Lecture 16 - Biotechnology and Generics

Question 1

What is the shark fin curve?

Answer 1

The sales of Innovator drugs from the time it was launched until the entry of generic drugs

Question 2

What is the product lifestyle of generics?

Answer 2

• When market opens to generics (usually at patent expiry), most drugs are subject to intense competition with upwards of 10 companies entering the market
• Price falls dramatically immediately and in the first year (shark fin curve)
• Innovators usually stop promoting innovator product by switching market to newer drugs or “evergreened” drug (some with real advantages, others small clinical advantages)
• Hence, total value and volume of sales of drug (innovator plus generics) drop substantially
• A 4-5 year profitable lifecycle is expected for simple generics vs innovator drugs of 7-10 years or more of high profitability
• Complex generics and biosimilars have longer lifecycles than simple generics
○ Less intense competition, more expensive R&D, fewer generic entrants

Question 3

What are the cost advantages of Generics?

Answer 3

• Generics avoid the expensive clinical trials
○ Average cost of discovering and testing a new innovative drug using a new chemical entity is as much as $800m (most costs in the clinical phase)
○ Generic total development cost $1-5 million, including

Question 4

What are the IP of Generics?

Answer 4

1. Published Patents
2. Trade Secrets
3. Data exclusivity
4. Trade Marks and Branding

Question 5

What are the cost sensitivity focus of generic companies?

Answer 5

1. Time to market
2. Profit margins (minimising cost of goods sold)
3. Cost effectiveness of company

Question 6

What are the Innovator IP Strategies?

Answer 6

1. Switch market to alternate in “improved” drug in the same class/ have drug combinations
2. “Evergreening” and extending their patent by adding patent on API (so that they can continue to collect royalties)
3. Authorised Generic (Innovator allows market access to generic company under license, may even sell innovator product in different packaging as a generic)
4. Marketed Generic (Innovator markets its own generic product, may continue to market own innovator branded product)
5. Stop promotion of innovator brand and exit the market

Question 7

What are the IP Strategies of Generics?

Answer 7

1. Wait for expiry of all relevant patents and data exclusivities
2. at expiry of data exclusivity challenge validity of unexpired innovator patents and lodge application for approval of generic
3. At expiry of data exclusivity, lodge an application for a drug product which does not infringe unexpired innovator patents generic - often evergreening patents targeted
4. Potential for non-infringing drug products to create IP for generic company
5. In US, first generic to file for a product ahead of patent expiry gets 6 months exclusivity
6. Branded generics also occasionally promoted by generic companies - often with unique features

Question 8

Why do Innovator companies charge higher prices for drugs during period of patent and data exclusivity?

Answer 8

1. Recoup cost of development and clinical trials
2. Ensures ongoing profitability and further investment in new drugs
3. Patent Monopoly and Data Exclusivity are important incentives for companies to develop new drugs