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Can Generic Pharmas Use PGx Tools to Create Niche Products and Rouse Slumping Margins?

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Generic pharmaceutical companies hoping to eke out some extra revenue in an increasingly crowded market may soon be turning to pharmacogenomics technologies, according to several industry insiders.

In getting involved in this new area, generic drug makers will most likely seek to identify biomarkers and develop molecular diagnostics that would help them sell off-patent compounds at a premium. Marketing these so-called niche generics to physicians, generic pharmas will claim their version is safer and more efficacious in a certain population of patients.

However, these companies will likely face tremendous obstacles on their road to applying pharmacogenomics components: New and evolving regulatory requirements, archaic reimbursement issues, and stiff competition will play larger and more diversified roles in the developmental and marketing stages.

“It’s definitely something that people are talking about,” said Claire Allan, worldwide director of test development and applied pharmacogenomics at GlaxoSmithKline.

To be sure, the trend among generic companies to begin using pharmacogenomics technologies in their drug-development programs is likely to mature over several years, and is dependent on numerous disparate factors. In fact, the phenomenon is so new that the Generic Pharmaceutical Association hasn’t formally discussed it yet, according to Steve Bende, vice president of science, professional, and regulatory affairs at the industry organization.

An official at a pharmacogenomics technology provider said he has been approached by at least two generic drug shops to study the feasibility of developing a niche generic; a handful of generic pharmas contacted for this article opted not to comment.

Yet insiders agree that niche-based generics, which might also be called branded generics, may become one way in which generic pharmas become more competitive. “Anything that can help us gain an edge and help us stand apart from our competitors is great,” said one person in the industry.

The generic pharmaceutical industry has faced an economically imbalanced playing field that it hopes pharmacogenomics will help level.

First of all, the potential market is huge: Over the next three years, some $15 billion in annual drug sales in the United States will be up for grabs as branded drugs begin losing their market exclusivity.

And though more than half of all prescription products sold in the United States are made by the 60 or so generic pharmas nationwide, total annual sales amount to $14 billion. By comparison, branded drugs, which account for 49 percent of all prescriptions filled in the United States, generate $178 billion in revenues for their manufacturers, according to GPhA, which is based in Washington, DC.

Plus, generic drugs cost between 40 and 70 percent less than their branded predecessors. According to GPhA, the average price of a branded drug is $76.29, while an average generic counterpart costs $22.79. That number decreases each year as more and more competitors dive into the market with their own version of popular drugs.

As Morrie Ruffin, vice president of the Biotechnology Industry Organization, said recently: Generic pharmas are “in survival mode right now.”

Niche-targeted generics, then, represent a ticket for many generic pharmas to begin generating greater profit margins. “It is feasible to take … a product that has worked for the general population … and to refine the characteristics to eliminate patients who are non-responders or have unacceptable side effects,” Ken Kaitlin, director of the Tufts Center for the Study of Drug Development, told SNPtech Pharmacogenomics Reporter this week. “In theory, it’s definitely reasonable. But it’s one of those things where you have to wait and see whether anybody really comes around. This really makes sense.”

Overcoming Obstacles

Generic drug makers face many hurdles if they want to market niche knockoffs, and in many ways they will face the same challenges as their branded counterparts.

Besides a murky and evolving regulatory landscape, generic companies will likely have to deal with the innovators themselves, which may decide to re-launch their compounds in the same niche market when their patents expire.

In this case, innovator pharmas have an advantage not only because of their deeper pockets, but because they have 15 or 20 years of epidemiological data that may help them develop a pharmacogenomics game plan.

Of course, innovator pharmas may decide to shut down generic competition by launching over-the-counter versions of their products once they lose their patent exclusivity. Schering-Plough went this route when the patents ran out for its one-time allergy blockbuster Claritin.

Then there’s the FDA. Assuming that the agency settles on a definition of ‘biomarker’ and issues its final guidance on the submission of pharmacogenomics data, generic shops will also face a finicky prescribing class [see 3/4/04 SNPtech Pharmacogenomics Reporter]. “If physicians are aware that only certain patients are likely to respond to [a certain generic] product or are able to avoid side effects, then one would think that the physicians will be more likely to prescribe this over more general medicines that would work over broader populations, or those that some people wouldn’t respond to, or some [that] will [cause] adverse events,” said Kaitlin.

Jeff Moe, executive in residence and senior director of business development for the health sector management program at the Duke University Fuqua School of Business, agreed. For instance, if a generic pharma will use superior safety as a fulcrum in their marketing campaign, “the adverse event itself has got to be of a significant nature — high cost and high risk to the patient,” he said. “And [it has to be] clear that even though a patient has the polymorphism that it’s going to manifest itself in his phenotype. Then there’s got to be sufficient patient awareness — that they know what their own molecular underlying response to the drug is,” Moe said.

“I think that because the margins are so significantly lower for generic products, it’s hard for me to imagine that they would be able to do this on their own,” he added. “It’s kind of the same challenges that the branded folks have, but with smaller margins.”

Jerry Williamson, managing director of pharmacogenomics consultancy Beacon Biopartners and former president of Pyrosequencing, has identified two challenges that generic pharmas will almost certainly face if they seek the pharmacogenomics route: intellectual property rights and molecular diagnostics.

“I think it’s clear there are people and companies that would like to do this as a way to garnish higher value for their product offering,” he told SNPtech Pharmacogenomics Reporter this week. “I think this holds true of generics, and I think it holds true of major pharmas as their drugs are going off patent; I think there are people who are now starting to think, ‘Before this goes off patent, is there a way that we can extend our proprietary hold on this drug by introducing some pharmacogenomics” component.

“That’s the theory and that’s the hope,” he said. “If you take it to its practical application, it requires that you know of a diagnostic test that can be used specifically for that drug. And I think that’s the Holy Grail. Everybody in the industry is looking for pharmacogenomics assays that make sense.”

Williamson said this becomes difficult for generic pharma companies “unless you can stake out an intellectual property position. And that IP is likely to be around the test, and not around the drug, nor is it likely to be around the combination of the two,” said Williamson. “You have a generic drug that you are selling, and you want to keep others from competing in that area. Well, if you don’t have IP around that biomarker, then any other generic manufacturer can do the same thing you’re doing.”

Because of the low margins faced by generic pharma companies, and because these firms aren’t known for their enormous bank accounts, they may approach this challenge by penning R&D collaborations with molecular diagnostics companies.

For instance, “how do you get access to the two or three different markers that you need to bring together in order to develop the diagnostic assay that says that your drug is going to be more efficacious?” Williamson asked.

— KL

 

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