cheapest brand in stock.
Conclusions Generic substitution has been implemented in practice although it did not reach full
dividend during the first year. The potential savings from extended use of generic substitution are
substantial.
Pharmacoepidemiology and Drug Safety 2005; 14: 341–348 35
Question 9:
What is the lesson learned?
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2007 Health Spring Meeting, Session 97: When a Brand Goes Generic37
Part IV: Actuarial
Considerations
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericActuarial Considerations
Projected cost impact of a new generic
Cost
# manufacturers
Exclusivity
Launched “At Risk”
Pricing
Initial Cost
Will it fall on MAC list
Cost reduction over time
Agreement with pharmacy vendor may differ in first 6 months generic is
released
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Actuarial Considerations
Projected cost impact of a new generic (continued)
Utilization
Trend in therapeutic class
Marketshare movement
Patent-expiring brand
Competitor brands impacted (Zocor, Lipitor)
First to go in class
Marketplace perception
Mandatory generic provisions/penalties
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericActuarial Considerations
Projected cost impact of a new generic (continued)
Rebates
Consider net net impact (after copays after rebates)
Is generic price is set competitively against the brand
House brands
Is cost of brand less rebate still lower than new generic (first 6 months)
Offer brand drug at generic copay to achieve lowest net net cost
Mixed message to members, but cost savings to plan
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Actuarial Considerations
Example:
Brand Drug Generic Drug with Generic Drug without
Exclusivity Exclusivity
Total Cost after Discount $100 $80 $40
Member Copay $25 $10 $10
Plan Responsibility $75 $70 $30
Rebate $12 $0 $0
Plan Responsibility after $63 $70 $30
Rebate
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2007 Health Spring Meeting, Session 97: When a Brand Goes GenericQuestions
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