Regulated markets in the US and Europe offer an attractive option for generics companies from emerging markets. However, accessing these is neither quick nor straightforward...

The world generic pharmaceuticals market was estimated at US$84 billion in 2006, growing at approximately 10% per annum1 and in 2007 the 10 leading generic pharmaceutical markets accounted for an estimated US$69.8 billion.1 The US is the largest single market and accounts for approximately US$29 billion, while the major markets in Germany and the UK account for approximately US$21.5 billion.2 The US and European regulated markets for generic drugs offer an attractive strategic option for generic pharmaceutical companies in emerging markets such as Asia, the Middle East, North Africa and South America seeking to grow their businesses.

Generic pharmaceutical companies have traditionally entered regulated markets as suppliers of APIs to already established generic businesses. The established company assumes responsibility for the 'finishing' activities such as the production of the finished dosage form, packaging and regulatory submissions, through to marketing and distribution of the finished product. The API often only accounts for a fraction of the price of the finished product, limiting the value accessible through this route. However, greater penetration of generic companies from emerging into regulated markets is underway, with companies aiming to capture an increased portion of the value chain by enhancing their capabilities and taking on more of the 'finishing' tasks themselves. Accessing these new territories is neither a quick nor straightforward route to growth and the companies that pursue this path face a number of hurdles before their ambitions can be realized. Several barriers to entry — particularly regulatory, intellectual property and marketing — can restrict their progress. As companies develop a number of strategies to overcome these, additional obstacles have emerged.

Regulatory

Before a company can market a generic pharmaceutical product in the US, it must first obtain marketing authorization from FDA via the Office of Generic Drugs (OGD). These applications, known as Abbreviated New Drug Applications (ANDAs), are submitted according to one of four possible certifications related to the patent status of the product of interest. Data from OGD indicate that the average time for ANDA approval was 16.6 months in 20063 and that it took slightly more than 20 months for OGD to review each application.3,4 The process takes time because of several factors, including the high number of applications received by OGD (almost 800 in 2006)5 combined with the multiple review cycles that are often required prior to final approval. Based on FDA statistics from all generic applications in 2001 and 2002, 93% of generic drug applications are not approved in the first cycle of review and 66% are not approved even after the second cycle of review.4 Delays in approval can be costly for generic companies that are usually aiming to meet patent expiry timelines in competition with other players. This is particularly important in the US as the first generics company to successfully file a challenge to a big pharma drug patent can gain a 180-day market exclusivity period. Figure 1 illustrates the lengthy, albeit declining, ANDA approval time.3

The state of Europe

The situation in Europe could be considered even more onerous as the authorization procedure has traditionally been less harmonized than the US. The European Medicines Agency (EMEA) enables pharmaceutical companies to have their products licensed for sale in all EU countries through the Mutual Recognition Procedure. In this instance, the company submits a request for marketing authorization to one of the member states. The decision is then considered, adopted and recognized by the concerned member states. The complexity in Europe arises from the fact that, historically, individual countries have worked to their own national provisions, which often means that what may be acceptable in one member state is not allowed in another. Legislation aimed at reducing this complexity came into effect in November 2005 and created a harmonized EU 8-year data exclusivity provision, with an additional 2-year market exclusivity extendible by 1 year for new indications.6 This means marketing authorizations can be submitted by generics companies after 8 years, but products may not marketed until after 10–11 years. This is harmonized throughout the EU, as shown in Figure 2.

Refining processes

To overcome these hurdles and facilitate progress through the prevailing regulatory procedures, generics companies from the emerging market have developed and refined their operational processes. This includes, in some instances, acquiring companies and establishing approved manufacturing sites in regulated territories, as listed in Table 1. Ensuring adequate product development is performed prior to submitting applications, providing prompt feedback and addressing any additional information requirements from regulators is central to an efficient regulatory procedure. Early communication with regulators is critical as companies seek to identify and resolve any issues in the regulatory process as soon as they arise.

Intellectual property

Pharmaceutical companies also face intellectual property barriers in regulated markets. Big Pharma implements life cycle management strategies, underpinned by strengthening, extending and defending patent estates. It often builds layers of protection by obtaining separate patents on multiple attributes of a single product, which is a strategy known as 'evergreening'.6 The filing of additional patents makes it more difficult for a generics company to make a case for noninfringement or invalidity when for marketing authorization. In addition, many big pharma companies extend their patent protection by applying for patent term restoration (applicable in the US) and supplementary protection (applicable in Europe). This tactic is an attempt to extend patent protection beyond the expected period. It is based on the patent filing date, and was introduced by regulators to compensate big pharma companies for the marketing time 'lost' during the regulatory review process. Patent term restoration and supplementary protection can delay market entry for generics companies, which need to be aware of any such provisions when formulating their launch plans.

When generics companies attempt to enter the US market ahead of patent expiry, certified ANDA applications will likely be challenged by big pharma companies, which usually undertake patent litigation to defend the validity of existing patents. Generics companies must be prepared (and able) to fight any such costly litigation when pursuing ANDAs. On the other hand, generics companies can challenge unreasonable ring fencing of patents. High-profile cases include challenges by Ranbaxy Laboratories (India) on Pfizer’s (NY, USA) anticholesterol drug, Lipitor and GlaxoSmithKline's (UK) antibiotic, Ceftin; and challenges by Dr Reddy's Laboratories (India) on Eli Lilly’s (IN, USA) antidepressant, Prozac.

More recently, rather than entering litigation proceedings, some generics companies have entered into strategic deals with Big Pharma to sell blockbuster drugs when they go off patent. One example is Dr Reddy's who, in 2006, entered into a deal with Merck (NJ, USA) for the launch of generic versions of the blockbuster drugs Zocor and Proscar, providing the company with 180-day market exclusivity for the generic versions. Additional complexity for generic companies in overcoming patent barriers lies in the fact that outstanding patent terms often vary between the US and Europe, and within Europe on a country-by-country basis.

Marketing barriers

Conclusion

References

Elizabeth Hill is Head of Transaction Support for Cambridge Consultants Ltd (UK).