Your Kid’s Acne Medicine Seem Pricy? It Is, and Here’s Why -- And Don’t Fall for the Fat Dividend
In its latest bid to level the playing field for generic drugs, the US Federal Trade Commission has filed a supportive brief in a lawsuit charging Warner Chilcott (WCRX) with concocting various schemes to thwart generic competition for its Doyrx acne pill. The lawsuit was filed last July by Mylan Laboratories (MYL), which claims the tactics were anticompetitive and cost consumers and taxpayers hundreds of millions of dollars.
At issue is a concept called product switching or product hopping in which a brand-name drug maker makes modest reformulations that purportedly offer little or no therapeutic advantages, but cause generic drug makers to reformulate their own aspiring copycat versions. Such tactics can delay generic entries into the marketplace and, as a result, forestall competition that, presumably, would offer lower prices to consumers and government programs.
And this is what Mylan accuses Warner Chilcott of doing several times over the past few years. To keep generic competition at bay, Warner Chilcott allegedly converted the market from Doryx capsules to tablets; released a study for administering Doryx with applesauce and sought a labeling change to require generic rivals to develop tablets that could be sprinkled over applesauce; and added scores, or lines, on Doryx tablets so patients would presumably find it easier to divide a tablet into thirds, court documents.
With each move, Warner Chilcott succeeded in delaying competition and Mylan cites internal documents that describe at least one of these moves as part of an “anti-generic strategy.” And in doing so, Mylan charges that Warner Chilcott successfully maintained a monopoly, an argument with which the FTC agreed in its amicus, or friend-of-the-court brief filed in federal court yesterday.
“Product-switching, or product-hopping, can be an effective way to game the regulatory structure that governs the approval and sale of generic drugs, thereby frustrating the efforts of federal and state policymakers to facilitate price competition in pharmaceutical markets,” the FTC writes in its brief. “A brand company can interfere with the mechanism by which generic drugs compete by making modest non-therapeutic changes to its product, and effectively prevent generic competition, not because the reformulated product is preferred by consumers, but simply because it is different” (here is the brief).
One can see why Warner Chilcott would fight hard to hold onto what it has. Sales and the stock, of late, have been on the decline. And though the acne medicine Doryx sold just $73 million in the nine months ended September 30, 2012, vs. $127 million a year earlier, every little bit helps.
This is not the first time that a federal agency has looked askance at Warner Chilcott and its tactics. Last year, the drug maker filed a citizen petition with the FDA in hopes the agency would force generic rivals to rework their own forthcoming versions of copycat Doryx pills with additional scores, which would delay approval of the rival products. The FDA, however, denied the gambit (see prior Pharma news).
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Ed Silverman is the editor of Pharmalot and a contributor to YCharts, which includes the just-released YCharts Pro Platinum for professional investors.