This article was originally published in the September 2014 issue ofInnovations in Pharmaceutical Technology. 

With blockbuster drugs reaching the end of their patent lives, many companies are looking for new ways to best secure their formulations and protect their share of the drugs market against increasing competition from generics. But are their motives justified?

With blockbuster drugs reaching the end of their patent lives, many companies are looking for new ways to best secure their formulations and protect their share of the drugs market against increasing competition from generics. But are their motives justified?

Ever since I was a young boy, I have never liked those who have sought to cut corners in order to get ahead, while I attempted to complete tasks in the proper way. In some respects, that is how I view the generic pharmaceutical industry: pioneering pharma puts in all the research, develops a drug and achieves a monopoly for the much-reduced period of time remaining on the patent (usually due to clinical trial and market authorisation delays), before the health system finds a generic competitor.

The quid pro quo for granting a monopoly is that when it expires, the subject matter becomes available for all to exploit. Supplementary protection certificates can extend by four years the basic patent upon which a pharmaceutical product depends, and for which a marketing authorisation has been given; however, it is difficult to persuade relevant authorities to grant them.

As a result, pharma companies resort to other measures to delay, for as long as possible, the time when generic manufacturers begin to start taking away market share. One particular tactic that has caught the headlines in recent years, and with which the US Federal Trade Commission (FTC) has taken issue, is ‘product hopping'.

Changing Status

Shortly before a patented drug loses its protection, a generic manufacturer’s drug may well achieve FDA approval as being therapeutically equivalent on the basis of the same active ingredient, dosage form, route of administration, strength or even concentration.

In response, the original drug manufacturer may make a nontherapeutic change to the formula, such as a switch to a different metabolite or to a different chiral molecule, or it can alter the strength or method of delivery (for example, liquid to tablet). Coupled with this change, the manufacturer is able to take the original drug off the market and – in some cases – just before it does, raises the price so high that the entry of the subsequent reformulated drug becomes significantly more attractive. This shifts the prescribing physicians, and their patients, on to the new formulation. As the generic manufacturer’s authorisation is based upon the now-withdrawn product, this considerably delays its drug’s entry into the marketplace.

The original drug manufacturer may also attempt to achieve a new patent for the reformulated product, claiming that there are significant differences to the original. However, to the FDA, there needs to be satisfactory evidence that the reformulated product is sufficiently similar to the original, in order to utilise the existing clinical data and obtain fast-track approval. Running in parallel with all this will be a marketing campaign among physicians, patients and wider healthcare establishments espousing the virtues of the ‘new and improved’ product.

Delaying Tactics

Two other tactics which have raised concern with the FTC are the so-called ‘pay for delay’ settlement agreements and alleged manipulation of the FDA’s official drugs listing, which would be infringed by any Abbreviated New Drugs Application for a generic drug equivalent.

In ‘pay for delay’ cases, the original drug manufacturer will sue the generic producer for patent infringement, before seeking a separate settlement in which the generic producer receives a large lump sum payment in exchange for not releasing its product onto the market as a rival. The FTC has considered these measures to be anti-competitive, and a number of legal actions in the US have sought to clarify how these agreements are to be viewed.

These situations occur mainly in relation to the second formulation patents, which seek to extend the scope of monopoly beyond the life of the initial patent. Were that not the case, there would be little scope for arguing non-entry of a generic drug beyond the life of the original patent. It is only because there is something to argue about in terms of the second formulation patent, that original pharma companies can have any hope of justifying payments.

Another delaying tactic relates to the FDA’s list of drugs covered by appropriate patent protection which, if a generic equivalent is applied for, would be infringed. The significance of this is that if a generic equivalent to any of the drugs listed is sought, then the holder of the patent has 45 days to bring an action against the generic company, bearing in mind that there is automatically a 30-month stay in the FDA approval process. Generic companies often claim that the drugs are not on the list and that the patents do not match up, but this takes a lot of time, effort and expense to prove, with the resulting delay in the launch of the generic drug.

Case in Point

These delaying tactics have infuriated various pressure groups seeking cheaper pharmaceuticals, as well as the FTC. The tactic of product hopping in one particular case, involving Warner Chilcott, appeared so blatant that the FTC filed an amicus brief, alleging that by reformulating their antibiotic (Doryx) three times, this constituted anti-competitive behaviour which violated US antitrust law – specifically the Sherman Antitrust Act.

It will be for the US District Court for the Eastern District of Pennsylvannia to decide whether there have been as many reformulations by Warner Chilcott as alleged, and whether such practice is anti-competitive or there is real justification behind what the company has done. If it is ruled that there have been three reformulations without any tangible change for the patients concerned, then this will prove to be an extreme case of product hopping and, as such, is unacceptable.

Such publicly extreme cases will draw attention to the entire range of pharma company tactics in this area, meaning that what had once been below the radar of the FTC, is now firmly on it.

Foul Practice?

In recent years, the blockbuster drugs needed in the pipeline to keep companies afloat have failed to materialise, resulting in a scramble to purchase smaller companies’ portfolios. The huge costs associated with failure have affected many pharma companies that rely on blockbusters to bring in the money necessary to enable them to conduct more R&D on other less lucrative drugs – which are, nevertheless, still needed.

While this may offer some justification for the manipulation of products and their patents, the lengths that some companies have gone to seem destined to drive any neutral observers to consider the practice unfair. And yet, given the many new drug failures that have occurred and the length of time it takes before those failures become manifestly obvious, there seems to be little else that companies can do to keep generating revenue, and to keep R&D departments functioning.

However, it is what is driving pharma companies to conduct themselves in such a manner that is really the issue. If it is simply greed, then it is clearly a foul practice. On the other hand, if it is out of necessity, then the underlying economics which provide few barriers to generics entering the market should be reconsidered. Perhaps then the right balance will be achieved, and the playing field finally leveled.