Bloomberg News

Pfizer May Get Generic Lipitor Delay Amid Ranbaxy FDA Troubles

September 01, 2011

Pfizer Inc. (PFE:US) may get a reprieve from generic competition to its $11 billion Lipitor cholesterol pill as Ranbaxy Laboratories Ltd. (RBXY) fights regulatory breaches that threaten to derail its push to produce the first U.S. copies.

Ranbaxy, India’s third-largest drugmaker by revenue, plans to introduce its copy of Lipitor, the world’s best-selling medicine, on Nov. 30. It must first persuade the Food and Drug Administration that its copy is equivalent to the original and that approval shouldn’t be thwarted by violations cited in 2009 at a plant identified in Ranbaxy’s drug application.

Failure to resolve the issue could prevent the FDA from clearing Ranbaxy’s Lipitor version by that date, said Ira Loss, an analyst with Washington Analysis. A delay also may stall plans by other generic-drug companies to introduce their versions of the $11 billion-a-year medicine, he said.

“I don’t remember another case where timely approval of the first generic on a big drug appears dependent upon cleaning up a mess in their manufacturing situation,” said Loss, who has followed the FDA for more than three decades. “Ranbaxy has repeatedly expressed confidence that this will all get resolved in time, but I’m not sure I believe them.”

Ranbaxy’s woes could also delay savings for the 3.5 million Americans who take Lipitor. A new generic medicine sometimes costs less than half the price of the original.

Americans spend $7 billion a year on Lipitor, according to Michael Kleinrock, director of research development at the IMS Institute for Healthcare Informatics in Parsippany, New Jersey. Generic-drug competition could cut that spending by $6 billion through 2015, he said.

Six Months Exclusivity

Ranbaxy says it plans to sell generic Lipitor with six months marketing exclusivity starting the last day of November. While a 1984 law grants that right to companies that are the first to challenge a drug’s patent, as Ranbaxy says it was with Lipitor, the pending FDA enforcement action may disrupt plans.

At least nine companies have sought FDA approval to sell Lipitor copies, according to U.S. court filings. Mylan Inc. (MYL:US), Teva Pharmaceutical Industries Ltd. (TEVA) and Dr. Reddy’s Laboratories Ltd., have settled Lipitor patent disputes with Pfizer and may start selling copies after Ranbaxy’s 180-day exclusivity expires. Dr. Reddy’s, India’s second biggest drugmaker, announced its settlement yesterday without disclosing details.

Those rivals may see their versions of generic Lipitor delayed if Ranbaxy fails to win clearance of its drug by Nov. 30, yet retains its six-month exclusivity, said Loss. The resulting lack of competition for Lipitor sales would give Pfizer a “de facto patent extension,” Loss said.

Watson Gain

Without a Ranbaxy approval, the only generic Lipitor to reach the market Nov. 30 would be an authorized version sold by Watson Pharmaceuticals Inc. (WPI:US) under an agreement with Pfizer. That pill doesn’t require FDA clearance because Pfizer will provide Lipitor to Watson to sell without the brand label in return for a share of the sales.

“Since Pfizer controls the supply of the authorized generic, it would be a bonanza for Pfizer, and maybe even for Watson, if there’s no other generic product out there,” Loss said. Pfizer reported $10.7 billion in worldwide Lipitor sales last year.

Watson may price generic Lipitor at only 5 percent less than Pfizer’s branded version if it doesn’t face immediate competition from Ranbaxy’s copy, said Ronny Gal, an analyst with Sanford C. Bernstein & Co. in New York.

Watson hasn’t disclosed its plans, said Patty Eisenhaur, a company spokeswoman, in an e-mail. “Should Ranbaxy be delayed on Nov. 30, we are prepared to supply the entire generic market with product,” she said.

Divvying Market Share

Ranbaxy may gain a 20 percent market share if its copy wins approval, Gal said. Teva and Mylan each may gain 15 to 20 percent of the market if their generic versions are approved, while Pfizer would have 30 percent of the market after three years, Gal said.

“I’m holding my breath until the FDA acts on Ranbaxy’s application,” possibly within a month, said Kleinrock. “It’s unprecedented to have a large manufacturer in such limbo so close to when it’s scheduled to start marketing a drug.’

Ranbaxy, 64 percent owned by Tokyo-based Daiichi Sankyo Co. (4568), could gain $400 million to $500 million in revenue from its generic version in the six months of exclusive sales, Deepak Malik and Ashish Thavkar of Emkay Global Financial Services Ltd. in Mumbai wrote in an Aug. 6 report.

The U.S. enforcement actions against Ranbaxy began in 2008 when the FDA cited manufacturing defects at two of the company’s India plants and subsequently barred it from importing 31 different drugs. The ban is still in effect. The following year, the agency said one of those plants in Paonta Sahib, India, falsified data used in drug applications.

Questions of Data Reliability

In a February 2009 letter to the company, the FDA said the findings “indicate a pattern and practice of submitting untrue statements of material fact and other wrongful conduct, which raise significant questions regarding the reliability of the data” in Ranbaxy’s drug submissions.

“Ranbaxy continues to work together with USA regulators for a confidential resolution” to the violations cited by FDA, Managing Director Arun Sawhney said Aug. 5 on a company earnings call. “The negotiations are progressing well so far.”

Ranbaxy spokesmen Krishnan Ramalingam and Raghu Kochar didn’t respond to e-mails seeking comment on the settlement negotiations or the FDA’s review of its Lipitor copy.

Shelly Burgess, an FDA spokeswoman, declined to comment on the agency’s pending review of Ranbaxy’s application, or on the company’s negotiations with the FDA and Justice Department regarding the plant violations.

Court Filings

A refusal to approve the drug “would not necessarily extinguish the possibility of exclusivity until Ranbaxy had exhausted all of its available appeals,” the FDA said in an April 4 court filing, responding to a lawsuit by Mylan.

Mylan’s lawsuit, dismissed May 3 by a federal judge, had sought to force the FDA to act on Ranbaxy’s application.

If Ranbaxy anticipates a lengthy approval delay, it could waive its 180-day exclusivity in exchange for a payment from a rival generic drugmaker, Credit Suisse equity analysts Edward J. Kelly and Rajat Suri said Aug. 17 in a note to investors. It also could partner with another drugmaker to make generic Lipitor and split the sales, Gal said.

“Either they do it alone, or they do it with someone else” to gain timely FDA approval, Gal said. “That is the most likely outcome.”

Pfizer has been preparing for the effects of generic competition to Lipitor and 18 other drugs from 2010 through 2015 by selling business units and buying back shares.

Pharmacy-Benefits Managers

Express Scripts, Medco Health Solutions Inc. (MHS:US) and CVS Caremark Corp. (CVS:US) are among pharmacy-benefits managers that will benefit as blockbuster medicines go generic, said Helene Wolk, a Bernstein analyst in New York. The companies act as middlemen among drugmakers, pharmacies and health-plan sponsors to negotiate prices and manage patients’ use of drugs. Profits are tied to cutting patient drug costs.

“Generics are the key growth driver across the PBM universe,” Wolk said in an interview. If Lipitor copies stall, “at least 25 percent of the earnings growth” from that generic in 2012 will disappear, she said.

An FDA rejection of Ranbaxy’s product may delay the rollout of generic Lipitor by as long as a year, Steve Scala, an analyst at Cowen & Co. in Boston, said May 3 in a note to clients.

“Such a delay would draw enormous pressure from various constituents, including Congress and other public interest groups,” Scala said. “In order to avoid this pressure, the FDA will find it expedient to approve” Ranbaxy’s application, he said.

To contact the reporter on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net


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Companies Mentioned

  • PFE
    (Pfizer Inc)
    • $28.92 USD
    • 0.10
    • 0.35%
  • MYL
    (Mylan Inc/PA)
    • $48.21 USD
    • 0.46
    • 0.95%
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