Generics: Long drawn journey! - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Generics: Long drawn journey!

Aug 18, 2004

US markets have been very lucrative for the Indian pharma companies and many companies such as Ranbaxy and Dr Reddy's capitalized on this opportunity. At the start, these companies entered the US as a supplier of bulk drugs, but with time they started looking at the more profitable generics business. In this article, we try to give you a perspective of what generics is all about and how do companies do generics business. Generics pharmaceutical products are bio-equivalents of their respective branded (patented) products. By bio-equivalence we mean that the therapeutic use or effect of the generic product and the patented product will be the same on certain set parameters. These products are providing a cost efficient alternative to the branded products. When patent or other regulatory exclusivity no longer protects a branded product, opportunities for other participants in the industry emerge and they introduce off-patent or generic counter part to the branded product.

To get an approval to launch a generic is an uphill task, as the regulations of USFDA regarding the quality of drug are very stringent. A company seeking to foray into generics space with a certain drug has to first file an abbreviated new drug application (ANDA) with the USFDA. This ANDA should contain data regarding the bio-equivalence of the drug with the branded product. The approval of ANDA does take time and apart from establishing bio-equivalence, USFDA checks up the manufacturing facilities and operations. The timing of an ANDA approval depends in part on patent protections for the original drug. The ANDA should contain information regarding the patented drug, which is published by the USFDA 'Orange book'. Based on this information from the book, the applicant for the generic version of the drug can file application under following Paragraphs (Para).

  • Para I:  The application states that the required patent information relating to such patent has not been filed, i.e. the drug is not patented.

  • Para II:  It says that the patent has expired

  • Para III:  It says that the patent will expire on a particular date

  • Para IV:  It says that that such patent is invalid or will not be infringed by the drug, for which approval is being sought.

A certificate by USFDA in Para I and Para II permits the ANDA to be approved immediately, if it is eligible from the regulatory side. A certificate under Para III indicates that the ANDA may be approved on the patent expiration date. However, the most contentious is the Para IV certification.

A paragraph IV certification begins a process in which the question of whether the listed patent is valid or will be infringed by the proposed generic product, may be answered by the court prior to the expiration of the patent. The ANDA applicant who files for a Para IV certification on a listed patent must notify the patent owner or the patent holder that it has filed an ANDA containing a patent challenge. If the current patent owner files a patent infringement suit against the Para IV applicant within 45 days of the receipt of notice, FDA may not give final approval to the ANDA for at least 30 months from the date of the notice. This 30-month stay will apply unless the court reaches a decision earlier in the patent infringement case. If this period expires, the court can lengthen the period for the stay.

The law provides an incentive of 180 days of market exclusivity to the "first" successful generic applicant who challenges a listed patent by filing a Para IV certification and running the risk of having to defend a patent infringement suit. Dr. Reddy's got a Para IV certification for the drug Fluxotine and got 180-exclusivity. The 180-day period of exclusivity begins from the date the ANDA applicant starts commercial marketing of the generic drug (this was introduced in the recent amendment, which is favourable to generics companies. Earlier the 180 days exclusivity began the day court gave the decision). 180-days marketing exclusivity holds good only for the Para-IV applicants.

However, if the generic company loses the case in court, the application for generic drug is deemed to be filed under Para III. But 180 days exclusivity is not given in this case. Although Para IV certification is difficult to get, this is a way Dr. Reddy's has chosen, because it will help company get a critical mass in the generics space in one shot. Many generics companies adopt this strategy. However, this should be supplemented with non-Para IV filings, which will also help companies to create a critical mass in US generics space. Ranbaxy has adopted this strategy quiet successfully.

With over US$ 50 bn drugs likely to go off patent over the next 5 years, the companies are willing to take on this circuitous route, if it helps them change fortunes overnight.

Equitymaster requests your view! Post a comment on "Generics: Long drawn journey!". Click here!


More Views on News

3 Indian Pharma Companies that are Investing Big Time for the Future (Views On News)

Nov 9, 2021

In 2021, R&D of pharma companies roared to life in a never-before-seen way.

Demerger of Financial & Pharma Businesses puts Piramal Enterprises in Limelight (Views On News)

Oct 8, 2021

The company's shareholders will be issued 4 shares in the demerged entity for every 1 held in Piramal Enterprises.

Block Deal Disappoints Max Healthcare Shareholders. Stock Falls 6% (Views On News)

Sep 30, 2021

The divestment of 6.6% stake by the promoter is considered to be one of the largest block deals of the market.

This Stock Just Made a Historical Debut on the Exchanges (Views On News)

Nov 15, 2021

Shares of the company listed at premium of 253% from its IPO price, the highest ever.

Krsnaa Diagnostics IPO Opens Tomorrow: Key Points to Consider (Views On News)

Aug 3, 2021

Krsnaa Diagnostics grey market premium is at around Rs 440 from its issue price of Rs 933-954.

More Views on News

Most Popular

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Nov 26, 2021 (Close)