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Should authorised generics be abolished?

The Hatch Waxman legislation is intended to strike a balance between encouraging innovation and affordable access to medication. In short, the Act offers a patent term restoration to compensate the innovator companies for the time lost during the regulatory review process and a 180 day exclusivity period as an incentive to generic companies for successfully challenging a Patent.

In the recent years, innovator companies have used authorized generics as a strategy to counter Paragraph IV challenges to their Orange Book listed patents. Authorized generics may provide for a market entry prior to patent expiry as well as may seize upon the 180-day exclusivity period granted to a successful Paragraph IV Litigant. This essentially  reduce the economic inventive to the generic applicant. The question that arises is whether authorized generics increase price competition and contribute to providing affordable medication or do they discourage generic firms from pursuing Paragraph IV challenges.

A Bill to amend the Federal Food, Drug, and Cosmetic Act to prohibit the marketing of authorized generic drugs was introduced in the House of Representatives on 15 January, 2009. The Amendment proposes to prohibit the marketing of authorized generic drugs.


While there may be no concrete evidence that authorized generics deter Paragraph IV challenges, there have been multiple concerns raised by opponents of the authorized generic system. 

Authorized generics may deprive generic competitors of their “first to market” status and hence discourage generic competition. Since the authorized generics are likely to enter the market before the Paragraph IV litigant, they can easily secure a definite market share, deterring the benefit to the 180-day exclusivity holder.

Authorized generic are often the innovator’s drugs approved under the original New Drug Application, with a generic label. This definitely seems to benefit the consumer, since the marketed product has the same size, shape, color i.e. same product experience. In such cases, will a physician be inclined to prescribe an authorized generic product as against a merely bioequivalent generic formulation?

Moreover, the advertising capabilities of the innovator company is most likely to be higher than the generic competitors which only causes further harm to generic competition. Innovator companies on the other hand have however argued that the authorized generics foster generic competition and benefit consumers by increasing price competition. Authorized generic undoubtedly present a regulatory advantage over other bioequivalent formulations. They clearly offer a consumer benefit, since the consumer is psychologically accustomed to the properties of the brand product.

However, a successful paragraph IV challenge may not guarantee complete exclusivity, but result in shared exclusivity, even absent any authorized generic. In such a scenario, how is the competition between two generics different from that between a generic and an authorized generic?
What do you think?  Should authorized generics be banned?
The major issue is to define an authorised generic in order to ban it.  Is it:
a) a product that is manufactured, registered and distributed by the innovator (or a generic division thereof) and only differs in the packaging
b) a product that is manufactured and registered by the innovator but distributed by a generic company,
c) a product that is manufactured by the innovator and supplied to the generic company who obtains its own registration and then distributes it, or
d) a product that is manufactured, registered and distributed by the generics company under license?
As you would know, each has an individual IP structure and it could be argued that the innovator at any stage would have the right to brand and price it's own authorised product however it chooses... can congress really change that?
 
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