A Cancer Drug May Hold Key To Stable Generics Pricing In US For Indian Firms
An oral cancer drug going off patent will be a test for Indian makers of generic drugs battling price erosion in the U.S.
An oral cancer drug going off patent will be a test for Indian generic drugmakers battling price erosion in the U.S., their largest market. The innovator and the makers of copycat versions have agreed upon a new kind of contract. The idea is to limit competition and protect margins.
Celgene Corp.'s patent for Revlimid fully expires in 2026. The drug has a market of around $12.8 billion (Rs 1 lakh crore) revenue globally, with U.S. sales alone amounting to $ 8.7 billion (around Rs 70,000 crore) in 2021, according to disclosures by Bristol Myers Squibb, Celgene's holding company.
In case of Revlimid, a batch of patents unconditionally expires on Jan. 31, 2026. That would give all companies a licence to sell the generic version with no limits. But Dr. Reddy's Laboratories Ltd. had contested in court to invalidate three of these patents to launch its version before 2023.
The U.S. Patent & Trademark Office, however, refused to invalidate the three patents. Bristol Myers then had signed a settlement with the Indian generics company to ink “volume-limited” agreements to launch sometime after March 2022. It allows Dr. Reddy's Laboratories a certain percentage of the market share every year, at times offering a six-month exclusivity period for certain dosage limits.
Bristol Myers signed similar agreements with Natco Pharma-Teva, Zydus Lifesciences Ltd., Cipla Ltd., Lupin Ltd., Biocon Ltd., Aurobindo Pharma Ltd., Torrent Pharmaceuticals Ltd., Sun Pharmaceutical Industries Ltd. as also the Canada-based Apotex Inc. and U.S.-based Alvogen. The terms are confidential but there are clauses on maximum volume sales and exclusivity.
Price erosion with the launch of generics has been a severe issue in the U.S. "The market size can usually contract up to 90%-95%," according to Vishal Manchanda, pharma analyst at Systematix. "The limited-volume agreements keep in check the supply thus, balancing the demand-supply dynamics and may therefore, prevent severe price erosions at the outset."
Exclusivity deals will allow certain generic drugmakers to earn some profits before facing competition.
Bristol Myers lost exclusivity in the April-June period. But, despite Natco Pharma launching the first generic versions with its partner Teva Pharmaceutical Industries Ltd., Bristol Myers' year-on-year sales rose 1%, indicating low price erosion, if any. Data on product pricing in the U.S. is not available publicly.
That, however, may change from September onwards as new companies enter the market.
Dr. Reddy's Chief Executive Officer, Erez Israeli in the Q1FY23 post-earnings call had announced that they, too, were going to have a volume-limited launch during September 2022, "and we will have that kind of permission to do that between September 2022 and Jan. 31, 2026, after that it will be unlimited".
Accordingly, the company announced launch of Lenalidomide capsules (Revlimid's generic) in the U.S. with two of six strengths eligible for first-to-market, 180-day exclusivity on Sept. 7, six months post Natco Pharma's launch.
Zydus Lifesciences, too, launched Lenalidomide capsules in the U.S. on Sept. 20.
The U.S. Food and Drug Administration has also approved Lenalidomide molecule for Cipla, Zydus Lifesciences, Dr. Reddy's, Natco, Mylan, Alvogen and Apotex, while Sun Pharma, Biocon, Lupin, Torrent Pharma and Aurobindo Pharma await approvals.
Natco Pharma's agreement allowed it to launch the first generic version of Revlimid giving it an exclusivity of six months. In the Q4FY21 concall, the management had stated that 70-75% of its stock remained after one month of its launch and would be sold in FY23.
In Q1FY23 commentary, the management said that it had sold off most of the total Revlimid stock of FY23, further stating that "Revlimid contribution in Q2 and Q3 will be minimum". This could be an indicator of having almost reached its permissible volume-limit.
Cipla, too, had said in its Q1FY23 concall that they expect to launch post receipt of approval. Since the U.S. FDA has approved, the launch may happen soon.
Torrent Pharma, while refusing to disclose the exact date, said that they were not in the initial two phases of launch, while Sun Pharma refused to divulge launch details on the post-earnings call. Aurobindo Pharma stated that they shall be launching in FY24.
Lupin, in its last quarter concall, expressed a cautious view on the volume-limited agreement.
"We saw risk in launching a limited quantity authorised generic. We saw risk in the potential launch in the near-term," the management said.
Emails sent to Natco Pharma, Dr. Reddy's, Zydus Lifesciences, Lupin, Cipla, Torrent Pharma, Sun Pharma, Biocon and Aurobindo Pharma have remained unanswered.
Manchanda expects a 20-30% price erosion in FY22 on Revlimid, around 50% in FY23, 60% and 70% in FY24 and FY25, respectively, prior to the patent expiry in January 2026.
While the actual market reaction cannot be predicted, the onslaught of expected launches will define what happens next.
Still, Revlimid may set a precedent for future deals.