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What Are Authorized Generics?

MHE PublicationManaged Healthcare Executive October 2019 Issue
Volume 29
Issue 10

Authorized generics have been gaining popularity with pharmaceutical manufacturers, but just how do they impact pharmacies?

generic pills
Karen Berger

Karen Berger

Authorized generics might just be the answer for drug manufacturers whose patents for their branded drugs have expired. Instead of risking the loss of market share when other drug companies enter the generics marketplace, the brand name manufacturers could develop their own generics.

An authorized generic is exactly the same product as an approved branded drug, but is marketed without the brand name on the label. Usually sold at a lower price, it can be marketed by a branded drug company or by another company with the brand company’s permission.

“By making an authorized generic, a brand manufacturer gets a jump start on the competition as generics start to appear,” says Karen Berger, PharmD, a staff pharmacist at Plymouth Park Pharmacy in Fair Lawn, NJ.

“Authorized generics, which are identical to the brand, should not be confused with a branded generic that has gone through the abbreviated new drug application (ANDA) process and is assigned a name other than its chemical name,” she says.

Leaving nothing to chance

“While a separate NDA is not required for marketing an authorized generic, FDA requires that the NDA holder notify the FDA if it markets an authorized generic. The NDA holder may market both an authorized generic and its brand name product at the same time,” says Charlie Kohler, spokesperson for the FDA.

That’s exactly what PDL BioPharma did this year to protect its expensive blood pressure medicine Tekturna (aliskiren tablets) under threat of a generic competitor and the end of its patent last year. It produced its own authorized generic of the drug that sells for less than its branded version but more than competing generics.

In essence, PDL is competing against itself and maximizing profits, suggests an article in KHN. According to the Pharmaceutical Research and Manufacturers of America (PhRMA), authorized generics increase competition through lower prices and cost savings.

Eli Lilly used a similar strategy, making authorized generics before its patents for Humalog (insulin lispro) expired. Eli Lilly recently made its authorized generic of insulin lispro injection available at half the cost.

Mylan did the same for its EpiPen, and anticipates that 85% of prescriptions will shift to its new authorized EpiPen generic.

Those are just a few examples of the nearly 1,200 authorized generics tracked by the FDA.

Why authorized generics?

One of the primary goals for pharmaceutical brand teams that undertake an authorized generics strategy is to slow the pace of market share decline after market exclusivity loss, according to a 2015 study from Cutting Edge Information.

“While brand name manufacturers want patients to receive authorized generics, I believe there is absolutely no need to specifically request an authorized generic once there are various generic companies offering a medication. A regular generic should do just fine as well as save money,” Berger says.

David Lassen, PharmD, chief clinical officer, Prime Therapeutics, has seen an increased trend in manufacturers releasing authorized generics, primarily for two reasons:

  • Recent market pressures around high drug costs have prompted them to provide cost relief, and

  • manufacturers can maintain market share of product through authorized generics.

“Prime takes a ‘lowest net cost’ approach to managing drugs with our clients, which in some cases means encouraging the use of originator brands over authorized generics when the net cost (with rebate) is lower than the authorized generic price,” he says.  

“In doing so, the objective is to help ensure members aren't penalized by higher out-of-pocket costs. For those members with coinsurance and high-deductible plans, we override benefits to help ensure the member isn't penalized,” Lassen says.

Pfizer, which has the broadest portfolio of authorized generics in the United States, stated its position on authorized generics in an August 2018 report. The company believes that authorized generics “help advance public health and the broader healthcare system by increasing competition, improving access, and helping patients adhere to high quality, affordable medicines.”

Pfizer attributes increased adherence to more ease in switching from a branded product to an authorized generic that looks similar to the original drug: As reported in a 2018 issue of BMJ, in an FDA-sponsored study of 210,000 patients, switching from a brand to an authorized generic was associated with lower “switchback” rates compared to switching from a brand to a regular generic.

Increased competition

“For generic drug companies, there is a strong incentive to be the first to file a Paragraph IV certification under Hatch-Waxman and market their products during the 180-day exclusivity period, even if there is shared generic exclusivity, because competition with other generic products is more limited during that period,” says Andrew Powaleny, director, public affairs, PhRMA.

The Hatch Waxman Act of 1984 allows the first manufacturer that comes out with an ANDA to have 180 days of exclusivity, at which time the FDA can’t approve another generic, often resulting in lawsuits and counter suits. However, if an authorized generic avoids a lawsuit while holding tight in its 180-day exclusivity period, the manufacturer will make money on both the brand and authorized generic, Berger says.

After the 180-day period, other generics might start to hit the market at a lower price, urging large chains and buying groups to send these to their stores from wholesalers.

Related:  How New Initiatives Could Affect Generic Drug Costs

Cost savings

According to the 

Federal Trade Commission

, consumers and the healthcare system could benefit from an authorized generic on the market during an 180-day exclusivity period because of increased competition that reduces generic prices and results in significant cost savings.

An FTC report notes that “competition from an authorized generic during the 180-day exclusivity period is associated with retail generic prices that are 4% to 8% lower and wholesale generic prices that are 7% to 14% lower than prices without authorized generic competition.”

In addition, the FTC found that, following the 180-day exclusivity period, the presence of an authorized generic “tended to be associated with lower prices in markets where an exclusivity period had expired” as retail prices post-exclusivity were found to be 10% to 11% lower and wholesale prices were 6% to 13% less. 

“As such, Congress should reject attempts to delay, restrict or prohibit authorized generics,” Powaleny says.

Berger says a patient’s insurance determines if authorized generics could save money. “Usually generics should have a lower copay so technically an authorized generic should have a lower copay for the patient than a brand would. Because every insurance has different structures and rebates and different technicalities, it is hard to generalize, but I would venture to say that most generics-whether it is a regular old generic, branded generic, or authorized one-should be less expensive than a brand,” she says.

Both Berger and Powaleny agree that drug rebates could influence the true cost of a drug. Berger says rebates play a role in price savings from authorized generics that can be more profitable than a brand name drug because they usually aren’t subject to rebates that flow from a drugmaker to PBMs and lower a brand’s revenue.

“If an authorized generic is not more cost effective than a brand discount (cost) minus the rebate, the plan (employer) may be better off with the brand; however, the member would likely pay less with the authorized generic as it has a deeper discount (cost), and the member pays a generic copayment or a lower cost in the deductible phase,” she says.

Medicaid, however, requires manufacturers to calculate and pay mandatory Medicaid rebates on AGs taken by Medicaid patients, Powaleny says.

Preventing drug shortages

Berger and Lassen agree that authorized generics have not filled the void during drug shortages. “It seems that when a drug is unavailable, it’s unavailable from every manufacturer whether it is a regular generic, authorized, or branded,” Berger says.

“To date, we have not seen the use of authorized generics play a significant role in helping to eliminate drug shortages,” Lassen says.

Sanofi, however, says that in 2015, it developed an authorized generic version of leflunomide for rheumatoid arthritis–17 years after the launch of Arava, its branded version-to meet demand left by a drug shortage from generic makers of leflunomide.

Berger predicts that the next big step for authorized generics will occur when companies that make biologics, such as AbbVie’s Humira (adalimumab), try to extend their profitability by making an authorized generic when their patents expire.

Read more:  Drug Shortages Continue to Burden Healthcare


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