Generic Pharma Battles for Allegra Rights

OCTOBER 01, 2005
Michelle Whelan

Rival generic drug makers have struck a deal to create a competitive edge in what has become an overly crowded marketplace. The agreement includes a deal between industry giant Teva Pharmaceuticals and Barr Laboratories, in which Barr handed its rights to 180 days of marketing exclusivity over to Teva for the generic version of the blockbuster allergy drug Allegra (fexofenadine HCl). In exchange, Teva will help shoulder the costs of litigation associated with an at-risk launch, as well as giving Barr a negotiated percentage of the gross profit from sales of the drug both during and following the 180-day marketing exclusivity—a window whereby generic drug makers can recoup investment costs and generate a profit. This comes after Barr had secured final US regulatory approval to market a generic version of the drug in 30-, 60-, and 180-mg strengths.

That window, however, could be slammed shut after the announcement that Sanofi-Aventis, which holds the intellectual property rights for Allegra, inked a distribution and supply deal with generic drug maker Prasco Laboratories to launch an authorized generic version of fexofenadine HCl tablets in 30-, 60-, and 180-mg formulations. The launch could come at any time during Teva's 180-day exclusivity period—a bone of contention among many players in the generic industry, and a growing practice the Generic Pharmaceutical Association (GPhA) continues to fight to change. GPhA maintains that the practice is counter to the intention of the Hatch-Waxman Act, which created the moneymaking 6-month window for generic drug makers willing to challenge a drug's patent.

Sanofi-Aventis is also urging the courts to block generic Allegra until after the expiration of various patents—an effort that could preserve the company's market exclusivity for a decade or more. Branded sales of Allegra brought in $1.4 billion for the company, based on IMS data for the 12 months ending June 2005. The first generic fexofenadine to hit the market stands to reap a substantial portion of those profits.

The agreement between Teva and Barr to pursue an at-risk launch for generic Allegra indicates how generic drug makers are aggressively responding to a more challenging time in the industry, with fewer generic exclusivity opportunities, increased competition and pricing pressures, and new entrants to the market, such as India-based players. "This period will see generic drug companies retrench and reevaluate," said Arthur Wong, pharmaceutical analyst for Standard & Poor's.

For instance, in today's generic marketplace, if a drug maker does not have access to first-to-file status, like Teva, the company will either buy or rent that status. It is also likely that generic industry players will generate more risk-sharing opportunities and ink more creative deals like the latest between Teva and Barr, moving forward.

Israel Makov, president and chief executive officer of Teva, said that the launch of generic fexofenadine represents the culmination of many months of work between Teva and Barr. "It allows us to accelerate the availability of this important generic product and expands the already large portfolio of generic pharmaceutical products that we offer to consumers," said Makov.

For patients, generic Allegra means a great savings. A boon for drugstores, generic fexofenadine means a much wider profit margin, because gross-profit dollars on generics generally are higher than on branded drugs.

"Our research shows each generic drug garnering at least $5 more in gross-profit dollars than the branded equivalent," said Lehman Brothers analyst Meredith Adler. "The incremental could be even higher for the largest [drugstore] retailers, since significant scale allows for a lower acquisition cost."

As the generic market for fexofenadine grows, drugstores will have more generic versions from which to choose. According to court documents, 5 other companies—including Impax Labs, Mylan, Dr. Reddy's, Sandoz, and Ranbaxy—currently are involved in Allegra or Allegra-D patent challenges.

"Potential launches of generic Allegra by other players after Teva/Barr's 6-month generic exclusivity period concludes depend on the expiration of each company's regulatory 30-month stay, the ability of each company to receive final FDA approval, and each company's assessment of outstanding legal risk," said Merrill Lynch analyst Gregory Gilbert. "To date, no other player has received tentative approval for generic Allegra; however, this could potentially occur soon."

Barr also has first-to-file status and potential 180-day marketing exclusivity for generic Allegra-D, with annual sales of approximately $413 million. Impax and Mylan also have received tentative approvals. Gilbert said he believes that a 3-way strategic alliance to launch Allegra-D is possible between Barr, Impax, and Teva.

Ms. Whelan is a freelance writer based in Teaneck, NJ.

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