Authorized generics lower drug prices, FTC report says; GPhA responds

WASHINGTON The generic drug industry will find little to celebrate in a report released late Wednesday by the Federal Trade Commission.

Titled “Authorized Generics: An Interim Report,” the study found that so-called authorized generics – branded drugs sold under their generic names designed to compete with genuine generic drugs – keep prices lower when they compete against a single generic drug than when they do not.

Under the Hatch-Waxman Act of 1984, which created a regulatory pathway for generic drugs, the first pharmaceutical company to file for approval of a generic drug with the Food and Drug Administration receives 180 days of market exclusivity once the FDA gives the generic drug final approval. During that 180-day period, however, the manufacturer of the branded drug can sell its product for a reduced price under its generic name, either directly or through a third-party company, as an authorized generic. The FDA considers authorized generics branded drugs, though consumers may not be aware of the distinction, thus creating the impression of two, competing generic drugs on the market, while the law permits only one.

Such organizations as the Generic Pharmaceutical Association oppose authorized generics, calling them harmful to consumers, but according to the FTC report, retail drug prices are 4.2% lower and wholesale prices are 6.5% lower when an authorized generic is present than when they are not.

“Authorized generics undermine Congressional intent by undercutting the 180-day exclusivity period for generic manufacturers,” GPhA president and CEO Kathleen Jaeger stated in response to the FTC’s report. “Congress provided the 180-day incentive as a means to foster investment by generic companies to challenge questionable and weak brand patents, with the ultimate goal of providing more timely access to, and greater choices of, affordable medicines.”

While authorized generics may keep prices lower, they have the same effect on generic manufacturers’ bottom lines, according to the report, lowering revenues for the first generic company to file for regulatory approval by 47% to 51%.

One way that generic manufacturers fend off competition from authorized generics is through “pay-for-delay” settlements, whereby a branded manufacturer pays the generic competitor to delay the launch of its generic product in exchange for promising not to launch an authorized generic during the 180-day exclusivity period. But on Tuesday, FTC chairman Jon Leibowitz said in a speech before the Center for American Progress in Washington that eliminating the settlements would save consumers $3.5 billion a year, including $1.2 billion for the federal government.