Generic Pharmaceutical Association (GPhA) Release: Independent Analysis Reveals That Authorized Generics Are Bad For Consumers, Lead To Higher Pharmaceutical Prices

Published: Jul 31, 2006

ARLINGTON, VA, July 31 /PRNewswire/ -- The Generic Pharmaceutical Association (GPhA) today unveiled an independent analysis of authorized generics that conclusively demonstrates that the anti-competitive brand pharmaceutical practice of introducing authorized generics (AGs) "significantly reduce incentives for independent generic firms to challenge invalid brand name patents and to develop non-infringing processes." This analysis also raised serious questions about the validity of a recent PhRMA study on authorized generics, noting that the PhRMA study contained significant errors making its conclusions questionable at best. The study concluded that, despite PhRMA's claims to the contrary, "the long-term effect of allowing authorized generics on the market during the 180-day generic exclusivity period will be less competition and reduced access to cheaper drugs."

The study, "An Assessment of Authorized Generics: Consumer Effects and Policy Issues," was authored by Dr. Aidan Hollis and Dr. Bryan A. Liang, leading academics on issues surrounding authorized generics. Drs. Hollis and Liang raised several concerns about the methodology used in the PhRMA study which they contend often compared apples to oranges in an effort to make PhRMA's point. The authors noted that factors such as an inconsistent choice of data, inadequate data points and the use of wholesale instead of retail prices resulted in "significant problems with the PhRMA study data, its analysis, its accuracy, and hence the basis for its conclusions regarding AGs. These errors create great concerns regarding the utility of the conclusions provided by it."

In unveiling the study, Kathleen Jaeger, President and CEO of GPhA, stated, "The nation's generic drug companies will not allow PhRMA to pull the wool over consumer's eyes. Flawed studies are just another example of what PhRMA will do to keep safe and effective generic drugs out of the hands of consumer. Authorized generics are yet another attempt by brand drug companies to stifle competition and put profits over consumers."

The independent analysis of the PhRMA study concluded that: * the prices consumers pay will be virtually unchanged by the presence or absence of AGs noting that much of PhRMA's alleged "discount" of prices associated with AGs is accounted for by higher brand name drug prices; * allowing authorized generic entry during the 180-day exclusivity period harms the incentives generic firms have to challenge invalid patents or develop products; and, * Authorized generics will lead generic firms to be less aggressive in competing against brand name firms and the ultimate losers will be consumers.

Jaeger went on to note that: "Previously, brand companies typically obtained one or two patents per drug product. Today, brand companies obtain dozens of patents relating to a single drug product. While these patents add little by way of innovation, if left unchallenged they nevertheless would extend the brand company's monopoly for years. The patent challenge process was intended by Congress to address this issue. Yet, since 2003, when MMA closed many of the loopholes previously used by brand companies to delay generic competition, authorized generics have flourished. To GPhA's knowledge, the brands have launched an authorized generic during every 180-day generic exclusivity period since September 2003, just prior to MMA becoming law."

"PhRMA is intent on abusing every loophole it can find in search of greater profits. Congress implemented the 180-day exclusivity period to increase competition and bring lower prices to consumers as early as possible. Brand name companies are undermining the Hatch-Waxman system, while simultaneously being rewarded for such behavior, by being permitted to introduce authorized generics into the marketplace during the exclusivity period," Jaeger concluded. "Unchecked, the use of authorized generics will enable brand companies to squeeze out generic competition by creating a virtual drug monopoly. As this new study states, the ultimate losers are consumers."

About the Authors

Summary Biography of Dr. Aidan Hollis

Dr. Aidan Hollis is Associate Professor in the Department of Economics at the University of Calgary. He is Academic Director of the Centre for Regulatory Affairs at the Van Horne Institute. Dr. Hollis was educated at Cambridge University and the University of Toronto, where he obtained a Ph.D. in Economics. He worked for a number of years in corporate banking in London and Seoul.

Dr. Hollis' research focuses broadly on the area of industrial organization, including on competition policy in the pharmaceutical industry. In 2003-204, he was TD MacDonald Chair of Industrial Economics at the Competition Bureau of Canada. Dr. Hollis has published widely on the economics of pharmaceutical markets. His latest work in the area, entitled "How do Brand's 'Own Generics' Affect Pharmaceutical Prices," was published last year in the Review of Industrial Organization.

Summary Biography of Dr. Bryan A. Liang

Dr. Liang is a Professor of Law and Executive Director at the Institute of Health Law Studies at the California Western School of Law, as well as Co-Director & Adjunct Associate Professor of Anesthesiology at the San Diego Center for Patient Safety, University of California San Diego School of Medicine.

Dr. Liang obtained his J.D. from Harvard University, his M.D. from Columbia University, a Ph.D. in public policy from the University of Chicago and a B.S. in Chemistry from the Massachusetts Institute of Technology.

Dr. Liang has authored or co-authored five books and over 200 articles on a range of health law and policy topics, including pharmaceuticals policy. In the mid-1990's, Dr. Liang worked with the U.S. Federal Trade Commission as a Special Projects Analyst to investigate potential anticompetitive behavior in the healthcare market, including the practice of authorized generics.

Background on the 180-Day Exclusivity Incentive

In creating the Hatch-Waxman Act, Congress determined that it was in the best interest of consumers to create the 180-day incentive to encourage generic companies to challenge questionable or frivolous brand pharmaceutical patents as part of the complex, intellectual property-based U.S. generic drug approval process. The 180-day exclusivity provision of the patent challenge process provides the check and balance in the drug patenting process, while also providing generic companies with a mechanism to recoup the significant costs of litigation and provides incentives to challenge more questionable patents in the future. Over the past 20 years, generic manufacturers have undertaken numerous patent challenges as a result of the 180-day incentive. These successful patent challenges have generated tens of billions of dollars in savings for American consumers.

An authorized generic is the brand's product repackaged and marketed either through a subsidiary or third-party. Because the brand is selling part of its inventory as a generic, it can currently compete with the true ANDA generic during the exclusivity period.

Representatives of the GPhA and the study's authors will present the findings on the conference call and respond to media questions. The number to call to participate in the briefing is: (800) 311-9407 and the passcode is GPHA REPORT. Following the call, the briefing will be available for replay by dialing 877-919-4059 in the U.S. (the international toll dial-in number is 334-323-7226). The passcode for the replay is 38803368 #.

GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk active pharmaceutical chemicals, and suppliers of other goods and services to the generic drug industry. Generics represent 56% of the total prescriptions dispensed in the United States, but less than 13.1% of all dollars spent on prescription drugs. For more information about the industry, visit

The Generic Pharmaceutical Association (GPhA)

CONTACT: Andrea Hofelich, +1-703-647-2495

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