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A DSN Special Report February 2016 The Business of Retail Pharmacy

Generic Drug Report 2016

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Table of Contents

Demand for generics strong, fueling steady growth in market share

News: GPhA briefs Congress on generics sav-ings; Practitioners want lower drug prices, but only 3% expect it; Biosimilars Forum launches access, awareness initiative and education guides; Congressional oversight meeting looks at biosimilars naming, reimbursement

Pipeline: Impact of patent expiries on gene-rics unclear

Biosimilars: Expiring patents set stage for biosimilars

Q&A with GPhA’s Chip Davis: The state of generics

Quality Metrics: Manufacturers await FDA’s final guidance

Distribution: Taming the generic supply chain

Pricing: Amid hike fear, most generic prices drop

Prescribing: Researchers tout generic savings

February 2016

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Generics Report

GPhA briefs Congress on generics savings

4 • FEBRUARY 2016 DRUGSTORENEWS.COM

Practitioners want lower drug prices, but only 3% expect itDoctors, pharmacists and managed care

executives in the United States want lower drug prices for patients, greater pharmacy reimbursement and an expanded focus on patient-centered care. However, they were strongly pessimistic about whether these changes will happen, according to data compiled by InCrowd, a provider of real-time market intelligence to life sciences and healthcare firms.

“The discrepancy between what the in-dustry wants and what it thinks it will get is stark,” stated Diane Hayes, president of In-Crowd. “Over half of respondents expected

the exact opposite result of what they hoped to get — like wanting lower drug prices and expecting there would be no change at all.”

InCrowd asked members of its Crowd of 1.8 million clinicians, pharmacy staff and managed care providers about important changes and innovations they wanted to see

in the pharmaceutical industry in 2016 — and at the same time, what changes they re-alistically expected.

Drug price concerns were the overrid-ing theme of the microsurvey, with 45% of respondents wanting lower drug prices for patients. Yet, while 34% of respondents said they would like to see better price control and lower prices in 2016, only 3% predicted they would see such changes.

Better pharmacy reimbursement was iden-tified by 13% of respondents as a top issue in 2016, yet over half of respondents who

Continued on page 6

The Generic Pharmaceutical Association on Feb. 1 briefed Congress about the ways generic drugs and biosimilars can drive healthcare sav-ings, when following up on a Department of Health and Human Services issue brief.

“It is clear that generics are a long-term solu-tion to rising health costs,” GPhA president and CEO Chip Davis said. “That’s why it is puzzling that Congress chose to increase the Medicaid re-bate for generic drugs as part of the October 2015 budget agreement. This provision will add signif-icantly to generic manufacturers’ costs, making it much harder to produce generics across many therapeutic classes.”

Davis pointed out that an increased rebate has the potential to lower the number of generic competitors on the market, which could drive costs up by making beneficiaries rely on branded products.

GPhA suggested five ways that Congress can ensure high use of generics and a healthy amount of competition in the generics market:

• Make sure that the FDA is fully resourced and able to deal with its backlog of 3,800 generic drug applications and reduce the amount of time it takes for approvals to come through;

• Increase use of generics among low-income Medicare beneficiaries — which GPhA estimates could save $17.7 billion over 10 years;

• Pass the FAST Generics Act to avoid ma-

nipulation of risk evaluation and mitiga-tion strategies that can keep generics from coming to market;

• Work to create a framework for biosimi-lars that will improve patient access and approval time; and

• Repeal section 602 of the 2015 Bipartisan Budget Act.

“GPhA will continue to highlight the un-deniable role of generics in lowering health costs,” Davis said. “Together with Congress, the administration, regulators, stakeholders and others we can do more to ensure the generic pharmaceutical industry continues to enhance patient access and drive patient savings for years to come.”

Source: IMS Health, National Sales Perspectives, March 2015

Months since loss of exclusivity

n Oral medicines n All medicines

-100

-80

-60

-40

-20

0

0 12 24 36 48 60 72 84 96 108 120

Pric

e re

duct

ion

0%

-20

-40

-60

-80

-100%

MONTHLY PRICE REDUCTION AFTER LOSS OF EXCLUSIVITY

-51-57

-66 -66 -67

-77 -78 -80 -78 -77-66

-74-77 -78 -80 -80 -80 -81 -81 -81

“THE DISCREPANCY BETWEEN WHAT THE INDUSTRY WANTS AND WHAT IT THINKS IT WILL GET IS STARK.”

— Diane Hayes, presiDent, inCrowD

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Generics Report

The House Energy and Com-merce Committee convened on Feb. 4 to hold an oversight meet-ing about the Biologics Price Competition and Innovation Act of 2010, the first since President Barack Obama signed the legisla-tion paving the way for biosimi-lars in 2010.

Among the stakeholders in the enactment of the law is the Generic Pharmaceutical Associa-tion’s Biosimilars Council, whose members include companies that have developed or are developing biosimilar drugs. GPhA president and CEO Chip Davis commented on the hearings, noting the need for more straightforward naming conventions for biologics and bio-

similars and calling for price cal-culations that ensure sufficient re-imbursement from the Centers for Medicare and Medicaid Services.

“The Biosimilars Council, a di-vision of GPhA, is concerned that different international nonpro-prietary names for biologics and biosimilars could lead to patient and provider confusion, increas-ing the likelihood of prescrib-ing errors and other unintended consequences,” David said. “The council also urges [CMS] to pro-vide non-interchangeable biosimi-lars with a unique average sales price calculation and billing code, to ensure a competitive reimburse-ment. Additional clarity from cur-rently outstanding FDA guidances on interchangeability, extrapola-tion and labeling are each critical to the timely availability of bio-similars in the United States.”

Congressional oversight meeting looks at biosimilars naming, reimbursement

wanted this predicted either no change or lower reimbursement. Similarly, over half of respondents who wanted more patient-orient-ed care predicted either no change in this dimension, or, in fact, less patient-oriented care.

“The data show how the phar-ma industry is largely on the same page as consumers and regula-tory authorities when it comes to hot-button topics like drug prices, even if the data don’t point the way to an immediate resolution,” said Hayes. “Sometimes quantify-ing the size of the challenge is the first step to solving it.”

The three-minute microsurvey included 118 respondents — 52 physicians, 59 pharmacists and seven managed care professionals — fielded in December 2015, us-ing InCrowd’s real-time platform.

“THE BIOSIMILARS COUNCIL, A DIVISION OF GPHA, IS CONCERNED THAT DIFFERENT INTERNATIONAL NONPROPRIETARY NAMES FOR BIOLOGICS AND BIOSIMILARS COULD LEAD TO PATIENT AND PROVIDER CONFUSION, INCREASING THE LIKELIHOOD OF PRESCRIBING ERRORS AND OTHER UNINTENDED CONSEQUENCES.”

— Chip Davis, presiDent anD CeO, Gpha

Continued from page 4

PractitionersBiosimilars Forum launches access, awareness initiative and education guides

The Biosimilars Forum launched on Feb. 1 its new Part-nership for Biosimilars Education and Access. The new initiative is aimed at raising awareness of and increasing access to biosimilars, and its launch was accompanied by the release of two education guides for healthcare profession-als, patient advocacy groups and the media on the group’s website.

“We know that some of the most difficult diseases that af-flict people in the United States are best treated with biological medicines,” Biosimilars Forum president Juliana Reed said. “The introduction of biosimi-lars is anticipated to help drive lower cost burdens for the U.S. healthcare system. It will also help expand earlier, more con-sistent access to these important medicines for patients with can-cer, anemia, inflammatory bowel disease, multiple sclerosis, rheu-matoid arthritis, psoriasis and Crohn’s and other inflammatory bowel diseases.”

The first U.S. biosimilar, Zarxio (filgrastim-sndz) was approved by the FDA and was launched by Sandoz in 2015.

Zarxio was the first U.S. biosimilar that was approved by the FDA in 2015.

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http://biosimilarsforum.org/

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Generics Report

The Generic Pharmaceutical Association announced in Janu-ary that it had appointed Anna McDermott-Vitak to be the or-ganization’s VP corporate de-velopment and administration. McDermott-Vitak’s role will be overseeing GPhA’s membership, human resources, finance, IT and meetings.

“Anna will strengthen our ex-ternal engagement with current and prospective member orga-nizations,” GPhA president and CEO Chip Davis said. “Anna’s

vast experience will be valuable in efforts to enhance association operations, maximize our growth opportunities and help GPhA ad-dress the issues that matter most to stakeholders in the dynamic and rapidly growing generic drug and biosimilars markets.”

McDermott-Vitak, who was most recently Amgen’s executive director of global government af-fairs, has experience in product development, investor relations and government affairs, which she has acquired during her twen-

ty years in biotechnology.“I’m thrilled to be part of a team

that helps bring more affordable medicine to millions of patients,” McDermott-Vitak said. “At a time when health costs are under scru-tiny, this industry has a consistent record of generating billions in patient and health system savings while expanding access. I look forward to growing the voice of GPhA within and beyond the Belt-way while guiding the association through an exciting period of de-velopment and expansion.”

GPhA appoints VP corporate development

Camber launches generic CorgardCamber on Feb. 4 launched its generic version of

Corgard (nadolol) tablets. The drug is indicated to treat high blood pressure and chest pain.

Camber will offer its nadolol in 100-count bottles of 20-, 40- and 80-mg tablets.

Greenstone intros Detrol LA authorized genericGreenstone on Feb. 2 announced the introduc-

tion of its authorized generic of Detrol LA (tolterodine tartrate) extended-release capsules.

The drug is indicated to treat such symptoms of overactive bladder as incontinence or frequent uri-nation. The drug will be available in 2- and 4-mg capsules, each sold in 30- and 90-count bottles.

Dr. Reddy’s gets tentative approval for doxycyclineThe Food and Drug Administration on Feb. 1

gave tentative approval to Dr. Reddy’s Laboratories’ generic version of Zenavod (doxycycline) capsules.

The drug is intended to treat inflammatory lesions of rosacea in adults and will be available in 40-mg capsules once it is given final approval.

The approval is tentative due to an ongoing pat-ent infringement process under the Drug Price Competition and Patent Term Restoration Act, the company said. “We are pleased to receive a ten-tative FDA approval of Zenavod and will be work-ing with external parties and the FDA to gain a full approval,” Dr. Reddy’s CEO and co-chairman G.V. Prasad said.

FDA approves Aurobindo’s generic VfendThe Food and Drug Administration on Jan. 29

approved Aurobindo Pharma’s generic version of Vfend (voriconazole) tablets. The drug is indicated to treat fungal infections in adults and children 12 years of age and older.

The drug will be available in 50- and 200-mg dos-age strengths, and total sales of voriconazole tablets were $102.7 million for the 12 months ended No-vember 2015, according to IMS Health.

Aurobindo gets approval for generic ZemplarThe Food and Drug Administration has approved

Aurobindo Pharma’s generic Zemplar (paricalcitol) tablets, the company announced. The drug is indi-cated to treat and prevent secondary hyperparathy-roidism in patients with stage 3, 4 and 5 chronic kid-ney disease, as well as stage 5 patients on dialysis.

The drug will be available in 1-, 2- and 4-mcg dosage strengths. The drug had sales of $38.5 mil-lion for the 12 months ended November 2015, ac-cording to IMS Health.

Greenstone intros authorized Colestid genericPfizer subsidiary Greenstone announced in January

that it had introduced its authorized generic of Colestid (colestipol hydrochloride) granules for oral suspension.

The drug, which is indicated to treat high choles-terol, will be available in cartons containing 30 5-g foils, 90 5-g foils and in 500-g bottles that come with a scoop.

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Untitled-1 1 11/18/2015 10:55:16 AM

Demand for generics remains strong,fueling steady growth in market share


By Jim Frederick

Like a powerful tide that gradually eats away at the foundations of a once-impregna-ble sea wall, the booming market for generic drugs advances and recedes with the rise and fall in the number of branded drug pat-ent expirations each year. But their long-term growth momentum remains on course, mak-ing generics an implacable force chipping away at what’s left of the market domain held by traditionally derived, broadly focused blockbuster drugs.

The steady advance of me-too medicines continues, even in the face of year-over-year declines in the number of branded-drug pat-ent expirations since the peak of the “patent cliff” that hit Big Pharma in 2012 to 2013. “Blockbusters worth $35 billion [in annual sales] lost their patents in 2012 — the high point of the patent cliff,” noted CVS Health in a CVS Insights market trends report.

Since then, generics have maintained their upward march, impelled by cost-saving pres-sures among public and private health plan payers and patients, post-patent market com-petition, brand-to-generic substitution incen-tives by payers, and the continuing impact of expiring patents on traditional blockbuster medicines facing copycat competition for the first time.

In 2014, the most recent year for which full-year figures are available, “Patent expiry events resulted in a reduction in spending of $11.9 billion … mostly from the impact of the loss of exclusivity for Cymbalta in 2013 and Celebrex in 2014,” IMS Health reported. “Despite the lower level of expiry impact, the share of prescriptions dispensed as generics increased by 2% to 88% in 2014.”

That rise in market share will continue — albeit at a more modest pace than in the go-go years of the past decade. “Generics will con-tinue to dominate prescription drug usage in the United States, rising from 88% to 91% to 92% of all prescriptions dispensed by 2020,” noted Murray Aitken, executive director of

the IMS Institute for Healthcare Informatics.“Spending growth in the next five years

will differ from the last four, which included the largest patent expiry cluster ever in 2012 and the largest year for new medicines in 2014,” Aitken reported. “The impact of pat-ent expiries over the next five years, while higher in absolute dollars, will be lower in percentage contribution than the past five years — and no single year will reach the level of 2012.”

Older patients with chronic conditions that can be treated with post-patent multisource medicines are keeping the generic growth en-gine humming, said Doug Long, VP industry relations at IMS. “The primary drivers of the [prescription growth] forecast reside in older patients with chronic conditions treated with generic medications,” he reported. Indeed, 70% of all generic prescriptions dispensed in the United States “are for chronic conditions,” Long said, “and 65% are filled by patients 50 years old and older. This accounts for more than 41% of all prescriptions.”

Overall, the IMS Institute reported, “U.S. spending on medicines will reach $560 bil-lion to $590 billion in 2020, a 34% increase

in spending over 2015 on an invoice price basis. This growth will be driven by innova-tion, invoice price increases (offset by off-in-voice discounts and rebates) and the impact of loss of exclusivity.”

Not to be overlooked in the steady rise of generics is the role played by pharmacy ben-efit managers and health plan payers. CVS Health’s Caremark PBM, for instance, makes “continuous efforts to encourage plan mem-bers to use generic drugs when they are avail-able,” according to the company.

“We believe our generic dispensing rates will continue to increase in future periods, albeit, at a slower pace,” CVS reported. “This increase will be affected by, among other things, the number of new generic drug intro-ductions and our success at encouraging plan members to utilize generic drugs when they are available and clinically appropriate.”

Over the past decade, the generic jugger-naut — accompanied by the ascendancy of specialized and highly targeted large mol-ecule biotech medicines — has upended the traditional market for branded pharmaceuti-cals and shifted the balance of power. “As a result of patent expirations, generic competi-

Sales of unbranded generics by top 10 corporations

* In millionsSource: IMS Health, National Sales Perspectives, June 2015

MAT JUNE 2015

U.S. DOLLARS* % MARKET SHARE % GROWTH

U.S. INDUSTRY $66,189 16.6% 7.4%

Teva 8,862 13.4 12.8

Mylan Labs 7,157 10.8 2.5

Actavis US 5,323 8.0 -15.0

Sandoz (Novartis) 5,193 7.8 9.7

Sun Pharmaceutical 2,623 4.0 -14.4

Endo Pharmaceutical 2,187 3.3 42.4

Par Pharmaceutical 1,934 2.9 -5.0

Dr. Reddy’s 1,756 2.7 8.6

Lupin Pharmaceuticals 1,646 2.5 -0.6

Hospira 1,607 2.4 16.7

TOP 10 $38,288 57.8% 3.1%

010-014_GenericReport_2016.indd 10 2/11/16 2:29 PM


tion and a withering pipeline of broad-reach-ing drugs, manufacturers are shifting their drug discovery, development and pricing strategies,” said pharmacy benefit manage-ment giant Express Scripts in its most recent Drug Trend Report. “Now, manufacturers are increasing their focus on medications that treat small subsets of patients with diseases like cancer, or patients with rare diseases such as hereditary angioedema.”

“Manufacturers also are tailoring mo-lecular drugs to patients with specific ge-netic profiles known to be affected by certain diseases, so the drugs are more effective in treating those specific patients,” Express Scripts reported.

Trumpeting the cost savingsIt goes without saying that the primary

engine driving the rise in generics’ market share is the price differential between brand-ed and copycat medicines. Savings from generics reached an all-time high in 2014, according to the seventh annual “Generic Drug Savings in the United States” report, compiled on behalf of the Generic Pharma-ceutical Association by the IMS Institute for Healthcare Informatics.

“The 2015 report shows that generic drugs are an essential part of any solution to sus-taining our health system and are central to efforts that increase patient access and gen-erate savings for patients, taxpayers, em-

ployers, payers, providers and others,” said GPhA president and CEO Chip Davis. “Near-ly 3.8 billion of the total 4.3 billion prescrip-tions dispensed in the United States in 2014 were filled using generic drugs. Yet generic prescriptions account for only 28% of total drug spending.”

At press time, full-year figures for 2015 weren’t yet available. But in 2014, “generic drugs were responsible for $254 billion in health system savings … bringing the total savings over the last 10 years to $1.68 tril-lion,” GPhA reported. What’s more, the in-dustry group reported, “Newer generic drugs introduced within the last 10 years are mak-ing significant impacts on patient and health system savings.”

Newer generics make up 57% of savings, according to GPhA. “These newer generic

drugs also saved the health system $638 bil-lion of the most recent decade’s $1.68 tril-lion,” said Davis. “Older generics generated upward of $100 billion in health system sav-ings in 2014 and $1.05 trillion in savings in the last 10 years.”

The biggest cost-saving impact, said an industry report, is “in therapy areas that ad-dress mental health conditions ($38.0 billion), treat hypertension ($27.9 billion), or help manage or lower cholesterol levels ($26.8 bil-lion). Rounding out the top 10, therapy area savings are accrued in pain medicines ($22.8 billion), anti-ulcerants ($19.2 billion), nervous system disorders ($15.6 billion), anti-nause-ants for cancer ($11.6 billion), anti-bacterials ($11.3 billion), other central nervous system disorders ($9.4 billion) and attention deficit hyperactivity therapies ($8.2 billion).”

The crucial role that these cost savings play in areas like improving patient medication adherhence can hardly be overstated. “Pa-tients’ rising exposure to costs, when not us-ing generics, puts them at risk for worse ad-herence,” said Long of IMS Health.

According to CVS Health, 91% of patients surveyed by the pharmacy and PBM giant “said having cost-effective alternatives to more expensive therapies improves medica-tion adherence.”

For drug retailers, the rise in generic dis-pensing remains a double-edged sword, be-stowing both benefits and challenges. All pharmacy operators and pharmacy benefit managers are constantly adjusting the deli-cate balance between the higher margins of-fered by me-too meds and the lower topline sales they bring.

The dramatic price hikes put through by some generic manufacturers in recent years added another layer of complexity to that balancing act.

In a recent report on its financial perfor-mance, CVS Health underscored the tug of war between profit margins and sales vol-umes. On the one hand, CVS reported, “the increase in our generic dispensing rates in both of our operating segments continued to have an adverse effect on net revenue in 2014 as compared to 2013, as well as in 2013 as compared to 2012.” However, the com-pany added, “our gross profit continued to

Prescriptions of unbranded generics by top 10 corporations

* In millionsSource: IMS Health, National Prescription Audit, June 2015

MAT JUNE 2015

TRx* % MARKET SHARE % GROWTH

U.S. INDUSTRY 3,605 100.0% 4.0%

Teva 455 12.6 -3.4

Mylan Labs 330 9.1 -4.6

Sandoz (Novartis) 259 7.2 11.8

Actavis US 234 6.5 -4.1

Endo Pharmaceutical 200 5.5 -5.0

Lupin Pharmaceuticals 200 5.5 8.0

Amneal 151 4.2 1.6

Sun Pharmaceutical 131 3.6 -22.3

Zydus Pharmaceuticals 121 3.4 6.9

Aurobindo Pharmaceuticals 113 3.1 8.0

TOP 10 2,194 60.9% -1.3%

Continued on page 12

“THE 2015 [GENERIC DRUG SAVINGS IN THE UNITED STATES] REPORT SHOWS THAT GENERIC DRUGS ARE AN ESSENTIAL PART OF ANY SOLUTION TO SUSTAINING OUR HEALTH SYSTEM AND ARE CENTRAL TO EFFORTS THAT INCREASE PATIENT ACCESS AND GENERATE SAVINGS FOR PATIENTS, TAXPAYERS, EMPLOYERS, PAYERS, PROVIDERS AND OTHERS.”


Generics Report



benefit from the increased utilization of ge-neric drugs (which normally yield a higher

gross profit rate than equivalent brand name drugs) in both the Pharmacy Services and Retail Pharmacy segments for 2012 through

2014, offsetting the negative impacts [of the net revenue decline].”

Sticker shock easesOne factor that squeezed retailers’ profit

margins was the generic price inflation that roiled the pharmacy market, beginning in 2013 and extending through 2014 into 2015. The sharp price hikes — particularly for single-source generics — increased pressure on pharmacy retailers, who were caught be-tween rising acquisition costs and limits on how much they could raise their own prices at the pharmacy counter.

Compounding the squeeze: the frequent failure of MAC (maximum allowable cost)- and AMP (average manufacturer price)-based drug pricing models — and the payers that base their pharmacy reimbursements on them — to keep pace with the inflationary price spiral for some generics in their reim-

As one of the top ten generic pharmaceutical providers in the United States*, we’ve made it our business to make medicines more a� ordable for millions of Americans. It’s something we take very seriously. Over the next few years, we commit to investing 11% of our revenue directly into R&D as we look to continue to build our pipeline of innovative, and sometimes lifesaving, medicines — addressing the urgency and need for more a� ordable, high quality pharmaceuticals now and into the future.

*Based on September 2014 IMS Sales. Source: IMS Health, National Prescription Audit, September 2014.

Dr. Reddy’s Laboratories, Inc. 107 College Road East Princeton, NJ 08540 Tel: 866-733-3952 www.drreddys.com ©2015 Dr. Reddy’s Laboratories, Inc. RDY-0215-096 All right reserved. February 2015

At Dr. Reddy’s We’re Proud To Be Doing Our Part

More than 85% of U.S. prescriptions are � lled with generic drugs, saving Americans more than $200 billion in healthcare costs annually.

SOURCE: 2014 GPhA

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Top molecules by dispensed prescriptions

* In thousandsSource: IMS Health, National Prescription Audit, June 2015

MAT JUNE 2015

TRx* % MARKET SHARE % GROWTH

U.S. PRESCRIPTIONS 4,382,482 100.0% 2.2%

Levothyroxine 120,297 2.7 1.4

Acetaminopohen/Hydrocodone 105,748 2.4 -19.9

Lisinopril 104,405 2.4 1.2

Atorvastatin 87,133 2.0 15.1

Metoprolol 85,772 2.0 1.6

Amlodipine 79,912 1.8 4.3

Metformin 78,732 1.8 4.7

Omeprazole 75,696 1.7 3.0

Albuterol 69,421 1.6 6.9

Simvastatin 69,199 1.6 -10.2

TOP 10 876,314 20.0% 0.4%


Continued on page 14

010-014_GenericReport_2016.indd 12 2/12/16 11:13 AM


As one of the top ten generic pharmaceutical providers in the United States*, we’ve made it our business to make medicines more a� ordable for millions of Americans. It’s something we take very seriously. Over the next few years, we commit to investing 11% of our revenue directly into R&D as we look to continue to build our pipeline of innovative, and sometimes lifesaving, medicines — addressing the urgency and need for more a� ordable, high quality pharmaceuticals now and into the future.

*Based on September 2014 IMS Sales. Source: IMS Health, National Prescription Audit, September 2014.

Dr. Reddy’s Laboratories, Inc. 107 College Road East Princeton, NJ 08540 Tel: 866-733-3952 www.drreddys.com ©2015 Dr. Reddy’s Laboratories, Inc. RDY-0215-096 All right reserved. February 2015

At Dr. Reddy’s We’re Proud To Be Doing Our Part

More than 85% of U.S. prescriptions are � lled with generic drugs, saving Americans more than $200 billion in healthcare costs annually.

SOURCE: 2014 GPhA

DR-3109.2015 CORP AD FINAL (DSN) 18.25 x 4.75.indd 1 7/27/15 4:52 PM

Untitled-1 1 8/4/2015 9:36:45 AM

GENERICS CONTRIBUTION TO U.S. PRESCRIPTION GROWTH

Source: IMS Health, National Sales Perspectives, Branded generics disaggregated, June 2015

MAT June 2015

Generics 10%

Brands 90%

Absolute change = +$45 billion

Brands 58%

2011

Absolute change = +$13 billion

Generics 42%

Generics Report



bursements to pharmacies for the medicines dispensed to their members.

IMS’ Long attributed the price hikes of re-cent years to several factors. Among them:

• “Increased scrutiny from the FDA,” which means “manufacturers need to invest more into their quality sys-tems, and when a quality/supply is-sue arises … it creates the opportunity to increase prices to recoup part of their investment,” said Long. Generic manufacturers have complained bit-terly about a backlog of some 4,000 abbreviated new drug applications that had piled up at the FDA by 2015, despite the additional resources avail-able to the agency under the Generic Drug User Fee Amendments of 2012, and Kathleen Uhl, director of the FDA’s Office of Generic Drugs, has promised that the agency will speed up its review and approval cycles as it hires additional staff to accommodate a flood of ANDAs.

• A consolidation among the retail phar-macy chains and wholesalers that de-pend on manufacturers’ drug product supply. The frenzied merger activity

among drug makers’ customers gives them “increased purchasing power,” he noted, and “manufacturers need to make up value on products where they can.”

• A falloff in the launch of new but tra-ditionally manufactured pioneer drug products on the branded side of the industry. “Generic manufacturers make money by launching new prod-ucts … and raising prices,” Long re-ported. “With fewer launches, it puts more pressure on the ‘in-line’ product portfolio, which again is a driver to in-crease prices.”

Nevertheless, “generic substitution re-mains one of the best ways to save patients and payers money,” CVS noted in a report. And the dramatic and controversial price hikes on some me-too meds — which drew withering criticism from some consumer groups and scrutiny from Congress in 2014 and 2015 — have abated somewhat, indus-try experts said. “Generic price increases are slowing down,” noted health industry con-sultant Adam Fein, president of Pembroke Consulting and CEO of Drug Channels In-stitute. Although “about half of the generic drugs increased in cost” during the second

quarter of calendar 2015, “the increases were much lower than those in our 2014 examina-tions,” Fein reported. “The average increase … was 2.6%, compared with an average increase of 25.7% in the second quarter of 2014. Almost half of the generic drugs de-clined in cost.”

George Barrett, chairman and CEO of Car-dinal Health, also sees a pullback in generic pricing. “We are seeing moderation in ge-neric pricing,” he said in a Feb. 1, 2016, con-ference call with analysts. Indeed, said Bar-rett, that moderation in prices “is somewhat steeper than we had originally modeled.”

The price hikes were, in some cases, swift and sharp, with some product prices rising exponentially almost overnight, generating sticker shock among patients and payers. But they were far from universal; many multi-sourced drugs actually saw price decreases in recent years from manufacturers.

Indeed, “a May 2015 report from AARP noted that retail prices for generic drugs fell an average of 4% in 2013, marking nearly a decade of consecutive years of decreasing drug costs,” Express Scripts noted in its most recently published Drug Trend Report. That report also notes that 73% of generic drugs in the study experienced price decreases.


U.S. PATENT EXPIRY EXPOSURE

$17.8

$15.4$16.6

$32.8

$10.3 $11.0

$27.7

$18.9

$11.1

$20.7

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Note: Sales from year prior to expiry for years 2009-14; sales in MAT Sep. 2014 used for years 2015-18Source: IMS Health, December 2014

Generics Report


Upsher-Smith Laboratories, Inc., 6701 Evenstad Drive, Maple Grove, MN 55369 | 1-800-654-2299© 2016 Upsher-Smith Laboratories, Inc. 110217.03

At Upsher-Smith Laboratories, Inc., we strive to deliver affordable, quality medications that measurably improve people’s lives.

But our work doesn’t end there. We also strongly believe in advocacy—which is why Upsher-Smith actively participates in and fi nancially supports many healthcare-focused charitable activities throughout the year, across the country.

Our goal is to promote awareness of challenging medical conditions, especially epilepsy and other seizure disorders, while also making a personal connection with the individuals and families who live with them.

The chance to help people live healthier and more productive lives—beyond what we can accomplish solely with medicine—is what inspires us to approach health and care differently.

Learn more about our advocacy work at healthandcareredefi ned.com.

deliver affordable, quality medications that measurably improve people’s lives.HEALTH AND CARE measurably improve people’s lives.

But our work doesn’t end there. We also strongly believe in advocacy—which is why REDEFINED

Big cholesterol, HIV drug patents to expire


By DaviD Salazar

The value of expiring patents on drugs hit $23 billion in 2015, according to IMS Health — due in large part to the expiration of three blockbuster patents over the course of last year.

One of the biggest drugs to lose its patent in 2015 was Teva’s Co-paxone, a multiple sclerosis drug that saw $4.8 billion in annual sales as of September 2015. San-doz introduced its generic, Gla-topa, in July. Additionally, Otsuka Pharmaceuticals’ atypical antipsy-chotic Abilify, which saw $5.9 bil-lion in sales as of September 2015, lost its patent and saw generics introduced last April. Rounding out some of the biggest generics launches of 2015 was Nexium, the anti-ulcerant drug that had $4.1 billion in annual sales through the end of September. Nexium’s ge-neric launch had such an impact that IMS Health said anti-ulcerant sales dropped more than 13% in the aftermath.

But to say that 2015 was a big year for generics launches is not to downplay the potential that 2016 and the years that follow have, as this year’s expiring patents are estimated by IMS Health to be worth about $22.2 billion based on annual sales as of September 2015 — with similar amounts set to ex-

pire in 2017 and 2018. This year, the industry will see 26 drugs’ patents expire, and the largest cat-egories with expiring patents this year are medications for treating high cholesterol, and those meant to treat HIV.

Cholesterol drugs, lipid regula-tors in particular, made up the sec-ond-largest number of dispensed prescriptions, according to IMS Health’s 2015 National Prescrip-tion Audit, which counted 258 million total prescriptions. And the cholesterol drug in the pole position when it comes to patent expiries this year is AstraZeneca’s statin Crestor (rosuvastatin), which is set to expire in May. The statin, one of the company’s best sellers, brought in $6.09 billion in moving annual total sales as of June 2015, according to IMS Health. Two other cholesterol blockbusters — Benicar (olmesartan medoxomil) and Zetia (ezetimibe) — will lose their patents in April.

Though it is still unclear what impact the new class of cholesterol drugs, PCSK-9 inhibitors, will have on the market share of statins in the future — especially given that as of June 2015, the category had seen a slight decrease in growth — it is possible that the potential for generic versions of top-selling medications will make prescribers more apt to take a more cost-effec-tive route, rather than recommend the injectable drugs that can cost more than $14,000.

Besides cholesterol medication, another category poised for ge-nerics growth in the coming years is HIV medications. Among the products slated for patent expiry is Epzicom (abacavir sulfate and lamivudine), an oral medication meant to treat the autoimmune disorder, set to expire in March. In addition, Trizvir (abacavir sulfate, lamivudine and zidovudine) and Norvir (ritonavir) will lose its pat-ent in June, and Kaletra (lopinavir/

ritonavir) will see a patent expiry in December. Sales growth among HIV antiviral combination drugs as a class saw 21.8% growth as of June 2015, which meant a moving annual total of $9.8 billion in sales.

Serqoquel XR (qutipaine fuma-rate) — the extended-release tab-let versions of bipolar disorder, major depressive disorder and schizophrenia treatment Seroquel — doesn’t lose its patent until May 2017, but because of settlements in patent infringement lawsuits, at least one company can launch a generic in November. The atypi-cal antipsychotic is part of a class of drugs that, as of June 2015, had seen a 12.1% growth in sales, total-ing $14.9 billion in moving annual total sales.

Another blockbuster set to lose its patent in March is a treatment for pediatric acid reflux, AcipHex Sprinkle, which is meant to be sprinkled onto food for patients ages 1 year to 11 years old.

Sales in billions in MAT September 2015 used for years 2016 to 2019Source: IMS Health, National Sales Perspectives, March 2015

2016

VALUE OF EXPIRING PATENTS THROUGH 2019

Pric

e re

duct

ion

0

5

10

15

20

25

30

35

$25

20

15

10

5

$02017 2018 2019

$22.2$21.4

$23.4

$9.0

The patent for AstraZeneca’s best-selling statin Crestor is set to expire in May.



Last year’s launch of Sandoz’s Zarxio (filgrastim-sndz), the first biosimilar drug in the United States, was just the opening salvo of a burgeoning market that is only expected to grow over the next five years. The Biosimilars Council of the Generic Pharma-ceutical Association pointed out that by 2020 the patents for eight biologics will have expired, with expiries happening in 2016 for several blockbuster medications.

The biggest name among 2016 patent expiries is AbbVie’s inject-able treatment for rheumatoid ar-thritis, plaque psoriasis and other autoimmune conditions, Humira (adalimumab). Humira is not just a blockbuster drug, but is in fact one of the top-selling drugs of all time — it saw $2.2 billion in sales growth just in the first six months of 2015, according to IMS Health.

Currently, Amgen believes it is the first company to file an ap-plication for a biosimilar of Hu-mira, called ABP 501, which has shown comparable safety and clinical equivalence to Humira. But according to recent reports, Amgen, which had hoped to be able to market its biosimilar by 2017, might be delayed in launch-ing ABP 501 as it is currently in a patent dispute with AbbVie.

Beyond Humira, blockbuster drug Rituxan (rituximab) — with moving annual total sales of $3.6 billion as of June 2015, up 21% — will expire in 2016. One bit of news to watch for this year will be which pharmaceutical compa-ny of the several currently devel-oping a biosimilar version or who have biosimilars of the rheuma-toid arthritis and oncolytic drug in other countries will be able to submit its application first.

Other biologics whose patents

will expire in the next five years include Avastin, whose patent will expire in 2017. The treatment for metastatic renal cell carcino-ma, metastatic colorectal cancer and non-squamous non-small cell lung cancer saw moving an-nual total sales of $3.06 billion as of June 2015, when it had also

seen more than 10% growth. Remicade — an infusion treat-

ment for various autoimmune disorders including rheumatoid arthritis — is slated to have its patent expire in 2018. The special-ty medication had seen $4.7 bil-lion in moving annual total sales as of June 2015. Then in 2019, in-

fusion oncolytic Herceptin’s pat-ent will expire.

After Herceptin, the next date to watch for a blockbuster drug’s patent expiry will be 2028, when Enbrel, a medication for plaque psoriasis and rheumatoid arthri-tis, will lose its patent. Enbrel was the fourth-largest selling drug in 2015 with annual moving total sales of $6.1 billion as of June. By the time its patent expires, the results of the FDA’s recently ab-breviated approval pathway for biosimilars will be known, and it is possible that biosimilars will see wider implementation as the result of various educational and outreach efforts on behalf of in-dustry stakeholders.

Expiring patents set stage for biosimilars

Biopharmaceutical production at Sandoz, a Novartis company that launched Zarxio — the first biosimilar drug in the United States — last year.

* In billionsSource: IMS Health, National Sales Perspectives, June 2015

Sales of biologic drugs losing patents in the next several years

BIOLOGIC DRUGS

MAT JUNE 2015

U.S. DOLLARS* PATENT EXPIRATION

Humira $8.5 2016

Rituxan 3.6 2016

Remicade 4.7 2018

Enbrel 6.1 2028

Generics Report



As Congress continues to look into the ques-tion of drug prices with hearings in early Feb-ruary featuring industry experts, one of the organizations being turned to is the Generic Pharmaceutical Association, whose president and CEO Chip Davis recently responded to the Senate Health, Education, Labor and Pensions Committee about the state of the generic drug industry. Drug Store News spoke to Davis about the year ahead for GPhA and what some of the biggest battles for the ge-neric drug industry will be.

DSN: You started the year calling for the pas-sage of the FAST Generics Act — what are some of the biggest benefits the industry and patients will see if that bill makes it to the president’s desk and he signs it into law?

Chip Davis: Misuse of FDA REMS patient safety programs is one way that certain brand drug companies delay generic com-petition. Failure to address the loophole that makes these abuses possible is a missed op-portunity to encourage more competition in generic drugs and to generate billions of dol-lars in additional savings for patients and the health system.

DSN: One of the items GPhA is wary of is com-pounding alternatives to certain drugs. What are some of the potential pitfalls of allowing compounding to take the place of approved generics and how do you hope to find a dif-ferent solution?

Davis: Rising health costs are unsustainable for patients and our health system. However, encouraging mass compounding via “out-sourcing facilities” or drugs that are unap-proved by the FDA, such as the compound-ed alternative to Turing’s Daraprim, creates avoidable patient safety risk. Circumventing the FDA approval process is not the answer.

Generics are currently 88% of prescriptions

delivered at less than a third of total U.S. drug costs. Competition from FDA-approved af-fordable generic alternatives remains the best way to drive down health costs. There are ways to boost access working through, not around, FDA safety and approval processes. The backlog of 3,800 generic applications pending approval must be addressed. Mis-use of FDA REMS safety programs by some brand drug companies continues to impede generic access and must be stopped. GPhA will continue leading a constructive dialogue that prioritizes patient safety and savings to ensure generic competition can keep drug costs low.

DSN: Another safety issue GPhA raised re-cently concerns labeling and adjustments that manufacturers would have to make without FDA approval — what are the issues with this proposed change and what’s a way to avoid them?

Davis: GPhA is pleased that the Food and Drug Administration will continue to evaluate the wide range of concerns expressed over the currently proposed changes to generic drug labeling requirements. GPhA continues to support the Expedited Agency Review, a

better way forward that strengthens the com-munication of drug safety information without putting patients at risk. Current law requires brands and generics to carry the same label to assure healthcare practitioners have con-sistent information to inform their decisions and patient conversations. The proposed rule would change this by requiring generic manufacturers to update labels based on in-complete information without first receiving FDA approval. However, no single manufac-turer has access to the full range of avail-able data — the proprietary data from clinical studies or the data held by each individual applicant holder.

The FDA is the only entity with all of the data needed to recommend a safety informa-tion change. Instead, the EAR suggests time parameters for the FDA to take action and en-courages the adoption of e-labeling for real-time information sharing rather than continu-ing the reliance on paper label changes that take months or years to adopt. The EAR also takes important steps to make sure that mul-tiple different labels do not exist for products with the same active ingredients, safety and efficacy. GPhA will continue to work with the agency and other stakeholders committed to advancing and protecting patient health to en-sure that any changes to labeling regulations do not put patient safety at risk and avoid causing provider confusion.

Q&AChip Davis, Generic Pharmaceuti-cal Association

The state of generics

“GENERICS ARE CURRENTLY 88% OF PRESCRIPTIONS DELIVERED AT LESS THAN A THIRD OF TOTAL U.S. DRUG COSTS. COMPETITION FROM FDA-APPROVED AFFORDABLE GENERIC ALTERNATIVES REMAINS THE BEST WAY TO DRIVE DOWN HEALTH COSTS. THERE ARE WAYS TO BOOST ACCESS WORKING THROUGH, NOT AROUND, FDA SAFETY AND APPROVAL PROCESSES. THE BACKLOG OF 3,800 GENERIC APPLICATIONS PENDING APPROVAL MUST BE ADDRESSED. MISUSE OF FDA REMS SAFETY PROGRAMS BY SOME BRAND DRUG COMPANIES CONTINUES TO IMPEDE GENERIC ACCESS AND MUST BE STOPPED.”



http://www.gphaonline.org/gpha-media/press/new-survey-shows-81-of-doctors-physician-assistants-and-pharmacists-believe-fda-approval-should-be-required-prior-to-generic-drug-safety-label-changes

http://www.gphaonline.org/gpha-media/press/gpha-phrma-press-alternative-to-fda-proposed-rule-on-generic-drug-labeling


By DaviD Salazar

Last year saw a big shake-up for the pharmaceutical industry with a regulatory focus on quality. In 2016, it’s likely that the Food and Drug Administration’s interest in quality will continue as drug manufactur-ers await the final version of its Quality Metrics Guideline.

The agency released a draft guidance of the much-hinted-at guideline in July. Under the draft guidance, OTC and prescription drug manufacturers, among others, would be required to submit to the FDA various quality-related data about finished drug products or active pharmaceutical ingredients used to make them.

Among the data manufacturers would be required to report, ac-cording to the draft guidance, are lot acceptance rate (calculated from number of attempted lots less the ones pending disposition and those rejected because of specification is-sues); invalidated out-of-specifica-tion rate (the number of invalidated results over the total number of tests performed); and annual prod-uct review, or APR, or product qual-ity review, or PQR, on-time rates. Additionally, manufacturers can submit optional metrics, including the effectiveness of corrective and preventive actions and whether an APR or PQR was reviewed by the quality unit head or the operations unit head.

Manufacturers would submit data collected during a one-year period that begins after the FDA issues its final guidelines, with re-ports coming due within 60 days of the end of that year, to be submitted through its FDA Electronic Submis-sions Gateway. Manufacturers who don’t report their data would have their predicted risk raised by the

FDA, which could lead to earlier in-spections and their products being deemed adulterated and thus sub-ject to enforcement action.

Using the data, the FDA said it plans to develop measures for a manufacturing site’s and a drug’s quality, as well as the effectiveness of the system surrounding a prod-uct’s manufacturing. The hope for the metrics, the FDA said, is to give the agency insights into the state of quality control, while giving it a quantitative method of evaluating quality of products, facilities and systems. It also hopes to use the metrics to improve the effectiveness of inspections, and highlight the fac-tors that contribute to disruptions in supply. This is all, according to the agency, also going to make drugs more reliably available for patients by reducing the number of recalls and quality-related shortages.

But for some in the industry, the proposed reporting requirements might mean more work for manu-facturers, and might even cause some of the issues that the report-ing process is aimed at combatting. Speaking at the FDA’s public meet-ing on the draft guidance in August, the Generic Pharmaceutical Asso-ciation’s VP sciences and regula-tory affairs, David Gaugh, outlined several issues that the organization and its members — which he said collectively manufacture more than 90% of generics in the United States — saw with the draft guidance.

One of the largest potential pit-falls that Gaugh identified is that the items many companies are inspected for are not necessarily the same as the data the FDA is re-questing. Moreover, Gaugh said at the meeting, the data the FDA is re-questing are not kept the way that the regulator is prescribing, and there isn’t a standard approach to

collecting this data across the indus-try — an issue that the FDA itself has identified as a potential hurdle. Gaugh noted that the penalties for noncompliance are the equivalent of refusing an inspection, though refusing to submit data isn’t neces-sarily the same thing. He also said that the FDA should not penalize companies for not supplying vol-untary data, though the draft guid-ance suggests de facto penalties for those who do not comply.

Gaugh suggested that the FDA’s risk-based inspection system should “prioritize the FDA’s focus to those suppliers that the FDA has never inspected, not inspecting within the last four years, and those with a history of serious compli-ance problems.” He added that the “FDA’s risk-based model should not … affect the cost of generic drugs by virtue of an undue met-rics burden.” One of the factors that IMS Health has cited as contribut-ing to rising generics prices has been increased scrutiny on manu-facturers that are now dedicating more resources to insuring quality in the supply chain.

Some of the unintended con-sequences that Gaugh pointed out include the potential for drug

shortages as a result of the imposed reporting, perhaps causing com-panies to stop making difficult-to-produce products at certain sites. He also pointed out the potential for manufacturers to manipulate their data by holding products rath-er than rejecting them, as well as the potential for increased inspec-tions for companies based on their launches, production volume and narrow therapeutic range.

What Gaugh proposed is that the final guidance be “reason-able and realistic,” reducing the burden on companies by directly requesting metrics from contrac-tors. Manufacturers also would need time to prepare to report their data, Gaugh said. He recom-mended a safe-harbor period to allow companies to develop good reporting practices, as well as an incremental approach to requiring data and using pilots to better un-derstand the effectiveness and po-tential impact of the guideline.

“We share the agency’s goal of improved product quality and miti-gation of drug shortages,” Gaugh said. “As the FDA moves forward with its quality initiatives, we look forward to an ongoing dialogue with the agency.

Manufacturers await FDA quality metricsWHAT WOULD BE REPORTED?

Reporting establishments would report data; these data should already be available per CGMPs

• Number of lots attempted• Number of specification-related rejected lots• Number of attempt lots pending disposition >30 days• Number of OOS results• Number of lot release and stability tests• Number of OOS results invalidated due to lab error• Number of product quality complaints for the product• Number of lots attempted which are released for distribution or for the next

stage of manufacturing• Whether the associated APRs or PQRs were completed within 30 days of an-

nual due date for the product• The number of APRs or PQRs required for the product

OOS: out-of-specification; APR: annual product review; PQR: product quality overviewSource: Food and Drug Administration

Generics Report


Taming the generic supply chain


By Jim Frederick

For pharmacy retailers, two principles now rule in the purchase and distribution of gener-ic drugs: Bigger is better, and partnering with a big supplier is better than going it alone.

It’s a quest for efficiency, profitability and predictability in a product category — in this case, generic medicines — that offers mas-sive sales volumes and potentially high profit margins, but also unpredictability in terms of pricing and occasional supply disruptions. And this “deepening [of] relationships be-tween wholesalers and the dispensing chan-nels,” in the words of health industry expert Adam Fein, president of Pembroke Consulting and CEO of Drug Channels Institute, is tak-ing place in an unforgiving retail climate that demands combined purchasing power and supply-chain efficiency.

“Over the past three years, the big three wholesalers — AmerisourceBergen, Cardinal Health and McKesson — have established nov-el generic purchasing relationships with their largest customers,” Fein noted. The result, he said, has been “a revolution in how wholesal-ers interact with their biggest retail customers.”

Joining this revolution among the big three wholesalers are the nation’s three largest drug store retailers: CVS, Walgreens and Rite Aid. “These three buyers accounted for more than three-quarters of total U.S. generic drug pur-chases from manufacturers,” Fein reported.

As part of the trend, Fein said, “Walgreens and Rite Aid have eliminated self-distribution capabilities for pharmaceuticals. Consequent-ly, full-line wholesalers have become virtually impossible to displace for primary care prod-ucts dispensed by retail pharmacies.”

In addition, said Fein, “wholesalers are also coordinating more closely with smaller, phar-macist-owned independent drug stores.”

The following is a look at the deals driv-ing this new alignment between retailers and generic suppliers.

CVS Health and Cardinal HealthCVS Health’s joint supply venture with Car-

dinal Health, called Red Oak Sourcing, is yield-ing improved efficiencies, purchasing clout

and profitability in its generic business, while creating “the largest generic sourcing entity in the United States,” said president and CEO Larry Merlo. Under terms of the agreement, CVS and Cardinal “contributed their sourcing and supply chain expertise to Red Oak and agreed to source and negotiate generic phar-maceutical supply contracts for both compa-nies,” according to CVS. Addressing analysts Feb. 1, Cardinal CFO Michael Kaufmann said the Red Oak partnership with CVS sprang from a reevaluation by both companies of the “overall way we buy generics … and the way we managed inventory with generics.”

“We made a conscious decision that we would cut back on our [speculative] buying …

and we really want to focus on how can we be the best possible partner for our generic partners and … manage inventory more from a supply standpoint vs. a pricing standpoint,” said Kaufmann, as reported by the Web media outlet Seeking Alpha.

Rite Aid and McKessonRite Aid said its expanded, five-year generic

supply agreement with McKesson, which ex-tends through March 2019, “creates efficien-cies for both companies.” Under its terms, McKesson took charge of sourcing and distri-bution of generics for Rite Aid under its One Stop Generics program.

Rite Aid had several goals in expanding its partnership with McKesson, said chair-man and CEO John Standley when the deal was consummated. Among them: leveraging the two companies’ “generic purchasing scale and sourcing expertise, in conjunction with McKesson’s industry-leading drug distribu-tion capabilities.” Rite Aid also was in search

of “supply chain efficiencies,” improved cus-tomer service and “additional cash flow to fuel our company’s growth,” Standley said.

The “drug purchasing and distribution pro-cess with McKesson … provides our pharma-cies with direct-to-store delivery, five days a week,” Standley told investment analysts re-cently. “We have now completed the conver-sion of all stores and our four pharmacy distri-bution centers to this new distribution process. We expect that this new process will provide the company with working capital benefits and improved customer service through better in-stock position. The agreement is also gener-ating purchasing savings that are in line with our expectations.”

Walgreens and AmerisourceBergenUnder terms of its unique supply and eq-

uity deal with AmerisourceBergen, Walgreens Boots Alliance now owns 5.2% of the big wholesaler, and both companies have com-bined their massive generic purchasing power. The agreement “provides AmerisourceBergen the ability to access generics and related phar-maceutical products through Walgreens Boots Alliance Development GmbH, a global sourc-ing enterprise formed by Walgreens and Alli-ance Boots,” noted Walgreens in a recent re-port. The deal also gave Walgreens “the right, but not the obligation, to purchase a minority equity position in AmerisourceBergen,” while shifting Walgreens’ formerly in-house distri-bution of branded and generic drugs to ABC.

Distribution deals beyond big threeMore recently, McKesson won a bid to sup-

ply pharmaceuticals to Albertson’s Safeway division, while Cardinal inked a pact to dis-tribute generic and branded drugs to the na-tion’s third-largest pharmacy benefit manager, UnitedHealth Group’s OptumRx.

All these deals mark a frenzied big-to-build scale and purchasing power in the retailing and wholesaling of generics. “For generic drugs, formulary power lies with the distri-bution channel, not with the payer channel,” said Fein. “If we consider Express Scripts and Walmart, then five entities will purchase about 90% of generic drugs for the U.S. market.”

“OVER THE PAST THREE YEARS, THE BIG THREE WHOLESALERS — AMERISOURCEBERGEN, CARDINAL HEALTH AND MCKESSON — HAVE ESTABLISHED NOVEL GENERIC PURCHASING RELATION- SHIPS WITH THEIR LARGEST CUSTOMERS.”

— AdAm Fein, president, pembroke Consulting And Ceo, drug ChAnnels institute


Amid hike fear, most generic prices dropBy DaviD Salazar

One of the big issues getting the attention of government officials, in-dustry professionals and consumers in 2015 was the price of generic drugs, particularly the question of what was driving an increase in prices among the group of medications meant to be the least expensive choice for payers and patients alike.

Though a recent report by IMS Health and an issue brief from the De-partment of Health and Human Services underscore the savings that ac-company generics prices, and their overall affordability, there are still chal-lenges facing manufacturers that have an impact on their bottom line and, ultimately, the cost of their generics.

First, the good news. On Jan. 27, IMS Health issued its latest report, “Price Declines after Branded Medicines Lose Exclusivity in the U.S.,” which high-lights just how much of an impact generics have in making medication more affordable for patients. Using data on generics that entered the market between 2002 and 2014, IMS Health’s analysis showed that the price of a medicine dropped 51% in the first year following loss of exclusivity and 57% in the second year. For oral medications, that number is 66% in the first year and 74% in the second year after generic versions hit the market.

The HHS issue brief, published on Jan. 27, looked at pricing trends among generic drugs. Using data up to the end of 2014, the brief “strongly supports the conclusion that generic drug prices are not an important part of the drug cost problem facing the nation,” and noted that data suggested generic prices are lowering as branded prices increase significantly. The brief also pointed out that many generics saw their prices drop in 2014.

But there is another side to the generic pricing coin, namely the more re-cent trend of price increases for generic drugs. HHS, whose issue brief was partly the result of increased scrutiny on generics prices, noted that between July 1, 2013, and June 30, 2014, about 64.8% of Medicaid generics spending went to drugs that had decreased in price, but that more than a quarter of spending went to drugs that had risen in price, some as as high as 1,000%. In fact, drugs whose prices had increased between 100% and 1,000% ac-counted for 8.6% of Medicaid generics spend, and these medications only make up about 1.8% of the total overall prescriptions.

So pronounced has the issue of generics prices become that the Senate Special Committee on Aging convened on Dec. 9 to investigate why the prices of some generics were increasing.

And congressional action has not stopped on the issue of generics. On Jan. 28, lawmakers held a hearing to address the speed at which the Food and Drug Administration is approving generics. Currently, the agency has a backlog of more than 3,800 generic medications awaiting approval — something for which the HELP committee chairman, Sen. Lamar Alexan-der, R-Tenn., asked Janet Woodcock, the FDA’s Center for Drug Evaluation and Research director, to talk about at the oversight hearing for the Generic Drug User Fee Amendments, which seeks to expedite the approval of ge-neric drug applications.

“Despite the FDA receiving nearly $1 billion in user fees since 2012 as a result of these user fee agreements, performance is not living up to Con-gress’ or patients’ expectations, as the number of generic drugs approved

per year remains about the same,” Alexander said at the hearing. “The trou-bling news is that it is taking longer for the FDA to get drugs through the approval process, and according to a survey of generic drug makers, the median approval times have slowed from 30 to 48 months.”

Alexander noted that when there are various generic versions of a given drug, the price of a medication is about 10% the price of a branded version. And when there is a backlog in applications, manufacturers have to rely on their existing portfolio to continue to produce a profit. As the HHS issue brief noted, though, the FDA is working as fast as it can.

“It should also be noted that the FDA is fulfilling, and in many cases sub-stantially exceeding, its negotiated GDUFA commitments,” the issue brief said. “The FDA’s productivity is consistent, and it is currently sustaining record or near record levels of generic drug approvals.”

Woodcock acknowledged the issue and has pledged to have the backlog more or less dealt with by the time GDUFA faces renewal in 2017.

But besides Woodcock’s and CDER’s delays in dealing with the applica-tion backlog, their proposed Request for Quality Metrics Guideline, a draft guidance of which was released in July 2015, has the industry concerned.

GPhA’s VP sciences and regulatory affairs attended the FDA’s public meeting about the draft guidance, where he expressed concern that the draft guidance as written has the potential to “affect the cost of generic drugs by virtue of undue metrics burden.” What Gaugh told the FDA was essentially that manufacturers are as invested in quality as regulators, but when more resources go into proving that they are ensuring a product’s quality, that adds onto the cost of producing it, and thus selling it.

PERCENT OF GENERIC PRESCRIPTION EXPENDITURES BY PRICE INCREASE

Note: Percent of total Medicaid FFS generic prescription expenditures by percent of acquisition cost change between July 1, 2013 and June 30, 2014Source: IMS Health, Dec. 2014

2.5%

GENERIC RX W/ NO-CHANGE GENERIC RX W/

NO COMPARISON

GENERIC RX W/ INCREASES

>1000%

GENERIC RX W/ INCREASES <1%

GENERIC RX W/ INCREASES

1% TO 20%

GENERIC RX W/ INCREASES 20% TO 100%

GENERIC RX W/ INCREASES 100% TO 500%

GENERIC RX W/ INCREASES 500%

TO 1,000%

64.8%

7.4%

11.0%

5.7%

5.6%

3.0%

GENERIC RX W/ DECREASES


Generics Report



By DaviD Salazar

The American College of Physicians recent-ly published a clinical guideline in the Annals of Internal Medicine that encouraged providers to more widely prescribe generic medications. The paper’s authors made a case that many in the industry know well: If physicians prescribe more generics, not only will patients and pay-ers save money, but it might also have an im-pact on adherence.

In order to illustrate their case, research-ers looked at several past studies concerning generic-drug use and the potential benefit, looking to examine how commonly generics are prescribed, how that use influences adher-ence, evidence of similar clinical effects between branded and generic drugs, barriers to access and strategies to promote generics usage.

According to their findings, in 2001 more than 40% of Medicare beneficiaries with heart disease were taking brand-name medication. More recently, in 2008, medications for which a generic drug exists made up between 23% and 45% of dispensed prescriptions, depending on the class — a number lower than that seen among patients in the Veterans Affairs system, whose centralized formulary emphasizes ge-nerics use.

Beyond that, many doctors prescribe new, brand-name medication in situations where accepted guidelines find generic drugs suf-ficient. What the authors call “guideline- consistent prescribing” has the potential to save more than a billion dollars annually, they said. The guideline also cited a paper that sug-gested Medicare alone could save $1.4 billion every year just among diabetes patients if it used both a generic-favoring formulary and therapeutic interchange — substituting less expensive but more or less equally effective medication in place of a branded drug.

“A 2005 analysis of commercially insured persons in the United States produced by a large pharmacy benefits manager estimated the potential cost savings of therapeutic inter-change … to be more than $20 billion annual-ly,” the guideline said. “To put this into context, $20 billion could provide Medicaid coverage to more than 3.6 million presently uninsured per-

sons, under the assumption that Medicaid ex-pansion under [the Affordable Care Act] costs an average of $5,440 per person per year.”

In addition to emphasizing the potential savings of wider generics use, the guideline paper also outlines the effect that generics can have on nonadherence — which the New England Healthcare Institute estimated in 2009 costs some $260 million every year. One of the biggest points the guideline makes is that pa-tients who are prescribed brand-name medica-tions are twice as likely to never pick it up after it’s been filled as patients who are prescribed a generic.

Authors cited one study that compared ad-herence among 90,000 Medicare beneficiaries

taking a statin, some of whom began the regi-men with a branded drug, with others starting with a generic statin. Those who started with the generic had a 6% higher adherence rate.

But, the guideline also highlighted elements that might stand in the way of making generic drugs more widely used. In particular, it points to differences among state laws surrounding generic substitutions — some have manda-tory substitution of branded drugs with their generic counterparts, whereas others require pharmacists to consult with patients before substituting generics and still others leave it up to the pharmacist’s discretion. Besides that, the authors noted perceptions of a lack of ef-ficacy in generics, as well as skepticism about generics that don’t closely resemble the origi-nal product.

But the guideline urged wider prescription, noting that even meager changes in prescri- ber behavior can have a big impact on the bot-tom line.

“Given the large cost differences between generic and brand-name medications, even small incremental increases in the rate of ge-neric dispensing are estimated to have impor-tant economic implications for both patients and payers,” the guideline said.

Researchers tout generic savingsANNUAL GENERIC DRUG SAVINGS* IN THE UNITED STATES

$87$98

$116

$135

$161$177

$197$213

$246 $254

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

* In billionsSource: “Generic Drugs Savings in the U.S. - Seventh Annual Edition: 2015,” Generic Pharmaceutical AssociationNote: Historic savings have been revised to include standard data restatements.

“GIVEN THE LARGE COST DIFFERENCES BETWEEN GENERIC AND BRAND-NAME MEDICATIONS, EVEN SMALL INCREMENTAL INCREASES IN THE RATE OF GENERIC DISPENSING ARE ESTIMATED TO HAVE IMPORTANT ECONOMIC IMPLICATIONS FOR BOTH PATIENTS AND PAYERS.”

— AnnAls of InternAl MedIcIne clinical guideline

Generics Report


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