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CHAPTER 1 - GENERICS IN THE ANIMAL HEALTH INDUSTRY
1.1 Introduction
The pharmaceutical industry, which is relatively young compared with other major industries, is driven by innovation and — very often — by the accidental discovery of drugs. However, the research and development work of pharmaceutical companies represent a substantial cost factor that has to be recovered during the lifetime of the drugs that these companies bring to market. The price of original drugs to the end-user reflects the cost of their expensive development as well as speculative research that has not yet yielded any marketable products. And this is the market niche for manufacturers of generic products, who do not have to consider substantial R&D costs and who therefore have the opportunity to market generic products at significantly lower prices than the originals.
Since the animal health industry traditionally evolved following the efforts of research-based companies, attitudes to generics vary widely within the industry and few issues generate more controversy. On the one hand, generic products are seen as a good long-term growth prospect for companies without sufficient resources to carry out extensive R&D, and as a way of ensuring plentiful supplies of low-cost medicines. On the other hand, the generic industry is seen as a ‘copy-cat’ trade taking advantage of the costly R&D, marketing and brand-development carried out by other companies.
The term ‘generic’ remains debatable, with uncertainty as to whether lack of patent protection or lack of branding is the key feature. This report defines generics in the animal health industry context as veterinary products that have come off-patent, and can therefore be manufactured and marketed by second parties. The original developer of a product retains the brand name rights, while generics manufacturers market their versions under new brand or non-proprietary scientific names.
1.2 History of generic pharmaceuticals
The modern pharmaceutical era dates back to just after World War II, which stimulated the need for developing medicinal products for both humans and animals. The post-war environment saw the rapid growth of an extremely viable pharmaceutical industry and it became apparent that it could be sustained chiefly through the creation of new drugs and their continuing supply. Innovative manufacturers marketed their drugs with comfortable gross profit margins in the region of 60-70%. Successful companies were thriving because of the discovery of relatively few products, which acted as ‘cash cows’ with, at times, tremendous yields. This showed pharmaceutical producers who were not innovators that opportunities existed which they could exploit.
In the 1950s, many of the major pharmaceutical companies achieved more than half of their turnover from only one or two products. In order to defend its domain, the industry relied upon quality as a key factor. Since control measures on the efficacy and safety of drugs were rare and often inadequate, it was easy for the companies to persuade veterinarians to use only products emanating from the originators.
In early 1960, however, things changed. This change was caused by problems highlighted by the thalidomide episode in the human medicines field. Controls were swiftly introduced in developed countries to monitor and tighten registration requirements for drugs to be used in humans and subsequently also for those to be used in animals. Official bodies were set up in the US and Europe to authorise and license drugs on a far stricter basis than previously. This forced pharmaceutical companies to secure and maintain safety and efficacy for their products, a factor that increased the overall costs of their production process.
Pharmaceutical businesses were extremely affluent, yet the success of the industry and the relatively few products it maintained for this success made it extremely vulnerable. Inevitably, because the profit margins the sector enjoyed were extremely lucrative, the industry came under attack from other sources, attracting alternative producers of its successful products. The upsurge of generics activity, however, was not expected by the established pharmaceutical companies.
It is difficult to be precise about the exact emergence of a generics industry, but during the period of post-war industrial growth, the arrival of the first generics coincided with the loss of patent protection for some major drugs. In early 1960, tetracyclines originating from Pfizer and Lederle (American Cyanamid) dominated both the human and the animal health markets in terms of value. Tetracyclines had made the pharmaceutical divisions of these two companies world leaders and their positions seemed impregnable.
The companies that were first involved in generics only covered readily available substances which were easily obtained from a multitude of sources. It was only when high-profile antibiotics, in the form of tetracyclines, were targeted that generics achieved any degree of prominence. Suddenly, with the expiry of the relevant patents, generics companies were able to offer the tetracyclines at prices considerably lower than those required by Pfizer or Lederle.
Indisputably, the generics industry emerged because of generics suppliers’ opportunism. The high-profile research-based industry was vulnerable once its drugs were off-patent. Although inventions are legally protected, the period of patent exclusivity is finite, with plenty of notice given regarding its termination. This needs to be taken into consideration by the originators of a drug when setting up their marketing strategy. Since patent expiry and loss of exclusivity are inevitable, the best the originator of a pharmaceutical can do is to delay accessibility by whatever means possible. The successful pharmaceutical company and, ultimately, the whole industry, is dependent upon the creation and supply of new products. Trying to sustain the life of an ageing product can be less economically viable than promoting a new drug. If there are no new products available, or the new drugs are not able to replace the dramatic loss in revenue caused by patent expiry, however, then there may be no option but to fight for market share, if only to sustain confidence in the marketplace. Immediately the patent life ceases the price of the product, together with its profitability, will drop.
Today, the global pharmaceutical industry is just as focused against generics as it was about 40 years ago. It seems to be a paradox that generics are still seen as a separate entity. Generics companies have contributed another valuable and lucrative dimension which is as effective in meeting medicinal needs – especially those in Third World countries – as the so-called R&D-based pharmaceutical manufacturers. The two areas are now interdependent, not conflicting. The patent expiry of successful products has allowed a constant flow of available products to generics producers. While this flow continues, the generics sector will continue to grow. This contrasts with the research-based industry which has not been able to sustain a long-term interest in the supply of patent-expired products.
1.3 The generic age
Generic products gain greater prominence in the human medicines field as governments in various countries try to reduce their national healthcare bills. In order to encourage the introduction of less expensive medicines, many moves have been made to simplify the registration processes. This attitude has spilled over into the veterinary medicines sector, and today there are both locally and globally operating generics manufacturers selling large quantities of inexpensive, quality products. Many companies have entered the sector, especially in Asia, South America and Eastern Europe where production costs are lower.
Increasingly stringent registration requirements and subsequently mounting costs have caused a reduction in the number of new active ingredients being developed in the animal health sector. This, in turn, has contributed to the increasing importance of generics. Many of the world’s best-selling products have now lost their patent protection and must compete with generic products. The potential for generics manufacturers has been boosted over recent years by the continued expiry of patents of the single most successful veterinary product of all time, ivermectin, in most of its major markets. For instance, in the US patents for Ivomec injection and pour-on formulations ran out during 1999.
Generics usually have significant market shares especially in depressed or static markets where consumers are looking for value for money, or where many products are sold at inflated prices. For example in the traditionally high-priced country, Japan, generic formulations account for the majority of antibacterials product sales. While the markets in North America and Western Europe are dominated by multinational companies, an increasing number of smaller companies survive by marketing ranges that are based almost exclusively on generic antibacterials and/or antiparasitics. In contrast to that, South American countries have traditionally been a haven for generics as a result of low levels of patent protection.
It is difficult to describe in exact terms the generics market either globally or even nationally. Most companies belonging to the industry associations sell a mixture of branded and generic products and will make little or no differentiation when submitting information on their sales data to their association when national market figures are collated.
Many animal health products are open to significant generic competition. Tables 1.1 and 1.2 show selected off-patent substances in two product sectors in the UK and US.
Table 1.1: Product competition in the UK market (selected, off-patent products)
Note: includes combination products
Table 1.2: Product competition in the US market (selected, off-patent products)
| Product sector | Active substance | Number of companies | Number of products |
| Endo- & endectoparasiticides | Albendazole | 1 | 3 |
| | Febantel | 3 | 5 |
| | Fenbendazole | 2 | 12 |
| | Ivermectin | 8 | 30 |
| | Levamisole | 6 | 25 |
| | Oxfendazole | 2 | 7 |
| Antibacterials | Amoxycillin | 4 | 15 |
| | Benzylpenicillin | 18 | 35 |
| | Chlortetracycline | 29 | 56 |
| | Oxytetracycline | 20 | 47 |
| | Trimethoprim | 4 | 11 |
| | Tylosin | 31 | 81 |
Note: includes combination products
The tables demonstrate that the degree of generic competition varies between countries and sectors. For example, fenbendazole and albendazole have attracted most attention from generic producers in the UK where wormers are concerned, while levamisole holds the leading position in this sector in the US. Chlortetracycline products only play a minor role in the UK when compared with oxytetracycline products, while the latter are not as numerous in the US as the former. These differences are usually for historical reasons: generic versions of a product are more common where sales of the original patented product were high and the potential returns thus more attractive.
1.4 Definition of generic products
The term ‘generic’ when describing a pharmaceutical is based on the specialist expression for the molecular name of the active substance. Traditionally, the term has been used to differentiate a non-proprietary drug from the original, branded version. Several definitions of generic pharmaceuticals have been made over time, which usually all imply that the respective products are based on the same active ingredient(s) and that patent protection has expired.
The European Generic Medicines Association (EGA), which represents generics companies in the human pharmaceutical sector, defined generics as follows:
‘… a generic medicine contains the same active substance as, is essentially similar to, and is therefore interchangeable with, an original brand name medicinal product. A generic medicine is marketed in accordance with patent law and is identified either by its own brand name or by its internationally approved non-proprietary scientific name’.
In many countries, the term ‘generic drug’ has been legally defined as a copy of an original medicinal drug whereby production and marketing are made possible by the expiry of the patent covering the innovator product. For example the French Code de la Santé Publique described it as:
‘… a speciality which is essentially similar and presents the same qualitative and quantitative composition of active ingredients, and the same dosage form and bio-equivalence, as the original product’ (Décret 97-221, 13 March 1997).
The European Court of Justice came to a similar conclusion when ruling on the validity of a generic product in December 1998, also including the aspects of safety and efficacy:
‘… a product that satisfies the criteria of having the same qualitative and quantitative composition in terms of active principles, of having the same pharmaceutical form and of being bioequivalent, unless it is apparent in the light of scientific knowledge that it differs significantly from the original product in regards to safety or efficacy’.
Essentially, a generic product is a competing version of an off-patent brand that shows bioequivalence but usually offers a price benefit compared with the branded product. However, this definition becomes less clear where patent protected products have been licensed out by the originator companies prior to patent expiry. Within this definition the generic may be unbranded, where it is sold under its molecular or generic name only, or branded.
Today, generic names usually comply with the so-called INN (International Non-proprietary Name) system, which identifies pharmaceutical substances or active pharmaceutical ingredients. Each INN is a unique name that is globally recognised and is public property. The INN system as it exists today was initiated in 1950 by a World Health Assembly resolution and began operating in 1953, when the first list of INNs for pharmaceutical substances was published. The cumulative list of INNs now stands at some 7,000 names designated since that time, and this number is growing every year by some 120-150 new INN.
In general, the acceptance of a single definition of the term generics depends on the particular activity of interested parties. A company that has researched and marketed a novel compound nearing the end of its patented life will probably have a different view to that of a generics company waiting for the patent to expire. The fact remains that a generic animal health product must be marketed with due regard to patent law and must have passed through the correct procedures for its approval and marketing authorisation.
A veterinary medicine that results from innovative research usually has a code name, a chemical name, a generic name and a brand name bestowed upon it, as with the example in the following table.
Table 1.3: Example of the nomenclature of a veterinary drug
Source: Animal Pharm Reports
Code and chemical names are rarely used outside the R&D laboratory. Original research publications and trials tend to use the generic name, while the R&D company’s marketing department will do its best to establish the brand name.
1.5 The quality of generics
There is no evidence to suggest that legitimately authorised generic products are inferior in quality to their branded predecessors. Generic veterinary medicines are often the same as branded originals because they have been through a direct copy registration procedure. A generic is subjected to the same scrutiny as a branded product and there do not appear to be any significant complaints of inadequacy from the field for those products that have been brought to market through the correct channels.
Generics manufacturers know that consistently high-quality raw material produced in expertly-run factories (subjected to Good Manufacturing Practice (GMP), Good Laboratory Practice (GLP) and other official procedures) is the only way to get continuous business. Generics may be produced in the least expensive way, but the low prices do not necessarily mean low quality. In fact, many international pharmaceutical companies buy-in quality-assured material at low prices to augment or replace their own production.
1.6 Generic company types
There are two opposing camps concerning attitudes to generic drugs, the R&D-based companies and the generics manufacturers. However, it is worth having a closer look at the situation in order to differentiate in more detail. There are in fact up to seven different types of companies that are involved in the manufacture or trade of generic animal health products:
1. R&D-based companies. They may license-in generics to complete or supplement a range of branded products in a particular market sector. For instance, a company may decide that it needs a long acting oxytetracycline product to round off its range of antibacterials;
2. Generics formulators. They purchase active material, formulate their own generics, obtain marketing authorisations and market them on a local or global basis. Usually these companies are also involved in confidential manufacture for third parties. For example, the Northern Ireland-based company, Norbrook, carries out its own R&D. It produces Drug Master Files (DMF) for licensing and has worldwide marketing and distribution capabilities in over 100 countries. Often such companies try to bring added value to the original product with improvements such as a slow-release or long-acting formulation. This area appears to be quite profitable, but increasing competition is squeezing margins;
3. Manufacturers of generic bulk active material. They provide raw material to other companies for processing. Many bulk active substance manufacturers supply both the human and veterinary pharmaceutical sectors. China and India are major sources of inexpensive bulk pharmaceutical substances. Generics for animal use have fewer production sources, but these need to be able to provide optimum volumes using sophisticated technology to be profitable in Europe, the US and other parts of the world where regulations controlling quality and manufacturing standards are extremely demanding;
4. Contract manufacturers. They are sometimes used by R&D-based companies who want to outsource the production of their products because they may not have the dedicated facilities or personnel necessary. Once the patent for that product expires, the manufacturing company — having the knowledge and necessary facilities — may be in the position (unless the original contract prevents this) to produce its own generic version of the drug;
5. Generic product traders. They specialise in worldwide trading of chemicals and pharmaceuticals. Sourcing from selected manufacturers around the world, they keep up a steady, reliable and economically viable output that they can sell on to their customers;
6. Wholesalers/distributors/farm co-operatives. Being an established force in the distribution channel of veterinary products, these organisations may decide to add a range of own-label generics to bolster their profit margins;
7. Generic human pharmaceutical specialists. These companies are beginning to pay more attention to the animal health sector, where the legal context allows it. For instance in the US, it is possible to supply human generics to the animal health sector even when there is a licensed veterinary alternative. However, this is not permitted in the EU under the cascade principle (see section 3.2.4).
1.7 Generic representation
Over the decades, it has become common practice for pharmaceutical manufacturers all over the world to organise themselves into animal health associations on national, regional and global levels. However, key functions in these organisations are usually filled by personnel from R&D-based companies, acting for their interests. This may have been an unsatisfying situation for some generics companies, and industry associations that represent specifically veterinary generics manufacturers were established in various parts of the world. Alliances between animal health generics companies are often developed from contacts between their human pharmaceutical counterparts, with whom links are maintained.
1.7.1 The European Group for Generic Veterinary Products
The European Group for Generic Veterinary Products (EGGVP), was formed in London in September 2000, but since April 2002 it is based in Brussels, Belgium. The establishment of the group followed increasing concern, expressed by a number of European companies involved in the manufacture and distribution of generic veterinary medicines, of the need to promote a harmonised regulatory framework for the licensing of veterinary medicinal products in the EU. The EGGVP seeks to ensure that any proposed legislative changes in the EU will provide further provisions to support the development and authorisation of generic medicines for use in animals.
One of the first accomplished tasks of the EGGVP was an in-depth comment on the draft modification of Directive 2001/82 EC which was forwarded to the Commission. The EGGVP is recognised by the Commission as a legitimate lobbying group that should be consulted on proposed legislative changes. The group has also been invited by the European Agency for the Evaluation of Medicinal Products (EMEA) to become an ‘Interested Party’ at a level of its Committee for Veterinary Medicinal Products (CVMP).
In this context the group points out that Directive EC 2001/82 states (without actually using the term generic) three options concerning the application for a marketing authorisation for a generic veterinary drug. These are:
• Informed consent applications;
• Bibliographical applications based on the well established use of the active(s);
• Applications based on essential similarity to a reference product.
(see also Section 3.2 Registration in the EU)
The group is working with the industry, regulatory agencies and government bodies to highlight current difficulties experienced by applicants. It is also closely linked to its counterpart, EGA. Member companies are located in numerous European countries, but may also include those outside the EU that have an interest in this market.
1.7.2 The US Generic Animal Drug Alliance
In November 1988, two weeks after the enactment of the US Generic Animal Drug and Patent Term Restoration Act (GADPTRA), the Generic Pharmaceutical Industry Association (now Generic Pharmaceutical Association, GPhA) established the Animal Drug Alliance. The Alliance was formed in anticipation of the expected conflicts between brand and generics companies that would arise due to GADPTRA, as the human pharmaceutical industry had witnessed following the introduction of the Drug Price Competition and the Patent Restoration Act of 1984.
Although GADPTRA closely resembles the Drug Price Competition and Patent Restoration Act, which tackled similar issues in the human pharmaceutical industry, the expected conflict was not seen in any great scale. The main issues tackled by the Act were the loss of market exclusivity following the lengthy approval and registration procedures for new drugs and provision of an abbreviated product approval application for generic drugs based on previously approved products.
The Animal Drug Alliance began as an association of manufacturers and distributors of animal health products with interests in the generics veterinary medicine sector. Its comments on proposed FDA policies and procedures have helped to defend the generics industry’s interests by balancing the perspective between the needs of the generic and R&D product sectors. The Alliance remained part of GPhA, becoming an independent trade association in 1994.
Although the Alliance was not needed to settle the expected disputes, it still remained in operation to represent the generics industry and create a platform for communication between animal drug and animal agriculture groups. Bringing these two groups together enabled them to focus on mutual problems, resulting in the formation of the coalition responsible for securing the Animal Drug Availability Act of 1996.
One of the first successes of the Alliance was in 1989. Following extensive lobbying by the Alliance, the CVM took on additional personnel so that New Animal Drug Application (NADA) and Abbreviated New Animal Drug Application (ANADA) procedures could be executed more speedily.
Members of the Alliance include companies that manufacture and distribute brand name products developed through research, generics producers, and companies whose primary interest is in the manufacture and distribution of animal health products — including generics. Associate members include companies engaged in any other facet of the animal health industry, such as bulk drug suppliers and testing laboratories. Some Animal Drug Alliance members also belong to the US Animal Health Institute (AHI).
The Alliance claims that its benefits are many. Below are three examples:
1. Communication and information: the Washington office of the Alliance monitors the activities of regulatory and legislative bodies and provides information on topics of regulatory, legislative and business interest to member companies through regular newsletters and special mailings.
2. Representation: the Alliance represents the interests of the generics animal drug industry before the FDA and other relevant regulatory bodies. In so doing, it speaks with the strength of a coalition of companies on matters such as implementation of the law. The Alliance comments on the FDA’s proposed implementation of GADPTRA, regulations, policies, guidelines and guidance. It also monitors the generic animal drug approval process within the FDA’s CVM.
3. Experience: since its inception, the Alliance has established itself as the representative of the generics animal pharmaceutical industry and is recognised as such by the FDA and Congress.
There are several major areas of concern for the Alliance, the first of which is to determine the appropriateness of human drug manufacturing requirements for animal drugs. Although the Veterinary Medicines Advisory Committee has agreed with the Alliance that imposing the same set of standard GMP requirements for veterinary products is excessive in some areas, nothing has actually been changed in terms of regulations. This is not a problem for larger companies that manufacture both human and veterinary drugs, as it is easier to comply with a single set of standards, but it is seen as introducing unnecessary costs for veterinary-only companies. A second area of concern is the effect that the International Conference on Harmonisation (ICH) guidelines will have on the veterinary generics industry. ICH, and its equivalent in the animal health field, Veterinary ICH (VICH), aim to standardise the data requirements for the US, EU and Japan so that only one data set needs to be generated to file in any of the regions. The discussion has revolved around requirements for new drugs, but the introduction of manufacturing guidelines will also affect generics manufacturers. The human generics sector was naturally concerned and the FDA agreed to their input in ICH on the subject of quality guidelines. The Alliance recognises that this is also an issue for veterinary generics and will also have to push the FDA for a similar role in VICH.
However, one of the most pressing areas of concern in the US is animal drug compounding. This refers to the preparation of customised prescription medications by a pharmacy to meet individual patient needs. This is a legal practice where an appropriate veterinary drug is not available, for example canine cancer treatments. Unfortunately, there are a number of compounding houses that produce drugs that are essentially the same as FDA-approved products manufactured legitimately by animal health companies. Ivermectin has often been a core active ingredient in compounding. The Alliance is leading a coalition of animal health groups to work in partnership with the FDA to fight illegal compounding of versions of FDA-approved veterinary products.
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