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Generic Firms Sanguine About New Congress, Preparing For Biogeneric Action

Executive Summary

Among a number of potential congressional actions that could benefit the generic industry, generic manufacturers appear to be most bullish about the prospects for the establishment of a pathway for follow-on biologics

Among a number of potential congressional actions that could benefit the generic industry, generic manufacturers appear to be most bullish about the prospects for the establishment of a pathway for follow-on biologics.

"There is a lot of support right now to do something on generic biologics obviously ... and we really believe that we are going to see significant motion there," Teva North America CEO George Barrett said during the company's fourth quarter earnings call Feb. 13.

Barr also has a positive outlook on follow-on biologics legislation. During a recent Morgan Stanley Congress, CEO Bruce Downey said that there is a "reasonable chance" of follow-on biologics legislation being passed this year (1 (Also see "Biogeneric Bill Has “Reasonable Chance” In ’07 – Barr; More CEOs Unplugged" - Pink Sheet, 8 Jan, 2007.), p. 13).

Only months earlier, Downey was significantly less optimistic about the prospects for generic biologics in the U.S. (2 (Also see "Generic Industry Likely To See Increasing Geographic Diversification – Barr" - Pink Sheet, 2 Oct, 2006.), p. 16).

However, the change in control of Congress appears to have renewed hope among generics companies that legislation will be passed in the near term.

Follow-on protein legislation has already begun to move forward; on Feb. 14, Sens. Hillary Clinton, D-N.Y., Charles Schumer, D-N.Y., and Rep. Henry Waxman, D-Calif., introduced the "Access to Life-Saving Medicine Act," legislation that would grant FDA authority to approve follow-on biologics.

Schumer suggested that the legislation could be combined with the reauthorization of the Prescription Drug User Fee Act.

During the Morgan Stanley meeting, Downey said that three companies - Barr, Teva and Novartis' generics subsidiary Sandoz - are positioned to be leaders in the follow-on biologics marketplace. All three companies have experience manufacturing complex compounds and marketing branded products, he explained.

During Novartis' Jan. 18 year-end earnings call, Sandoz CEO Andreas Rummelt said generic biologics are a priority for the unit in 2007.

Sandoz has already made some headway marketing biosimilars in the U.S.; the company received FDA approval under the 505(b)(2) pathway for its follow-on human growth hormone product Omnitrope (somatropin [rDNA origin]) in May, referencing Pfizer's Genotropin (3 (Also see "FDA Clears Omnitrope; Product Is Not The Process, But Nor Is It A Pathway" - Pink Sheet, 5 Jun, 2006.), p. 3).

In an effort to expand its follow-on biologics capabilities, Sandoz is working to increase the number of difficult-to-make generics in its product portfolio, Rummelt said.

"On the difficult-to-make, we are focusing on biosimilars," he said. "We are focusing on patches, inhalers and oral solids and the most focus this year was put on the inhalers, as asthma is a very increasing disease with higher morbidity and mortality rates."

In addition, Sandoz has "started a collaboration on dry powder inhalation, which is becoming more and more popular and we are also investing in development and manufacturing capabilities in this technology area."

Rummelt pointed to Sandoz's development of a special technology to facilitate production of its generic of AstraZeneca's Toprol-XL (metoprolol succinate extended-release) as an example of the firm's ability to produce complex generics.

One company that did not make Downey's short list, Mylan, recently announced that it is preparing for the advent of generic biologics.

During a Feb. 1 year-end earnings call, Mylan CEO Robert Coury indicated the change in power in Congress has spurred the company to develop a follow-on biologics strategy.

"I fully expect by the end of 2007, you will hear about a biologics strategy. ... I think we owe you that," he said.

"We're not waiting because we're very confident with the new balance in Congress that there is going to be some movement in some legislation and some push," he said.

While Coury expects support for legislation to pick up steam, he said that follow-on biologics are "still three to five years away."

For this reason, Mylan does not currently have plans to begin construction of a biologics manufacturing facility. "I certainly wouldn't go as far as building out a facility. I think we are way too premature for that," he said.

The establishment of a regulatory pathway for follow-on biologics is one of a number of pieces of legislation that would benefit generic firms, which could gain momentum with the change in control of Congress.

Sen. John Rockefeller, D-W.V., reintroduced legislation Jan. 30 to block the practice of authorized generics (4 'The Pink Sheet' Feb. 5, 2007, In Brief).

"The authorized generic bill is getting probably greater legs than we would have guessed six months ago," Teva's Barrett said.

"I think that's good news and it's the right thing," he said, cautioning that "obviously ... the stakes are really high and innovators fight in lots of different ways."

Similarly, Coury said Mylan is "extremely optimistic" about the prospects for congressional action on authorized generics, maintaining that such agreements are "a misuse, and even in our opinion, abuse of what was not meant to be when the original balance was brought into place" with the Hatch/Waxman act.

Coury said that generics companies' successful efforts to require inclusion of authorized generics in Medicaid best price for branded products are beginning to pay off; as of Jan.1, brand manufacturers are required to include authorized generics in best price calculation under the 2005 Deficit Reduction Act (5 , p. 24).

"I believe that [pharma companies] are starting to feel the real pain of the authorized generic now being included in best price. ... I am not going to say it is for every single product an opportunity, but for a lot of them," Coury said.

"It's really playing well to the generics, but again, we never said that the best price would be a total fix, we said it would be a deterrent," he added.

Although the generics industry stands to benefit from the passage of some legislation, there is at least one bill on Capitol Hill that they oppose, a proposed ban on "reverse" settlements between brand and generic drug manufacturers.

The "Preserve Access to Affordable Generics Act" (S 316), introduced by Sen. Herb Kohl, D-Wisc., would prohibit settlements involving payments to generic firms to, in effect, delay the launch of a generic. The bill passed the Senate Judiciary Committee Feb. 15 with unanimous consent and without amendments (see 6 (Also see "Brand/Generic Settlements Bill Clears Senate Cmte., Awaits Day On The Floor" - Pink Sheet, 19 Feb, 2007.) ).

Downey testified during a Senate Judiciary Committee hearing on reverse settlements in January, arguing that such a bill "will have very serious unintended consequences" (7 (Also see "Brand/Generic Settlement Reform Will Be Balancing Act For Congress" - Pink Sheet, 22 Jan, 2007.), p. 3).

Teva's Barrett said that "we'd certainly be concerned with legislation that too broadly restricts the terms of settlements because we think that settlements can be very, very pro-competitive."

In fact, Teva conducted an analysis of the settlements the company has entered into and determined that they've taken more than 50 years of patent life off products.

"We just want to make sure that we don't make it hard to bring generic products to market by creating a law just to restrict it," Barrett said.

Mylan Head of North American Operations Heather Bresch said that her company's position on reverse settlements "has been that if some of the other delay tactics were fixed in Congress, settlements would take care of themselves."

While Bresch said that for the authorized generics bill to pass, it will likely need to be attached to another piece of legislation, such as the Prescription Drug User Fee Act, she does not necessarily see the same happening with the reverse settlements bill.

"Attaching the authorized generic bill to another piece of legislation is how we see it ultimately prevailing in this Congress, but I don't know that I see it on the settlement bill as much as some of the other pieces of legislation," she said.

- Kathryn Phelps ([email protected])

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