Memorandum by the British Generic Manufacturers
Association (PI 148)
1. The role of the generic pharmaceutical
industry within the NHS is:
To provide low-cost high-quality
versions of older medicines once the patent protection on those
products lapses, thus reducing the medicines bill and allowing
the NHS to pay higher prices for branded medicines, ensuring that
originator pharmaceutical companies have the funds to research
and develop truly new innovative products (the "headroom"
To provide competition for older
medicines produced by originator pharmaceutical companies, thus
offering a commercial impetus for them to research truly innovative
new chemical entities against which generic medicines cannot compete
during the period of patent protection.
2. These principles have been adopted and
endorsed both by the European Commission, and the UK Government.
However, the launch of generic equivalents to branded products
does not always take place immediately following expiry of the
patent protection enjoyed by the brand. In some cases, this may
be due to technical or scientific issues.
3. In others, however, it can be due to
a failure of the policy and legislative framework within which
the generic pharmaceutical industry must rightly operate, and
this failure may be subject to influence exerted by the originator
branded pharmaceutical industry. Clearly, if originators are able
to delay the launch of generic versions of their products, they
extend the commercial life of them.
4. We believe that the Government should
be more alert to activity undertaken to produce this "evergreening",
and act in a more concerted and joined up way to prevent it happening.
Only in that way will the Government ensure that the NHS fully
benefits from the reduction in the prices of medicines brought
about by generic competition.
II. THE BRITISH
5. The BGMA is the representative trade
body of the manufacturers and suppliers of generic medicines in
the United Kingdom. Our members are: APS/Berk (Teva), Alpharma,
Crescent Pharma, Dr Reddy's Laboratories, Generics UK (Merck),
Genus Pharmaceuticals (Stada), IVAX, Kent Pharmaceuticals, Ranbaxy,
ratiopharm, Rosemont, Sandoz and Sterwin (Sanofi).
6. We believe that our membership accounts
for more than 80% of the supply of generic medicines in the UK.
7. A generic medicine is one that contains
the same active ingredient as an original branded product. It
is subject to the same regulatory standards of safety, quality
and efficacy as the original brand; and, before being marketed
in the UK, must similarly receive a marketing authorisation from
the Medicines and Healthcare products Regulatory Agency (MHRA).
8. However, rather than having unnecessarily
to reproduce data relating to preclinical and clinical trials
as with an originator product, a generic manufacturer instead
needs to demonstrate that the generic product is essentially similar
to the original brand in terms of its effect on the patient. This
not only avoids the need for unnecessary trials on animals and
humans, but reduces the research and development costs involved
in bringing a generic medicine to the marketplace.
9. Under current UK legislation,
a generic manufacturer may make a so-called abridged application
for a marketing authorisation to the MHRA, based on demonstrating
"essential similarity", 10 years after the commercial
launch of the original product.
Once the MHRA has issued a marketing authorisation, the generic
medicine may be launched, so long as any relevant patents on the
original brand have expired. It may take two years or more to
develop a generic version of an original brand.
10. Thus, after the expiry of the patent
or patents covering an original branded medicine, there are a
number of versions of that medicine in the marketplace: the original
brand, and any number of generics, depending upon the number of
generic manufacturers that chose to launch the product. Under
a community pharmacist's terms of service, the pharmacist must
dispense the brand if the GP writes a prescription for the brand;
but a prescription written generically may be met by the generic
or the brand (since the two are equivalent and thus interchangeable).
In the latter case, however, the community pharmacist is reimbursed
at the lower generic price, even if the brand is dispensed.
11. The reimbursement price of a branded
medicine under the NHS is directly related, and can be close to
its market price. Market prices are only indirectly regulated
by the Department of Health under the Pharmaceutical Pricing Regulation
Scheme (PPRS), which sets a limit on the overall profit that members
of the Scheme are able to make. The PPRS takes account of the
very significant research costs borne by the branded sector and
also provides allowances for promotional and advertising activities.
12. Because there are typically a number
of suppliers of most generic medicines, the market price paid
by community pharmacists and wholesalers is set by competition
between generic manufacturers. Different generic manufacturers
compete largely, but not wholly, on the basis of the price of
The reimbursement price paid to community pharmacists by the NHS
(the Drug Tariff price) is determined on a monthly basis by the
Department of Health and is based upon a weighted average of the
list prices of five suppliers (three generic manufacturers and
two wholesalers, the latter contribution being weighted double:
ie, manufacturers provide three sevenths of the prices taken into
account, and wholesalers four sevenths).
13. Competition naturally drives down prices
and, according to the latest published Department of Health statistics,
generic medicines account for 55% of prescriptions dispensed,
at a cost of only 24% of the drugs budget. On this basis, if there
were no generics available, and all medicines paid for by the
NHS were priced at the average cost of brands today, the drugs
bill would increase by over £5 billion.
14. [In fact, we believe that the savings
due to generics could be significantly greater than this because
the current reimbursement price does not fully reflect discounts
from list prices that are offered by generic manufacturers. With
others, we have been working with the Department of Health to
agree a more realistic reimbursement scheme which will ensure
that the NHS fully benefits from the savings due to generic medicines.]
IV. DELAY IN
15. It is clear, therefore, that any delay
in the launch of a new generic after expiry of the patent or patents
on an original brand is potentially very expensive for the NHS.
We set out below some recent examples of where delay has been
caused, at least in part due to the influence or actions of the
originator branded pharmaceutical industry.
16. In many cases, the delay is due to the
brand originator changing the active ingredient, formulation or
pharmaceutical form shortly before patent expiry. Generic manufacturers
will already be well down the road of developing generic versions
of the original product. Launch of the changed version of the
brand often leads to GPs prescribing the new versionparticularly
if the originator has withdrawn the first version from the marketand
thus there is no market for the generic under development.
17. Developing the revised version may take
another two years or more, delaying generic launch by that period.
Alternatively, the brand originator may claim data exclusivity
on the revised form, delaying generic launch by 10 years (though
the recently adopted revised EU pharmaceutical legislation limits
the scope for this in future).
18. In making these points, we must make
clear that we do not seek to undermine the legitimate rights of
the originator sector, nor criticise them for making the most
of available opportunities to extend the commercial life of their
products, especially where real benefits are given to patients
and are cost-effective. However, it is crucial for everyone concerned
in the NHS, not least patients, that the creative energies of
the originator pharmaceutical companies are directed to researching
and developing new medicines, which will become generic medicines
in due time, rather than working to extend the commercial life
of their older products and reducing the headroom created to pay
for true innovation.
(i) Chiral switching (Example: Omeprazole/Esomeprazole)
19. Most commonly used drugs are administered
as 50:50 mixtures (also know as racemic) of enantiomers, a type
of optical or stereoisomers. These are left-handed and right-handed
3-D forms of the same molecule. The originator company usually
first markets its product as a racemic mixture.
20. With a view to evergreening or extending
the return on the originator product and delaying generic competition,
it has become a common strategy for originator companies to develop
and market different mixtures of, or single isomer forms of the
original product, and gain extra patent and other intellectual
property protection on the new product. These invariably have
no or only marginal therapeutic benefit to patients over the first
originator product. Where these new products are introduced, changes
to prescribing habits are promoted further restricting the market
for the previously available form.
21. In this case, the originator sought
to establish a distinct identity for the single isomer version
by obtaining a marketing authorisation for it to be used at twice
the strength of the original product (40mg for indications where
20mg was traditionally used and 20 mg where 10mg was used).
22. Marketing to GPs to prescribe the single
isomer version undermined the market for generic versions of the
original form which had been developed ready for launch.
23. Issues surrounding the introduction
of esomeprazole are currently the subject of a competition inquiry
by the European Commission.
(ii) Switching to active metabolite (Example:
24. Originators can also switch the active
metabolite, potentially to the more active isomer.
25. The withdrawal of loratadine and its
replacement with desloratadine prior to patent expiry similarly
meant that there was no market for generic loratadine once it
became available since GPs had changed to prescribing the new
(iii) Different formulations (Examples: Doxazosin
26. In this case, different formulations
are marketed, usually based on sustained release technologies.
Historically, they were marketed alongside the original brand
but increasingly they are replacing the original product.
27. Just before patent expiry the originator
marketed a sustained release version of doxazosin and discontinued
the corresponding strength of the conventional product.
28. Just before patent expiry the originator
marketed a soluble version of Mitazapine (Soltab) and discontinued
their tablet form.
29. In each case, prescribing patterns changed
so that there was a reduced market for the generic.
(iv) Different presentations (Example: Ramipril)
30. Ramipril was licensed and sold in the
UK as a capsule. Elsewhere in Europe, it was presented as a tablet.
The patent expired on 9 January 2004, at which point generic manufacturers
were ready to launch Ramipril capsules.
31. The originator attempted to withdraw
the capsule form in the UK, intending to replace it with the tablet
form, to be sold at the same price as the capsule. The originator
contacted all major wholesalers and retail suppliers informing
them that capsules would be replaced by tablets with effect from
3 November 2004. A large number of GP prescribing computer systems
were also changed to list and print prescriptions for the tablet
form and not for capsules. Pharmacists would be required to dispense
tablets if that form was specified on the prescription.
32. If action had not been taken there would
have been very little or no market for Ramipril in the capsule
form, when patent expiry took place in January 2004, if the majority
of prescriptions had required the tablet to be dispensed. It would
have taken generic manufacturers two or three years to undertake
from scratch the development work for the tablet form, and gain
authorisation from the MHRA.
(v) Different salts (Example: Amlodipine)
33. Medicinally active chemical entities
are commonly insoluble in water and are therefore manufactured
in salt form to increase solubility. One of the decisions of the
recent European Pharmaceutical Review was that a generic may be
based upon a different salt than that of the brand if the products
can be shown to have the same safety and efficacy profile. This
is logical given that it is the medicinally active chemical entity
that provides therapeutic benefit to patients.
34. The Amlodipine base is not water soluble,
and must therefore be manufactured in salt form. The brand is
manufactured as amlodipine besilate. Other salt forms include
amlodipine maleate and amlodipine mesilate. Generic versions are
based upon these latter two salts since, although the patent on
the amlodipine base expired on 7 March 2004, there is a further
patent on amlodipine besilate which does not expire until 25 March
35. The originator company wrote to GPs,
in March 2004, advising that alternative salt forms were not identical
to the brand (amlodipine besilate), despite the European Medicines
Evaluation Agency having confirmed that the two salts were equivalent
in adjudicating upon two arbitrations. In parallel, many of the
GP prescribing software packages automatically produced apparently
"generic" prescriptions for amlodipine besilate (ie,
the brand) due to the generic description entered in the product's
Summary of Product Characteristics by the originator.
36. We are still working to ensure that
GPs' software produces a generic descriptor when desired by the
GP that is salt neutral and allows all forms of amlodipine to
be supplied by a pharmacist.
(vi) Costs of delays
37. We have calculated below the potential
cost over one year to the NHS should these circumstances lead
to a delay in the onset of generic competition. In doing so, we
have used two hypotheses: first, that the generic would take 50%
of the market, and reduce market prices by 50%; and, secondly,
that the generic would take 75% of the market and reduce market
prices by 75% (the latter being more normal).
POTENTIAL COSTS OF DELAYS (£ MILLION)
|Product name||Market value
50% price drop
75% price drop
V. PATENT LAW
38. The generic industry is facing growing difficulties
in launching new products due to the increasing number of patents
on very minor or marginal changes to pharmaceutical products.
There is evidence that this could become the principal obstacle
facing the industry. As an example, in the year 2000, the US Patent
Office granted 6,730 pharmaceutical patents whilst the US Food
and Drug Administration only registered 27 new chemical entities.
39. This growing global trend has the effect of delaying
the entry of new generic products, and allows the originator industry
to reap continuing benefit from its older products. This not only
keeps the cost of medicines unnecessary high, but reduces the
incentive on the originator sector to develop truly innovative
new chemical entities.
40. We believe that more should be done to simplify current
patent structures, and to ensure that the growing trend of establishing
numerous patents on superfluous aspects of medicines for the sake
of prolonging market exclusivity should not be allowed to become
common practice in the UK and the EU. This is particularly important
in the light of the newly adopted EU legislation on the enforcement
of intellectual property protection.
VI. BRAND EQUALISATION
41. We are also concerned about the way in which branded
and generic medicines are treated under the Government's approach
to reimbursement. This allows the branded sector to use the flexibility
it enjoys under the PPRS to compete with generics in the post-patent
market in a way that is unfair and which lessens the cost savings
that the NHS would otherwise enjoy as a result of generic competition.
42. Under so-called "brand equalisation", the
brand originator sells a proportion of his product at the generic
market price, thus allowing pharmacists to dispense a branded
product against a prescription written and reimbursed generically
without suffering any commercial disadvantage. Branded companies
may similarly be able to "balance" prices across their
patented and non-patented portfolio to gain a greater market share
in segments of the market where they face the greatest competition,
such as primary care. Notwithstanding the restrictions placed
on modulation in the current PPRS, branded companies are able
to manage the pricing of the portfolios in this way.
43. We believe that this form of competition acts against
the interests of the taxpayer and patients, as well as those of
the generic pharmaceutical industry. At a time when the Government
intends to change the way in which generic medicines are reimbursed,
we believe that it is crucial to ensure that the current competitive
balance between true generics and off-patent brands is not tilted
in favour of brands.
44. Indeed, we believe that it is essential that the
Government ensures that the impact on this competition is properly
assessed in the light of its proposals to amend the generic reimbursement
scheme, and as part of its consideration of changes to the PPRS.
This is apparently not being done.
45. We believe that the current scope of PPRS does not
reflect the operation of the marketplace, and is thus wrong. As
we have commented above, off-patent brands and generics compete
in the marketplace to meet prescriptions written generically.
Broadly, the PPRS applies to brands and the generic reimbursement
system to generics. These are not, however, two distinct markets.
Rather, there is an on-patent market and an off-patent market.
The Government's schemes for managing the price of medicines to
the NHS should reflect this market reality.
46. For on-patent markets, competition takes place in
the doctor's surgery. Brand originator companies market their
products to encourage doctors to prescribe their brand. (Even
if doctors prescribe an on-patent medicine generically, only the
brand will be available.) For products still under patent, therefore,
there is no competition outside of the doctor's surgery: once
the prescribing decision has been taken, they enjoy a monopoly
in the marketplace.
47. Once a product's patent has expired, however, the
scope of competition normally increases dramatically. If the product
is prescribed generically, the prescription can be met by a generic
medicine, typically manufactured and marketed by a number of competing
companies, or by a brand. There is, therefore, usually very considerable
competition at pharmacy (and wholesale) level. However, if the
brand originator succeeds in persuading doctors to continue to
prescribe the brand after patent expiry, no price competition
exists at pharmacy or wholesale level.
48. We believe that these features of the marketplace
under the current twin systems of price regulation (the PPRS and
the generic pricing in the Drug Tariff) act against the interests
of the NHS and the taxpayer. We believe that the market would
be more competitive and more dynamic, and more closely meet the
public policy principle of "headroom", if one form of
price regulationthe PPRS or its successorwere to
apply to the on-patent market, and anotherthe proposed
revised generic reimbursement schemeto the off-patent market.
49. We have urged the Department of Health to seek to
renegotiate the PPRS along these lines.
50. The Department of Health has from time to time intervened
to ensure that the launch of generics, and the benefit that that
brings for the NHS, is not delayed and is fully realised. That
intervention has, however, been sporadic and ad hoc. There
has, further, been little co-ordination between the different
government agencies involved, and external suppliers to the NHS.
51. We believe that, if the NHS is to achieve the maximum
benefit from generic competition, the Department needs to take
a more holistic approach. We have raised these issues with them
and are confident that they will respond positively. We should,
however, very much welcome the Committee's endorsement of this
16 August 2004
Changes to the detail but not the principle are due to be implemented
next year. Back
It is open to a generic manufacturer to make a different form
of application before the expiry of this ten-year period of "data
exclusivity" by undertaking its own preclinical and clinical
trials; but an abridged application under which the MHRA compares
the similarity of the generic with the data submitted by the brand
originator in support of its application is the normal way of
bringing a generic to the market. Back
Other competitive factors include quality of service, range of
products available, customer loyalty schemes, etc. Back
See footnote 2 for an explanation of "data exclusivity". Back