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GPhA Welcomes FTC's Decision to Study Authorized Generics: 'Authorized Generics' Undermine Incentive to Produce Affordable Medicines

ARLINGTON, VA, November 9, 2005 -- The Generic Pharmaceutical Association (GPhA) today welcomed news that the Federal Trade Commission (FTC) will undertake a request by Senators Chuck Grassley, Patrick Leahy, and John D. Rockefeller IV to study the competitive effects of the use of authorized generics. The Senators made the request in May 2005.

“We are encouraged that the FTC has agreed to study authorized generics. This study puts us one step closer to closing the unintended loophole that has allowed these products to infiltrate the health care system,” said Kathleen Jaeger, GPhA President and CEO. “As the FTC has pointed out before, authorized generics could lead to fewer generic applications and fewer products on the market in the future, which ultimately would be bad for consumers.”

According to the Senators, the FTC said in a letter that it will look into the circumstances under which innovator companies launch authorized generics; examine competition during the 180-day exclusivity period; and further examine the long-term effect of generic drug entry on prescription drug prices.

Authorized generics are brand products that are masquerading as generics. They are brand products marketed under a different label by the brand company or a third party distributor generally during the 180-day exclusivity period awarded to the first generic company that has successfully challenged a questionable patent.

Two federal agencies, the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS), treat authorized generics inconsistently, resulting in two undesirable results. Authorized generics are considered brand products by FDA, thus bypassing that agency’s rigorous generic drug approval system and taking advantage of a loophole in the federal law known as the Hatch-Waxman Act. This loophole has allowed authorized generics to compete with the generic products awarded generic exclusivity (180 days).

Yet authorized generics are considered “generics” by CMS for purposes of the agency’s best price calculation, which is the lowest price at which CMS purchases medicines. Currently, brand companies obtain a major windfall by not including in their CMS best price calculation brand products that are dressed up as generics to the detriment of the federal and state government programs. In other words, when it comes to federal reimbursement, the brand company benefits by calling the “authorized generic” a generic product for best price purposes, said GPhA.

“Authorized generics, in the long term, will have a negative impact on consumers and the health care system,” Jaeger concluded.

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 53% of the total prescriptions dispensed in the United States, but less than 12% of all dollars spent on prescription drugs.

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