Everyone is familiar with generic drugs that were once proprietary. As soon as the patent runs out, companies rush in with their version of a popular drug.
But so far, biotech medicines haven’t suffered this fate, largely because they’ve been too new. In fact, when the generic drug laws, known as the Hatch-Waxman Act, were passed in the 1980s, biotech drugs were so obscure that they weren’t included in the regulations, and the FDA still hasn’t figured out what to do about it.
Now, patents on many biotech drugs are finally about to expire, and the race is on to determine who will benefit from the potential market in biogenerics, as they’re being called. Biotech drugs are fundamentally different from the pharmaceuticals of the past. They include such exotic ingredients as interferon, human growth hormone, and targeted antibodies. Under their brand-name banners, they also generate some $32 billion in annual sales and represent the fastest growing business in medicine. In fact, biotech drugs are outperforming the broader pharmaceutical industry by two to one.
They’re expensive, they’re in high demand, and until now, their success has gone unchallenged. But that’s about to end, and the companies that can overcome the regulatory, legal, and technical hurdles stand to reap huge rewards. Unfortunately, the U.S. stands to lose if it doesn’t unravel the regulatory nightmare of the Food and Drug Administration.
As a result of that confusion, some observers don’t see biogenerics taking hold in this country until 2010, by which time European companies could be well established in the market. The European regulatory body issued regulations and guidelines in 2003, and although no product has yet been approved for generic manufacture, it could happen within a year or two, according to a recent Research and Markets report.
With a dozen biotech patents due to expire next year, the heat is definitely on. But not everyone wants the FDA to act. Those companies holding the aging patents, for example, don’t want upstart companies manufacturing cheap versions of their drugs. Pfizer has already submitted a petition to the FDA to use an obscure rule to prevent biogenerics from going forward in the U.S.
The stakes are enormous. Amgen alone has two red blood cell enhancers that earned nearly $3 billion in 2004, the year when their patents began expiring. That’s half Amgen’s total earnings.
Genentech’s hottest drug is Rituxan, a lymphoma treatment that earned $1.2 billion in 2002 ? again, half Genentech’s income.
Despite the efforts of those companies, it’s not a question of whether biogenerics will arrive; it’s a question of when and how. The big challenge now seems to be how to make those generic versions of biotech drugs safe and effective. Why? Because biotech drugs are much more complicated and difficult to manufacture than traditional pharmaceuticals.
For one thing, unlike most ordinary drugs, biotech drugs can trigger powerful immune responses in the body. Normal drugs use very small molecules. Biotech drugs tend to use very large and highly complex molecules, which the immune system may recognize as an invading organism. This reaction, known as immunogenicity, could produce potentially fatal results if there is even the slightest variation in the manufacturing process.
But the large generic drug makers are confident that legislators will iron out the wrinkles in the law needed to make biogenerics possible and that they can successfully manufacture the complex drugs. Teva Pharmaceuticals and Barr Laboratories, the two largest generics manufacturers, are already building new factories to produce biogenerics. In addition, Teva is trying to buy companies that sell biotech drugs outside the U.S., and Barr is pouring money into lobbying Congress for rules to allow the new generics.
Of course, the very companies that hold the patents will launch their own generic brands in some cases. Sandoz is the generics division of Novartis. In 2003, it attempted to introduce a generic human growth hormone, called Omnitrop, to the European market. After recommending approval, the European drug agency denied it over testing issues. Sandoz sued the agency. Among the big questions to be resolved both here and abroad is whether a company manufacturing a biogeneric has to repeat all the clinical trials that the original company conducted.
In light of this trend, we offer the following three forecasts for your consideration:
First, by 2010, patents on biotech drugs, worth more than $11 billion in worldwide sales today, will lose that protection, opening the market to competition. There will be a global scramble to capture that revenue. Rapid introduction of biogenerics in Europe ? as soon as 2006 ? will push U.S. regulators to act by 2007. With healthcare costs rising higher every day, biogenerics will first appear in Europe and other foreign countries, but pressure from regulators here at home will ensure a booming American market by 2010. Those companies that can be first to market with new, cheaper biotech drugs will also find a welcoming market in China and India, where regulations are more relaxed, testing standards are lower, and markets are driven by price.
Second, by 2010, biotech pharmaceuticals will become a $53 billion market. The hot products will be growth hormones, insulin replacements or substitutes, blood factors, and targeted antibodies for treating cancers of various kinds. The biggest winners will likely be companies in the European Union and the U.S., with some of those being established pharmaceutical manufacturers or their subsidiaries. Not all of them will benefit, however: Expect to see Amgen, Schering-Plough, and Novo Nordisk come under siege.
Third, after an initial shake-out period, this trend will bring not only cheaper versions of existing biotech drugs to people worldwide, but will also propel a new wave of innovation in bio-pharmaceuticals as manufacturers strive to replace profits associated with the lost patents. This will mean better treatments for every sort of disease from debilitating neurological disorders to deadly cancers.
References List : 1. To access the report “The Biogenerics Market Outlook,” visit the Research and Markets website at:www.researchandmarkets.com/reports/c24114
