Branded versus Generic Medicines | Dr.Bhumika Aggarwal Name: Dr.

Bhumika Aggarwal Student ID: 2224325 Project topic: Branded versus Generic Medicines: cost-saving and life-saving: A review of the difference

Faculty supervisor: Prof. Unni Course Name: Executive Program In International Business Institute: Indian Institute of Management Calcutta

Branded versus Generic Medicines | Dr.Bhumika Aggarwal

Literature Review

Databases searched: ssrn.com Search terms used: branded versus generic pharmaceuticals Total hits: 130 Relevant hits: 53

Introduction: Seven years after Novartis, a global pharmaceutical company filed for a patent for its drug glivec in India (Novartis 2006; Novartis 2012); the application was rejected by the Supreme Court of India under Section 3(d), introduced in April 2005 into the Indian patent law. This decision re-ignited the discussion about several issues: 1. Do patents obstruct the access of affordable healthcare to patients 2. Are patents and generics adversaries 3. Do global pharmaceutical majors use patents as life-cycle management tools. Medicines called generic medicines or generics are defined by the World Health Organization (WHO) as a pharmaceutical product, usually intended to be interchangeable with the innovator product, marketed after the expiry of patent or other exclusivity rights.

This paper aims to address the understanding of patents briefly, and whether court rulings as above promote or mar innovative companies from entering the developing countries / emerging markets like India. The paper is organized into 5 sections. The first section is the summary of the literature search and review from the ssrn.com database. The second section takes up some theoretical considerations for the strategies used by both branded companies and generic manufacturers with examples, an outline of the commonly used terms/ acts / laws with respect to generic medicines. The effect of entry of generics into the market and the current generics scenario globally are described in the third section. The fourth section presents a detailed debate about HIV/AIDS and the availability of branded versus generic medications. A discussion of the implications appears in the fifth and final section of the paper.

1.0 Literature search and summary 2

Branded versus Generic Medicines | Dr.Bhumika Aggarwal Branded companies invest millions and spend ten years on average to bring a new drug treatment to market. On the other hand, generic manufacturers focus on two critical factors to demonstrate the clinical bioequivalence to the innovator drug and to be the first to file their Abbreviated New Drug Application for regulatory review and approval. The market entry strategy employed by generic manufacturers are driven by two key factors: the competitive advantage and the competitive scope.

These factors then shape the cost leadership, differentiation and focus of the generic industry to segment the entry strategy in markets, the power of the buyer and the supplier, and the potential competition.

Branded versus Generic Medicines | Dr.Bhumika Aggarwal

Manufacturers of generic medicines simplified the treatment of several diseases in developing countries on a mass scale through provision of reasonably priced, quality-assured medicines. This is changing with implementation of the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and intellectual property measures being discussed in regional and bilateral free trade agreement negotiations. India once positioned as the pharmacy of the developing world, was obliged to modify its patent law to allow product patents on medicines to comply with the WTO Agreement on TRIPS. Now, there is a threat that the limited policy space that remains will be further constricted by bilateral or regional free trade agreements. The economic effect of generic versus patent drugs Depending on the side of the economic equilibrium, this entry of generics into the market can be a positive (for patients, medical organizations, governments) or negative (branded manufacturers) market development. Using the laws of economics, it can be concluded that with an increase in supply of generic drugs, the price of these drugs (and their branded counterparts) will lower.

Branded versus Generic Medicines | Dr.Bhumika Aggarwal

2.0 Strategies used by both branded companies and generic manufacturers 2.1 Approaches used by pharmaceutical companies to delay generic drugs. Patent Infringement Litigation: The patentee or licensee of the patentee sues other companies for e.g. a generic company that manufactures, imports, uses, sells, or offers for sale patented technology without permission/license from the patentee, during the term of the patent. This strategy used by the innovator pharma company can at time backfire. In 2010, Abbott Laboratories and Fournier Laboratories were sued by 24 states for filing patent infringement suits meant to prevent generic versions of Tricor, a cholesterol fighting drug, from reaching the market.

Branded versus Generic Medicines | Dr.Bhumika Aggarwal

Evergreening: Branded drug companies try methods to extend their drug patents by making improvements such as making different dosage formulations or new delivery methods to the original drug. India, Brazil, Thailand, and South Africa are the few countries with laws against evergreening. The Indian Patent Act, amended by the Patents (Amendment) Act 2005, states that drugs cannot be patented if they result from the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance. This has allowed the continued production of cheap generic versions of drugs by Indian companies. And this was the reason for the Supreme Court judgment on the Novartis case the molecule glivec did not show enhanced efficacy over the original imatinib and was only a minor modification of the original drug; granting a patent would mean declining generic companies from making and marketing the drug and hence its being available as an affordable and accessible medication to cancer patients.

Authorized Generics: Many drug companies license medicines going off-patent to another company or a subsidiary that will sell the drug as an authorized generic. These authorized generic agreements defeat the purpose of laws to allow lower priced drugs reaching the patients. e.g., Johnson & Johnson manufactures and supplies authorized generic versions of the attention deficit hyperactivity disorder (ADHD) drug Concerta to Watson Pharma, which distributes the authorized generic product in the United States. Watson Pharma also has an 6

Branded versus Generic Medicines | Dr.Bhumika Aggarwal agreement with Cephalon Inc. to sell the authorized generic version of Amtrix for the control of muscle spasms.

Pay for Delay: Also called as reverse payment arrangements, an innovator/ branded company will compensate a generic competitor company to delay introduction of its generic drug. This could also include incentives to make it attractive for a generic manufacturer to delay market entry, including allowing the generic company to sell in some markets without any legal challenge. e.g., Pfizer tied up with Ranbaxy Laboratories to keep it from introducing a generic version of Lipitor, its cholesterol fighting drug. 2.2 Strategies adopted by generic companies against the branded drugs: Six-Month Exclusivity for Generics: Under the Hatch-Waxman Act, generic manufacturers that are first to file and gain FDA approval for a generic are granted 180 days of market exclusivity, wherein no other generic competitors can enter the market. During this period, generic companies price their drugs as high as the branded drug. Prices begin to drop only after other generic competitors enter the market. Generics that entered the market with this exclusivity in 2010 included losartan, zolpidem, etc. Pediatric Exclusivity for Brands: of an additional six months beyond the existing marketing exclusivity and patent periods. To qualify for pediatric exclusivity, the manufacturer must submit study results that assess the safety and effectiveness of new drugs and biological products in pediatric patients." Generics Tend to Win Patent Challenges: Generic manufacturers willing to take on the risk and the expense of a court battle to challenge patent exclusivity generally win. 2.3 Two types of medicine patents exist: Process patent - only the process of manufacturing of the medicine can be patented. Advantage of a process patent: molecule itself is not patented and other companies can manufacture the same molecule using a different manufacturing process. In this case, competition keeps medicine prices low. 7

Branded versus Generic Medicines | Dr.Bhumika Aggarwal Product patent - the drug molecule is patented. Disadvantage: Increased patent protection for medicines are key features of new agreements and newer medicines, especially for diseases such as HIV/AIDS, tuberculosis and infectious diseases, resulting in them being more expensive (WTO, 1995).

2.4 Commonly used terms/ acts / laws with respect to generic medicines

The Waxman-Hatch Act (Drug Price Competition and Patent Term Restoration Act of 1984) eased the testing requirements for entry by generic drugs, accompanied by the expiration of patents on a large number of branded drugs is altering the competitive dynamics of the pharmaceutical market place. The act echoes the determination of policy makers to concurrently address issues of price control and technical progress. The 1984 Act: Increased returns to innovation by extending the period of patent protection to take into account the time between receipt of a patent and FDA approval of a drug for sale in the market. Reduced the testing requirements for approval of new generic brands of existing chemical entities, thus reducing entry barriers in markets where patents have expired (Frank et al 1995).

The Doha Declaration on the TRIPS Agreement and Public Health (2001) adopted by the WTO reaffirmed flexibility of TRIPS member states in circumventing patent rights for better access to essential medicines (Alsegard 2004; Scherer et al, 2002). Section 3(d) of the Indian patent law (2005): This section states that inventions that are mere "discovery" of a "new form" of a "known substance" and do not result in increased efficacy of that substance are not patentable. This implied that India did not support patents for inventions which were minor modifications and prevented undue monopoly during the extended period of patent protection by the company.

3.0 Effect of entry of generics into the market and the current generics scenario 3.1 Increasing share of the generics market in developed countries

Branded versus Generic Medicines | Dr.Bhumika Aggarwal

Possible reasons of increasing generics market share not only in the developing countries but also, in the developed world include: Loss of patents of drugs Some percent of patients not covered by insurance Generic drugs / medications approved by the regulatory bodies like the FDA / EMEA etc. as efficacious and safe as the branded versions of the medications Increasing price competition to the branded drug due to the presence of multiple generic versions of the drugs in the market

Branded versus Generic Medicines | Dr.Bhumika Aggarwal

Factors promoting the use of generics include: 1. Economic factorsa. support by government and private health sectors, b. Retail pricing mechanisms that favour use of generics and c. Reference pricing for reimbursement programs. 2. Supportive legislation and regulationa. Regulatory measures favouring generic prescribing and substitution and b. The requirement that labels and drug information contain generic names. 3. Public and professional acceptance and 4. Quality assurance (Kaplana et al, 2012)

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Branded versus Generic Medicines | Dr.Bhumika Aggarwal

The generics sector is fast growing, primarily driven by an increasing demand for cost effective medicines and availability of high value products. 3.3 India and the generics industry

India has more generic drug-manufacturing facilities approved by FDA than any country other than the US! India has developed a world-class generic drug manufacturing sector with major generics firms such as Cipla, Ranbaxy, Reddy's Laboratories, etc. in the absence of patent-law restraints before 2005 (Mdecins Sans Frontires, 2012). 11

Branded versus Generic Medicines | Dr.Bhumika Aggarwal With the introduction of patent laws in India, will patients around the world be at risk of losing the biggest source of accessible, affordable and lifesaving generic drugs. Fortunately, this plausible risk is minimal, due to the public health measures of the Indian government. Price controls on essential medicines (since 1970) and reports suggest that this list of drugs will be expanding. Patent coverage for pharmaceutical products will apply only to applications filed with the Indian Patent Office on or after January 1, 1995. Any Indian generics company that began to manufacture a drug before 2005, which was subsequently covered by an Indian patent, can continue to make and sell that drug, though it might have to pay royalties established by the government to the patent holder. Compulsory licensing - Generics firms can legally copy patented drugs for export to the least-developed countries, which lack domestic manufacturing capability (Mueller, 2007; Bhargava et al 2006). The loopholes: Neither the Indian patent statute nor its implementing rules define efficacy. They give the patent office no guidelines for applying the new test. TRIPS requires that patentable inventions be new and involve an inventive step. TRIPS does not define inventive step.

4.0 HIV/AIDS and the generics industry

Indian generics companies, supply 84% of the HIV/ AIDS drugs that Doctors without Borders uses to treat 60,000 patients in more than 30 countries (Mayer, 2005). India has emerged as a world leader in generic pharmaceuticals production, supplying 20% of the global market for generic medicines. Indian generic producers supply the majority of ARVs in developing countries (Reich, 2005).

Even today, the most of the people in low and middle income countries have been treated with generic medicines against HIV/AIDS produced by Indian generic manufacturers not constrained or hampered by patent and other intellectual property restrictions (Mdicins sans Frontires, 2006).

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Branded versus Generic Medicines | Dr.Bhumika Aggarwal

Till 2009, the FDA and WHO Prequalification Programme approved or pre-qualified 57 adult fixed-dose combinations and 31 paediatric anti- HIV/ AIDS tablets produced by Indian generic manufacturers but only eight adult fixed-dose combinations and 14 paediatric anti- HIV/ AIDS tablets produced by non-Indian and originator manufacturers (Waning et al, 2010).

This absence of intellectual property barriers additionally brought about the development of improved formulations of existing approved drugs, such as paediatric dosage forms and fixeddose combinations combining two or more medications against HIV/ AIDS into one tablet. This has kept the market share increasing for the generic medications through the years, with the aim to reduce the burden of diseases like HIV/ AIDS at affordable prices with accessible medicines (Waning et al, 2009). 13

Branded versus Generic Medicines | Dr.Bhumika Aggarwal

Generic competition acts as a catalyst for price reductions and the start of differential pricing programs. The fall in the price of first-line combinations of stavudine (d4T), lamivudine (3TC), and nevirapine (NVP) from over $20,000 in 2000 to $90 in 2010 and the start of multiple tiered pricing programs by large ARV manufacturers is attributed largely to generic competition by some authors. (Wilson P 2010).

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Branded versus Generic Medicines | Dr.Bhumika Aggarwal 5.0 Discussion and conclusions 5.1 The challenge today

Future scale up of the existing generic medications and development of generic forms of recently recommended medicines against diseases like HIV /AIDS and others in the developing (low and middle income countries) will possibly be hampered until the generic producers are able to provide the dramatic price reductions and improved formulations witnessed in the past.

The restraint on government spending has affected generics, with many countries lowering the prices of generic medications through cuts in reimbursement rates or contract tendering with a resultant curbing of margins for the generic manufacturer.

5.2 Why branded and generics could and should go hand-in-hand; the concept of coexistence 5.2.1 The burning question: Do patents / regulations discourage innovation:

Branded company innovates (value creation through breakthroughs)

Branded companies lose revenue and hence put in money to innovate more products

Branded vs Generics

Branded company gets patent

On patent expiry, generics enter market (value creation through competition

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Branded versus Generic Medicines | Dr.Bhumika Aggarwal 5.2.2 The advantages of generic medicines:

They usually cost a very less than the price of branded drugs, sometimes as much as 80% to 85% less. Generic drugs are under the same governance as branded drugs and must adhere to the same standards. When branded drugs go off patent, the market is opened up to generic versions. After a patent expires, pharmaceutical companies come under pricing pressure due to competition from their generic equivalents.

In last few years there has been a tendency towards alliance, both within the different players in the generics industry itself, and also between the generics industry and the branded / innovator dug companies. This has been a trend more because of necessity, reflecting both the difficult economic environment and the slowdown in development of innovative drugs. Branded companies are now taking an increased interest in the dynamic generics market as an aftermath of increasing revenues being spent on development of innovative products and at the other end the huge profits being generated from generics (http://www.reportlinker.com/ci02261/Generic-Drug.html).

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Branded versus Generic Medicines | Dr.Bhumika Aggarwal

5.3 Recommendations of this report: 1. Reliable quantitative estimates of the role of generics in the global drug supply are needed to understand potential effects of such measures on treatment of life-threatening diseases such as cancer and HIV/AIDS, especially in developing countries. 2. Differential Pricing: (also called tiered pricing) is the revision of product/ medicine prices on the basis of the purchasing power of consumers in different geographical or socio-economic segments. Differential pricing could be a very effective strategy To improve access to essential medicines in low and middle-income countries where most patients pay for medicines out-of-pocket and therefore cannot afford prices comparable to high income markets. Additionally, a well-executed differential pricing system can lead to incremental sales for the pharmaceutical manufacturers (Scherer, 2002; WHO Differential pricing report 2010). 3. Free trade agreements creating novel intellectual property commitments can not only increase drug prices and impede the development of acceptable dosage forms but also delay access to newer and better drugs for widely prevalent diseases. Such measures can challenge the international goal to achieve worldwide access to medications for diseases. 4. To be given marketing permission it be made mandatory that a generic product must demonstrate bioequivalence to a reference/ innovator/ branded / standard medicine. 5. Negative perceptions about the quality of generic medications need to be put to rest in a collaborative effort by stringent regulatory processes, ownership and accountability of the generic manufacturers and support from government sector. 6. Compulsory licensing: authorization permitting a third party to make, use, or sell a patented invention without the patent owners consent. Under TRIPS, the patent holder is forced to allow a local entity to produce the patented product in a number of circumstances such as in case of national emergencies and public health crises such as HIV/AIDS, tuberculosis and malaria etc., prior negotiation with the patent holder is not required for voluntary licensing. At WTO in 2003, members agreed that developing countries without manufacturing capacity could import generic variants of drugs under patent to address public health threats such as malaria, HIV/ AIDS, or tuberculosis. The agreement enables low-income countries to import generics from medium-income

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Branded versus Generic Medicines | Dr.Bhumika Aggarwal countries rather than being forced to set up domestic production to have access to medicines (Danzon 2003, Hellenstein 2004). 7. India and its trade partners, along with international organizations, donors, national governments, civil society and pharmaceutical manufacturers should ensure that there is sufficient support and understanding for the generic industry to continue its pivotal role in supplying developing countries/ emerging markets with accessible, affordable, quality generic medicines rather than agreeing to inappropriate intellectual property obligations.

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Branded versus Generic Medicines | Dr.Bhumika Aggarwal References: Alsegrd E. Global pharmaceutical patents after the Doha Declaration What lies in the future. Script-ed. Volume 1, Issue 1, March 2004 (Accessed at http://ssrn.com/abstract=1137545) Bhargava A, Srinivasan S. Price regulation of essential medicines. The Hindu. October 17, 2006. (Accessed at http://www.thehindu.com/2006/10/17/stories/2006101702601000.htm.)

Danzon, P. M and A Towse (2003) "Differential Pricing for Pharmaceuticals: Reconciling Access, R&D, and Patents." International Journal of Health Care Finance and Economics, 3: 183-205, 2003.

European generics association (http://www.egagenerics.com) 2002.

Frank RG, Salkever DS. Working Paper 5306, Generic Entry and the Pricing of pharmaceuticals NATIONAL BUREAU OF ECONOMIC RESEARCH October 1995

Hellerstein R. (2004). Do Pharmaceutical Firms Price Discriminate Across Rich and Poor Countries? Evidence from Antiretroviral Drug Prices. Research Report Federal Reserve Bank of New York

IMS Health, National prescription audit, Dec 2010

IMS market prognosis, 2011

Kaplana WA, Ritz LS, Vitello M, Veronika J. Wirtz VJ. Policies to promote use of generic medicines in low and middle income countries: A review of published literature, 20002010. Health Policy 106 (2012) 211 224

Mayer KH, Pizer HP. The AIDS pandemic: impact on science and society. Academic Press, 2005. p 325.

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Branded versus Generic Medicines | Dr.Bhumika Aggarwal Mdicins sans Frontires, September 26, 2006. (Accessed at http://www.doctorswithoutborders.org/pr/2006/09-26-2006_1.cfm.)

Mdecins Sans Frontires. Q&A: patents in India and the Novartis case. February 2012. www.doctorswithoutborders.org/publications/article.cfm?id=5769&cat=briefing-documents. Mueller JM. Taking TRIPS to India Novartis, Patent Law, and Access to Medicines. N Engl J Med 2007; 356:541-543.

Novartis: writ petition against denial of Gleevec patient. Affidavit filed on behalf of the petitioner: Novartis AG v. Union of India et al., W.P. No. 24754 of 2006 (Mad. High Ct.) (May 19, 2006). (Accessed at http://www.lawyerscollective.org/.)

Novartis. Glivec patent case in India: fact vs fiction. 2012 www.novartis.com/downloads/newsroom/glivec-informationcenter/Fact_vs_fiction_of_Glivec_India_Case.pdf. Reich MR, Bery P. Expanding global access to ARVs: the challenges of prices and patents. In Scherer F. M. and Watal J. 2002. "Post-TRIPS Options for Access to Patented Medicines in Developing Nations." Journal of International Economic Law 5(4): 913-939

The 2010-11 Economic Report on Pharmaceutical Wholesalers (http://www.pennbrokeconsulting.com)

Waning B, Kaplan W, King AC, Lawrence DA, Leufkens HG, Fox MP. 2009. Analysis of Global Strategies to Reduce Prices of Antiretroviral Medicines: Evidence from a Transactional Database. Bulleting of the World Health Organization 2009;87(7):520-528.

Watal, Jayashree (2000): "Pharmaceutical Patents, Prices and Welfare Losses: A Simulation Study of Policy Options for India under the WTO TRIPS Agreement", The World Economy, Vol. 23, No. 5, May, pp. 733-752.

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Branded versus Generic Medicines | Dr.Bhumika Aggarwal WHO report; Differential Pricing for Pharmaceuticals. Review of Current Knowledge, New Findings and Ideas for Action; http://apps.who.int/medicinedocs/en/m/abstract/Js18390en/ (2010; 57 pages)

World Trade Organization. Overview: the TRIPS agreement. January 1995. www.wto.org/english/tratop_e/trips_e/intel2_e.htm. Wilson P., 2010. Giving developing countries the best shot: An overview of vaccine access and R&D, Mdecins Sans Frontires, Technical Report, April 2010

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