Pharmaceutical Company Strategy Blocks Generic Drug Makers

Jennifer Garcia

April 09, 2012

April 9, 2012 — Researchers have evaluated how current policy and physician-prescribing behavior allow pharmaceutical companies to maintain market share by the sequential launch of branded reformulations not shown to be superior to first-generation products.

Nicholas S. Downing, AB, a medical student at Yale University School of Medicine, New Haven, Connecticut, and colleagues used the marketing strategies of Abbott Laboratories, makers of branded fenofibrate, as an example. Abbott's products have dominated the market for the past decade, despite the existence of generic fenofibrate. Information based in part on data obtained under license from the National Prescription Audit (2002 - 2009) was used for the study, which was published online April 9 in the Archives of Internal Medicine.

Despite questions regarding the efficacy of fenofibrate in reducing cardiovascular risk, its use in the United States has continued to grow, and branded formulations of the drug produced by Abbott Laboratories have persisted in the US marketplace, leading to higher drug costs.

"Abbott's efforts to preserve the market share of its branded formulations of fenofibrate was legal. Thus, current policy could be seen as a factor that contributed to the continued used of branded fenofibrate," Downing said in an interview with Medscape Medical News.

"The implication for clinical practice is that clinicians should be encouraged to consider the cost of a drug, both to the patient and to the healthcare system, in their prescribing decisions. In the case of fenofibrate, more expensive branded formulations continued to be prescribed years after comparable generics became available. Had clinicians prescribed generic formulations as they became available, the healthcare system could have realized substantial savings," he continued.

Marketing and Production Strategy

The researchers discuss how Abbott's successful market dominance can be attributed to 2 factors. The first is the sequential launch of branded reformulations that differed subtly in dose and used only bioequivalence data in their new drug application (NDA) to demonstrate that the new dose had the same pharmacological properties as the original formulation. These reformulated products showed no improvement in surrogate markers or patient outcomes. The slightly different formulation also made substitution with older generic formulations impossible.

The second strategy employed by Abbott, note the study authors, involved taking advantage of current US Food and Drug Administration (FDA) policy. Once a generic drug maker filed an abbreviated NDA (ANDA) and challenged a patent used by Abbott for their branded fenofibrate product, Abbott would respond with a patent infringement lawsuit. By law, the FDA requires a 30-month delay before the approval of an ANDA to allow litigation to be resolved. The researchers discuss how Abbott would then use this time to produce and market their next-generation product before the generic version of the previous-generation drug could be approved. Lacking the extensive sales force of major pharmaceutical companies, generic drug makers could not compete.

Abbott Laboratories has been the target of multiple lawsuits as a result of this marketing strategy. A class action suit on behalf of all pharmacies and wholesalers that purchased branded fenofibrate products was filed in 2005 by the Louisiana Wholesale Drug Company, and various patients and states have also filed antitrust lawsuits against Abbott. All of these lawsuits were ultimately settled out of court and cost Abbott $300 million, a figure that amounts to less than 4% of total sales to date of their fibrate franchise, according to Downing and colleagues.

What May Prevent This From Happening Again

The study authors suggest changes to policy that may prevent this strategy from being used by other pharmaceutical companies, reserving market exclusivity for products that offer true innovations and improvements to patient outcomes. For example, the FDA can require that pharmaceutical companies settle pending lawsuits concerning the original drug before seeking NDA approval for the next-generation drug. In addition, the FDA can require that drug makers market their reformulations under different brand names in an effort to make the changes more transparent.

Patients and payers can also wield their power as customers to challenge premium drug costs and negotiate pricing. Although it would require careful consideration of bioequivalence criteria, modifications to generic substitution statutes would allow pharmacists to substitute generic medications at bioequivalent doses. The researchers note, however, that in addition to possible safety risks, these laws are set by the states and would require substantial legislative effort.

The researchers also discuss the role of physicians in recommending cost-effective care and note that physicians should be more proactive in researching changes to branded drugs, and whether they are superior to less costly generic formulations.

"No one forces prescribers to use brand-name drugs when generic equivalent alternatives are available," James Foody, MD, chairman of the pharmacy and therapeutics formulary committee at Northwestern Memorial Hospital in Chicago, Illinois, who was not involved in the study, told Medscape Medical News. "One would think that professional ethics oblige clinicians to rely on [evidence-based medicine] information, rather than to pretend that pharmaceutical marketing agents are disseminating unbiased information."

Dr. Foody concluded, "Abbott is not the only company to take advantage of deceptive, yet legal, practices to secure profits. The story emphasizes what should be obvious: In a free market economy, the primary purpose of all corporations is to maximize the profits of the shareholders. The question here is: How much responsibility do we in the healthcare provider community have to protect our patients' and society's interests in controlling cost?"

"Policy changes, such as permitting generic substitution of bioequivalent formulations of the same drug at different doses or tweaking the FDA approval process for branded reformulations, could potentially limit similar approaches in the future," said Downing. "However, we should remember that several other factors that cannot readily be shaped by policy, such as clinicians' prescribing habits and payors' formulary structure, played an important role in maintaining demand for branded fenofibrate."

Downing is supported by the Richard A. Moggio, MD, Student Research Fellowship, Yale University. One coauthor receives support from the National Institute on Aging and the American Federation for Aging Research through the Paul B. Beeson Career Development Award Program. One coauthor is supported by the College of Pharmacy of Western University of Health Sciences. One coauthor is supported by the National Heart, Lung, and Blood Institute. One coauthor serves on a scientific advisory board for FAIR Health Inc and is a recipient of a research grant from Medtronic Inc through Yale University. One coauthor chairs a cardiac scientific advisory board for UnitedHealth Group and is a recipient of a research grant from Medtronic Inc through Yale University. Dr. Foody has disclosed no relevant financial relationships.

Arch Intern Med. Published online April 9, 2012.

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