Thursday, January 15, 2009

The Promised Land For Generic Drugs

Generic drugs are supposed to be ascendant these days. A cost-conscious country is using them more frequently, and Congress seems to be moving down the path towards creating a whole new kind of generic – the follow-on biologic. Prospects for that legislation have considerably improved with bigger Democratic majorities in Congress and the new quantum majority in the White House. But at the same time, the forces that created these positive trend lines also contain elements that could lead to a reversal for generic firms.

For example, the widespread use of generics has allowed many firms to bloom, but manufacturing problems at some of these fast-growing operations threaten to discredit the industry as a whole. And an approval pathway for follow-on biologic could open up new business territory for firms, but to hear some tell, they may not benefit at all since the capital requirements will be too intense. The brand industry, having learned its lesson from the toothless labeling exclusivity in Hatch-Waxman, is hoping to include language in the FOB bill that will give biologic line extensions long lasting protections.

These pressures – along with a broader patent reform debate in Congress and state bills that would limit mandatory substitution – mean that the lobby and policy arms of the generic industry still have to work on overdrive even as the sector seems to have the wind at its back. Because while the generic industry’s presence in Washington has expended along with its sales, a by-product of that very growth, consolidation, now threatens to weaken the sector’s influence.

Barr’s acquisition by Teva means that what were arguably the industry’s two most robust D.C. operations are now squeezing under one roof, and the Generic Pharmaceutical Association will be missing one of its dues paying members. We’re not suggesting that this means that the generics industry is headed for hard times on the Hill, just that it’s going to have to continue to apply the same creativity and gumption that has brought it so much success in its previous battles with the brand industry.

Indeed, the poised, well positioned nature of the generics industry offers a Moses and the Promised Land analogy. Generics stand ready to enjoy some FOB meat and honey, but Barr, the firm that helped lead them there, isn’t going to join them. Barr’s D.C.-based CEO, Bruce Downey, was one of the first in the industry recognize the importance of having an lobbying operation, and, as noted in a recent interview with "The Pink Sheet," Downey was one of the driving forces behind the merger of the three fledgling associations into the current GPhA powerhouse. We’ll leave it up to you, dear readers, to decide whether this means that Henry Grabowski is Jericho.

image by flickr user runako used under a creative commons license

1 comment:

Anonymous said...

I have a tough time believing that follow on biologics are going to have a huge impact on the industry. I envision mild price pressure (akin to categories populated by me-too drugs) but FOB is going to be a very different business model than the current generics market. Let's see if the big generics players are up for reevaluating their core competencies in order to compete. If not, big pharma/bio is going to be in no real rush to push for significantly lower prices.