It’s no secret the generic pharmaceutical industry is in a time of change and dramatic growth. The patent cliff, a major driver of this growth with its crescendo in 2012, opened the door to renewed investment into new high-potential generic drug revenue streams. Since Hatch-Waxman in 1984, generic drugs have generated hundreds of billions in savings for U.S. citizens; becoming a timely governor that has helped slow rising healthcare costs. It’s equally apparent that the industry’s prominence and global supply chain has brought with it the scrutiny formerly reserved for Branded Pharma. Generic Pharma has become a global powerhouse. But with great power comes great responsibility, and it’s time for Generic Pharma to demonstrate its leadership on a number of fronts, including quality, safety and accessibility, as well as compliance and issues that have a far-reaching and long-term impact on the industry.
In a recent report “Global Markets for Generic Drugs,” analysts at BCC Research note: “The demand for generics is increasing steadily because of pressure to control health care costs. At the same time, fierce price competition in this area has put some companies in difficulties because of slashed profit margins.” Price pressures continue to eat into current and potential profit margins, and that has led to increased merger and acquisition activity in the sector as well, say BCC analysts.
The numbers associated with Generic Pharma are impressive. According to Ralph G. Neas, president & CEO of the Generic Pharmaceutical Association (GPhA), “Generic utilization hit an all-time high as 84% of prescriptions dispensed are now generic.” In 2012 the global generics sector, says BCC’s report, reached $269.8 billion, and is expected to reach $300.9 billion in 2013; and by 2018, some $518.5 billion via CAGR of 11.5%. According to GPhA, generics saved the U.S. health system $217 billion in 2012 and $1.2 trillion in the most recent decade. Not too shabby Generic Pharma!
With a market like that, Branded and Generic pharma are wrestling even more vigorously over patent rights in pursuit of capturing or preserving the profits from the most promising off-patent compounds — a trend that is showing no sign of abating anytime soon. Such market potential is attracting non-traditional responses as Branded Pharma (“originators” in analyst vernacular) is seeking to sell its own “branded” generics. BCC points to the rise of “Supergenerics” as another response to heightened competition and price pressure. Supergenerics, says BCC, are “offering added value as well as low prices.” BCC notes that many traditional generics companies are not positioned well to exploit the trend, but several majors are exploring their potential to create new revenue streams.
The expansion of the global generic drug industry has not come without its share of challenges. The regulatory community, it appears, has been especially challenged by the sectors’ growth over the last 30 years. It became apparent to many in the industry that the FDA and its Office of Generic Drugs (OGD) did not possess the resources to manage the tremendous influx of Abbreviated New Drug Applications (ANDAs) as a growing number of branded pharmaceuticals lost patent protections.
In his GPhA annual meeting keynote, newly elected GPhA chairman Craig Wheeler remarked that “the companies represented in this room supply about 85% of every prescription drug in the U.S. healthcare system.” Just in the last decade, he said, the industry had saved $1.2 trillion because of the generic drug industry. “We’re a critical part of the solution, not a part of the problem of the health care system we’re facing in this country. Yet as an industry, we have never faced stronger headwinds to the vitality of our companies.” Wheeler pointed to the problem of delayed ANDA approvals directly: “We face cruel delays that wreak havoc on our P&Ls,” he said poignantly. Later in his talk he circled back noting that it’s high time the industry manage past the issue: “Although we are providing the major funding for the FDA in the form of user fees, we have not yet seen … progress in the shortening of regulatory timelines. The FDA has been hard at work preparing … it is only this year that metrics start to kick in. We collectively have a lot of work ahead to get this backlog reduced and achieve the timelines envisioned [by] GDUFA.”
According to Lachman Consultant’s Bob Pollock, the OGD received a record 1,059 ANDAs during Calendar Year 2012. In addition, OGD received 163 ANDAs in December, “traditionally a month with the most number of submissions, as firms attempt[ed] to beat the end of year clock,” said Pollock, on his company’s website. Another blockbuster month in 2012 was September, said Lachman, as the rush to beat the implementation of Generic Drug User Fee Act (GDUFA) occurred.
The ANDA backlog hit its zenith in August 2012 with 2866 ANDAs (plus 1,868 PAS Supplements) waiting processing. To remedy the resource issue, the FDA promulgated and passed into law GDUFA on July 9, 2012. According to FDA, “GDUFA is designed to speed access to safe and effective generic drugs to the public and reduce costs to industry.” Now the industry pays user fees to supplement the Agency’s costs of reviewing generic drug applications and the subsequent inspection of facilities. These additional resources will enable, says the FDA, to reduce a current backlog of pending drug applications, cut the average time required to review them for safety and increase risk-based inspections.
GDUFA: YEAR ONE
In her keynote address at GPhA’s February 2014 annual meeting, OGD acting director Dr. Kathleen Uhl took the opportunity to update attendees on GDUFA and agency’s activity implementing and administrating the Agency’s generic drug program. First, she offered GDUFAs’ three basic tenants: “Safety, so that there [are] high quality standards for generic products; Transparency, which gets to facility identification and communication, and … Access, such that there is predictability and timeliness in the review process.”