The generics market is seen as a potential solution to the industry’s drug pricing problem, with the segment benefiting greatly from FDA’s outspoken support. It is a very interesting time for the pharmaceutical market, and this is especially true in the US. Big Pharma has become politicised, with drug pricing and policy shifted into the centre of a national dialogue. Issues regarding the Affordable Care Act, children’s health coverage and the opioid crisis have culminated in a public outcry for transparency in drug development and, therefore, pricing.
Public pressure is on manufacturers to be able to justify launch prices with hard, evidence-based data, with third-party analysts being called in to determine whether the benefit of a drug justifies its cost.1 At the centre of the debate within the industry is whether or not such attention to pricing will thwart private equity investment and, therefore, innovation.
The last year was record breaking for the FDA, with the approval of more than 40 new medications.1 There has been a veritable boom in R&D, in which cell and gene therapies have actually reached the market, leading to many robust pipelines spread across the industry. However, with innovation and drug development comes patents and patent protection. This is another hot topic, and one that has reached the Supreme Court.1 At the heart of the debate is whether or not patents are fair or do they keep one drug in the hands of one company for too long? Do they delay innovation, especially within the biologic and biosimilar space?
Enter generics. Although FDA has not formerly entertained questions about drug pricing, this is an entirely different climate and one in which generics hold a particular kind of promise. If drug pricing is perceived as a key issue within the industry and reducing prices will quieten the storm — so to speak — then generics begin to hold a new kind of gravity. FDA Commissioner Scott Gottlieb issued a statement this January, responding to a report from the Government Accountability Office (GAO) in an update on the “FDA’s ongoing efforts to increase access to complex generic drugs.” The outcome of his response was an agreement with the GAO recommendation; FDA is actively working toward the accomplishment of the goal of doing whatever possible to push generics into the market.
In his statement, Gottlieb recounted what the agency has done to further push generics through the pipeline, as well as an explanation regarding why complex drugs are harder to formulate and are therefore less likely to wind up as generics — or to be “genericised,” as Gottlieb explained it. Complex generics are “cases where (sic) the drug involves a complex formulation or complex active ingredient. In other cases, the drug acts locally on tissue, such as an inhaled medicine that acts directly on the lung, or an eye drop that acts on the surface of the eye. In some cases, costly, branded drugs that are complex drugs have lost their exclusivity, but there is no generic competition,” he said. The bioequivalence of most generics is measured by how fast it reaches the blood; but, with complex formulations, this blood measure does not exist, thereby making it much more difficult to confirm whether or not a drug can be approved as a generic. “These challenges warrant specialised consideration by the agency. That’s why we’re looking for ways to maximise scientific and regulatory clarity with respect to complex generics,” he noted.2
Support and guidance
To propel generics further into the market, FDA reauthorised the Generic Drug User Fee Amendments in 2017 (GDUFA II), devoting resources to aid complex generic drug manufacturers. FDA also provides specialised advice to those looking to develop a generic through the pre-ANDA (Abbreviated New Drug Application) programme — this includes assistance to promote more complete submissions, promote a more effective review process, reduce the number of review cycles and facilitate approval.3 In addition, this FDA programme includes “regulatory science research” in which new ways of showing a complex generic is equivalent to the branded drug is a priority. This is heightened the facilitation of meetings regarding the regulatory expectations. FDA issued the following guidances on complex generics in 2017:
- Draft Guidance for Industry: ANDAs for Certain Highly Purified Synthetic Peptide Drug Products that Refer to Listed Drugs of rDNA Origin (October 2017)
- Draft Guidance for Industry: Formal Meetings between FDA and ANDA Applicants of Complex Products under GDUFA (October 2017)
- Draft Guidance for Industry: Determining Whether to Submit an ANDA or a 505(b)(2) Application (October 2017)
- Guidance for Industry: General Principles for Evaluating the Abuse Deterrence of Generic Solid Oral Opioid Drug Products (November 2017).2
To say that the US regulatory agency is advocating generics is an understatement. It has taken on the subject almost as a crusade, pledging allegiance to the development of generics and amplifying their potential as a solution to the national outcry on the current drug pricing debate. In the same statement, Gottleib concluded by reinforcing FDA’s position to propel generics as crucial to public health. “Our aim is to make sure that our policies and regulations — and our scientific and clinical standards — keep pace with the nature of these complex products, as well as the challenges we face in protecting consumers and promoting drug competition and access when it comes to generic medicines. Greater access to high quality generic drugs is key to giving us more ways to advance the public health,” he noted.2
Given the unlikely position that generics hold in the American health sector — that is, as exempt from the unpopular opinion that’s associated with branded pharma — it’s unsurprising that the area is poised for growth. FDA has not only encouraged the development of complex generics, promising that it will aid drug developers who try to do so, but has published a list of off-patent, off-exclusivity drugs with no generic counterpart.4 This is a signal for companies who are capable of doing so to dive into the space and increase competition in an attempt to drive down pricing, effectively taking the burden off patients and onto drug developers.
The US pharma market, along with Canada and Mexico, is currently the largest continental market in the world; the US alone captures 45% of that share, which was valued at $446 billion in 2016.5 From this, generics have slowly grown to represent more and more of this market share. In 2005, branded pharma represented 81% of drugs, whereas branded generics and unbranded generics comprised 10.1% and 8.8%, respectively. This figure has risen steadily during the last 10+ years. In 2016, brands represented 74.2% of prescription drug revenues in the US, whereas branded generics totalled 10.8% and unbranded generics rose to 15%, indicating the upward mobility of the trend.5
Generics have managed to capture a steadily increasing segment of the prescription drug market, typically thought of as reserved for branded pharma. According to “US Generic Drug Market Outlook 2018,” a report by RNCOS Business Consultancy Services, the US generics market is anticipated to grow at a CAGR of 11% during this year.6 The report, published in 2015, notes that the generics market was valued at $43.5 billion in 2013, and will show growth potential in a diverse range of therapeutic areas, including oncology, respiratory, thyroid and ulcers, as well as cholesterol disorders during the next several years.6
Judging by both the amount of pressure placed on the industry from FDA and government — not to mention the American public — it would be surprising if those numbers didn’t rise even more, especially during the next 5 years. According to research firm Evaluate Pharma, generics are in a position to steadily rise.7 In the firm’s “World Preview 2017, Outlook to 2022” report, generic worldwide prescription drug sales are expected to rise from $90 billion in 2018 to $112 billion in 2022, indicating steady growth in this key market segment.8 This has translated to an industry wide impact; the worldwide R&D spend by pharma and biotech companies will increase at a CAGR of 2.4% from 2016 through 2022, predicts Evaluate Pharma.7 It is apparent that investment in generics is included in this larger industry trend of an internal focus on new developments.
Generics are an upwardly mobile market in the US, one that will no doubt capture more and more of the market share as the years progress. Last year alone was record breaking for generics.8 The FDA approved 1027 generics as opposed to 813 in 2016.8 Of the more than one thousand, 843 were marked as full approvals, whereas 184 were deemed “tentative” approvals — meaning that they are scientifically ready for approval but patents or exclusivities on the brand-name drug have prevented a full approval.8 Approvals heated up particularly at the end of the year, perhaps indicating that progress towards their development reached fruition. In November 2017, 23 drugs were slated for tentative approval whereas 84 received full approval. In June 2017, 88 drugs reached full approval — the most out of any month that year, an indication that patents may have expired, whereas 12 were given tentative approval.8
Taking all of this into consideration, it seems very likely that this generic trend will continue. Depending on how the Supreme Court handles patent cases going forward, generics could pose more of an immediate threat to branded pharma than had been considered in the past. It’s up to each company to decide how they will go about dealing with generics, whether they want to attempt to block generics or join them has yet to be seen.
However, this segment, which has in the past been consistently a marginal amount of total prescription drug sales might be ready for a transition to becoming a more active, pivotal player in the total US pharma market overall.
- www.fda.gov/NewsEvents/Newsroom/ PressAnnouncements/ucm592629.htm.
- www.fda.gov/ForIndustry/UserFees/GenericDrugUserFees/ ucm568916.htm.
- www.fda.gov/downloads/Drugs/ResourcesForYou/ Consumers/BuyingUsingMedicineSafely/UnderstandingGenericDrugs/UCM564441.pdf.