February 16, 2018

Big Pharma's Drug War: Innovative vs. Generic and Biosimilar Drugs

Big Pharma’s Drug War: Innovative vs. Generic and Biosimilar Drugs

By Wayne Schnarr

When I started my job in 1989 as a lobbyist for the Canadian generic drug industry, I thought that my job would be accumulating and organizing facts in a logical manner to present to consumer groups, governments and provincial healthcare commissions about the benefits of generic drugs and the Canadian industry. I was quickly immersed in an ongoing war, still with no end in sight, based not on science and healthcare needs but on fake news (maybe a little strong but at least biased and misleading), politics and profits. What an eye-opening learning experience!

A little history

The pharmaceutical industry of the 1950s was based on branded formulations of a small number of active ingredients. Each formulation was marketed as distinct and better in some way – there were no generics sold as equivalent to a brand product. The industry evolved as science and medicine evolved with new understandings about diseases, new targets, new drugs and the emergence of the blockbuster business model in the early 1980s.

A key piece of U.S. legislation was the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Amendments. These amendments were intended to balance, and I emphasize balance, patent protection and a period of marketing exclusivity to enable brand companies to recoup their development costs with the rapid availability of lower priced generic versions of innovator drugs once the statutory patent protection and marketing exclusivity had expired. In 1984, there were very few biologics (vaccines, blood products, insulin, human growth hormone) and these rules were never meant to apply to biologics.

What is the basis for approval of generic drugs?

Virtually all small molecule active ingredients can be manufactured by numerous companies worldwide, and the chemical equivalence of these active pharmaceutical ingredients (APIs) can easily be established. This doesn’t mean the APIs are identical; there can be differences in the synthesis which result in minor variations in the impurities although these impurities do not impact the safety or efficacy of the drugs made from the APIs.

A generic drug must be bioequivalent to be interchangeable with the brand and other generic equivalents. This is usually easy for injectable drugs given either as bolus injections or through IV drips. For oral drugs, the bioequivalence must be shown over the period the drug is meant to be effective, usually 6, 8, 12 or 24 hours. As with the APIs, bioequivalent drugs are not identical as there may be differences in excipients (non-active ingredients), size, shape and colour. The bioequivalence testing required for each drug might require dosing over several days or dosing under both fed and fasting conditions. Unique bioequivalence testing only applies to a very small number of drugs with a narrow therapeutic index (difference between minimum effective dose and the onset of toxic effects).

In simple terms, the same amount of the same chemical in the blood will have the same therapeutic benefit – bioequivalence.

The physician, the pharmacist, the drug benefit plans and generic drugs

The physician decides which drug will be prescribed and will write the name of the drug, either the brand or generic name, and dosing information on the prescription. Brand companies encourage the use of the brand name. Many years ago, some brand companies handed out prescription pads printed with ‘Do Not Substitute.’

The pharmacist will stock the brand drug and usually only one bioequivalent generic of each brand drug. There is obviously going to be competition between generic drug companies to be that one generic on the shelf. Pharmacists or the buying groups for the large pharmacy chains will not generally buy all their generic drugs from one company.

There are generally three groups of payers for prescription drugs – provincial drug plans for seniors and welfare recipients (Medicare and Medicaid in the U.S.), private insurance or benefits managers, and direct-pay by individuals. Most drug plans have some variation on mandatory generic substitution or lowest available price.

This is a war because of the huge financial impact of losing market exclusivity on a blockbuster drug. Imagine the following scenario, a drug has:

Any action which can delay generic approval or market entry by days or weeks is worth tens of millions of dollars.

The entire argument can be boiled down to the following sentence of which each underlined section will be the subject of subsequent blog posts in this series: New drugs cost millions to billions of dollars to develop so the innovative pharma industry asks for guaranteed periods of market exclusivity, primarily through patents, and no controls on pricing to fund a continuous flow of new drugs for the healthcare system.

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