Animal Pharm Reports
Generics in the Animal Health Industry
Published May 2006
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CHAPTER 1 - GENERICS IN THE ANIMAL HEALTH INDUSTRY
1.1 Introduction
The research and development work of pharmaceutical companies represents a substantial cost factor that has to be recovered during the lifecycle of the drugs these companies bring to market. The cost of both the previous development of Commercialized drugs and speculative research that has not yet yielded any marketable products is reflected in the price of original drugs in the marketplace. This is the market niche for generic manufacturers, who do not have to consider substantial R&D costs – if any – and who therefore have the opportunity to market generic products at significantly lower prices than the originals.
The animal health industry has evolved based on the efforts of research-based companies, which is why attitudes to generics vary widely within the sector and few issues generate more controversy. For some, 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. Others see the generics industry as a ‘copy-cat’ trade, taking advantage of the costly R&D, marketing and brand-development carried out by other companies. But when patents for ivermectin, the veterinary industry’s most successful substance ever, ran out – if not before – virtually all of the established, research companies dropped their reservations and joined the ranks of those offering generic versions of this product in some parts of the world.
The era of modern pharmaceutical research dates back to the mid-20th century. The post-World War II 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 thrived because of the discovery of a few lucrative products, which acted as ‘cash cows’ with at times tremendous yields. Later 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 medicine field. Controls were swiftly introduced in developed countries in order 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 authorize 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 relatively small number of successful products they maintained made them 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. This upsurge of generics activity, was not anticipated by the established pharmaceutical companies.
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 the first high-profile antibiotics, in the form of tetracyclines, lost their exclusivity that generics achieved any degree of prominence. In the early 1960s, tetracyclines originating from Pfizer and Lederle (American Cyanamid) dominated both the human and the animal health markets in terms of value and had contributed to making the pharmaceutical divisions of these two companies world leaders. Suddenly, with the expiry of the relevant patents, generic companies were able to offer tetracyclines at prices considerably lower than those required by Pfizer or Lederle.
It is clear that the emergence of the generics industry was based on the opportunism of the generics suppliers. 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 success of a 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 attitude of the pharmaceutical industry towards generics is changing inasmuchas more and more research-based companies are overcoming their traditional resistance and acquiring access to generic drugs – often in collaboration with generics suppliers. This coincides with a tendency within the research-based industry sector to generate fewer and fewer novel products – mostly due to the increased costs involved. Generics companies have contributed a valuable and lucrative dimension which is as effective in meeting medicinal needs – especially those in Third World countries – as the so-called ‘ethical’ pharmaceutical manufacturers. The two areas are now increasingly 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.
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 effected a reduction in the number of new active substances being developed in the animal health sector. This, in turn, has contributed to the increasing importance of generics. Many of the world’s highest-selling products have lost their patent protection and are therefore the subjects to generic attack. The potential for generics manufacturers was boosted when the major patents of ivermectin expired globally.
In depressed or static markets where consumers are looking for value for money, or where many products are sold at inflated prices, generics usually have significant market shares. For example, in the traditionally high-priced market of Japan, generic formulations account for the majority of anti-infective 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 anti-infectives and/or antiparasitics. In contrast to that, South American countries – as well as Spain and Portugal – have traditionally been a haven for generics as a result of low levels of patent protection.
The generic product profile in any chosen sector may vary significantly in different countries. Such differences usually have historic reasons, with generic versions of a product being especially copious in countries where the originator had a strong position and the markets were well prepared. As an example, fenbendazole and albendazole have attracted most attention by generic producers in the UK in the wormer segment, while levamisole holds the leading position in this sector in the US. In the anti-infective sector, chlortetracycline products only play a minor role in the UK while they are dominating the total tetracycline segment in the US. Compared to that, oxytetracycline products are dominant in the UK, but not as numerous in the US as chlortetracycline.
As amendments in the regulatory environment on either side of the Atlantic are being introduced, the balance of power in the generics industry is now undergoing profound change. Leading figures in the generics industry in Europe and the US predict that the market will change significantly. It is also predicted that there will be a shift towards Europe, since ever more stringent controls are becoming an increasingly difficult pill to swallow for generic producers in the US, while tightening residue controls in Europe mean that the authorization system favours generic firms. In any case, numbers of generic producers are predicted to swell, either by R&D-based firms being put off by difficult authorization procedures, or by new companies jumping on the generics bandwagon as regulatory costs continue to fall.
1.2 Definitions
The term ‘generic’ when describing a pharmaceutical product refers to the technical term that is used for the molecular name of the active substance. In the industry, the term has traditionally 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 is the therapeutic equivalent of an originator pharmaceutical product whose patent has expired. It contains the same active substance as, is essentially similar to, and is therefore interchangeable with the originator product. A generic medicine is produced and marketed in compliance with international patent law. It is identified either by its scientific International Nonproprietary Name (INN) or, less frequently, by its own brand 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 EU Directive 2004/28/EC defines it as follows:
”A generic medicinal product shall mean a medicinal product which has the same qualitative and quantitative composition in active substances and the same pharmaceutical form as the reference medicinal product, and whose bioequivalence with the reference medicinal product has been demonstrated by appropriate bioavailability studies.”
In a ruling on the validity of a generic product in December 1998, the European Court of Justice also included the aspects of safety and efficacy in its definition of a generic product:
“… 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.”
Basically, a true generic is a competing version of an off-patent brand that shows bioequivalence but usually offers a price benefit compared to 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 - sold under its molecular or generic name - 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 Recognized 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 INN for pharmaceutical substances was published. The cumulative list of INN now stands at some 8000 names and this number is growing every year by some 120-150 new INN. The WHO collaborates closely with INN experts and national nomenclature committees to select a single name of worldwide acceptability for each active substance that is to be marketed as a pharmaceutical. The INN Expert Group convened by WHO rejects any proposal that could result in a conflict with known trademarks. Selected names are published in a WHO periodical (“WHO Drug Information”) as proposed INNs and interested parties are given a period of four months to raise an objection to a proposed 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 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 authorization.
A veterinary medicine that results from innovative research usually has four names: a code name, under which initial research data is usually published; a chemical name describing the molecular structure; a generic name, usually equivalent to its INN; and a brand name bestowed upon it. The following table shows the various names of fenbendazole as an example:
Table 1.1: Example of the nomenclature of a veterinary drug
| Research Code | HOE 881V |
| Chemical Name | Methyl 5- (phenylthio)-2-benzimidazolecarbamate |
| Generic or molecular Name (usually equivalent to INN) | Fenbendazole |
| Brand Name | Panacur |
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.
Concerning the quality of generics, there is no evidence to suggest that legitimately authorized generic products are inferior in quality to their branded predecessors. Generic veterinary medicines are often the same as branded originals because they have passed 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 real complaints of inadequacy from the field for those products that have been brought to market through the correct channels in mature markets. Generics manufacturers know that consistently high-quality raw material produced in expertly-run factories (subject 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 research-based pharmaceutical companies buy in quality-assured material at excellent value prices to augment or replace their own production.
1.3 Company types
Concerning the manufacture of pharmaceutical products, ostensiblythere are two different company types in general terms: the ethical, research-based companies and the generic manufacturers. However, when taking a closer look at the situation in order to differentiate in more detail it quickly becomes apparent that the position is considerably more complex. 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. Ethical, 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 anti-infectives.
2. Generics formulators. They purchase active material, formulate their own generics, obtain marketing authorizations 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 110 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 has, historically, been highly profitable, but increasing competition is squeezing margins.
3. Manufacturers of generic bulk material. They provide raw, active material to other companies for processing. Many manufacturers in this sector supply both the human and veterinary pharmaceutical sectors. China and India are major sources of inexpensive bulk pharmaceutical substances. Generic substances exclusively used in the veterinary field have fewer production sources. Still, in order to be viable and profitable these need to be able to provide optimum volumes and to meet the technical standards required 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 to reduce costs or change their cost structure. Once the patent for that product expires, the manufacturing company – having the knowledge and necessary facilities – may be in the position 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, private-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, following the introduction of the European cascade principle this is not possible in the EU.
1.3.1 Industry representation
It is common practice for pharmaceutical manufacturers all over the world to organise themselves within animal health industry or umbrella associations, on national, regional and global levels. However, key functions in these organisations are often filled by personnel from ethical companies, acting in their interests. This was an unsatisfactory situation for some generic companies, so that specific alliances for the representation of veterinary generics manufacturers were established in various parts of the world. These alliances usually branched out of their counterparts in the human medicines field and usually liaise closely with them.
1.3.2 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 has been 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, about the need to promote a harmonized regulatory framework for the licensing of veterinary medicinal products in the EU. Today, the EGGVP represents around 80% of the generic industry in Europe and seeks to ensure that any proposed legislative changes in the EU will provide further provisions to support the development and authorization of generic medicines for use in animals.
The EGGVP 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 in the human medicines field, EGA. Member companies are located in numerous European countries, but may also include those outside the EU that have an interest in this market. The EGGVP 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).
Following its foundation, one of the first tasks the group set itself was to make an impact on the discussions surrounding the new European Directive 2001/82/EC as amended with Directive 2004/28/EC. The EGGVP sees this Directive – which is coming into force from November 2005 onwards across the various Member States – as a positive sign for generic producers as well as for the general public, although it did not quite achieve its initial objective in relation to Harmonized data protection periods. Still, the group believes that the Directive may lead to a greater availability of generic products. While the approval process for generics is less stringent under the new Directive, the procedure for gaining marketing authorizations are stricter than before, placing a much heavier emphasis on the importance of safety and efficacy. This means that it will be more difficult for novel substances to pass through the process of gaining marketing authorization.
1.3.3 The US 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 its human counterpart, the expected conflict was not seen to any great extent. 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, when the FDA’s Center for Veterinary Medicine (CVM) took on additional personnel following extensive lobbying by the Alliance, 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 traditional representative body for research-based pharmaceutical manufacturers.
The basic tasks of the Alliance are communication and representation. It 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. Furthermore, it represents the interests of the generic animal drug industry before the FDA and other relevant regulatory bodies. The Alliance comments on the FDA’s proposed implementation of GADPTRA, regulations, policies, guidelines and guidances. It also monitors the generic animal drug approval process within the CVM.
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 Harmonization (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 Recognizes 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, where customised prescription medications are prepared 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. A common example of an ingredient involved in this practice is ivermectin. The Alliance is leading a coalition of animal health groups to work in partnership with the FDA in fighting illegal compounding of versions of FDA-approved veterinary products.
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