As Authorized Generics Proliferate the Market, Their True Benefits Are Unclear

Pharmaceutical manufacturers likely will continue to turn to authorized generics — drugs produced by brand-name drugmakers without the brand label — as they face increased pushback against high drug prices, but payers and patients probably won’t see much benefit as a result, according to industry experts.

“I think we will continue to see authorized generics competing with traditional generics,” says Stacie Dusetzina, Ph.D., associate professor of health policy at Vanderbilt University School of Medicine. “I’m hopeful that we will see fewer signs that they are being used in pay-for-delay types of arrangements or to discourage traditional generic competition.”

However, Dusetzina, lead author of a viewpoint on authorized generics published in JAMA Internal Medicine, says drug manufacturers may ramp up their efforts to introduce authorized generics in cases where they are being closely scrutinized regarding their pricing practices. Companies have used this tactic with insulin, with epinephrine injectors and with hepatitis C treatment, she tells AIS Health.

Eli Lilly and Co. introduced insulin lispro, an authorized generic for Lilly’s Humalog, in March 2019, and Novo Nordisk A/S launched insulin aspart, another authorized generic for Novolog, in January 2020. Gilead Sciences, Inc., launched authorized generics in September 2018 for its hepatitis C drugs Harvoni (ledipasvir/sofosbuvir) and Epclusa (sofosbuvir/velpatasvir). Mylan Specialty L.P., which makes EpiPen epinephrine auto-injectors, launched an authorized generic for that product in 2016.

“As pressure grows to address drug prices, companies may try to use this approach to appease policymakers, but the reality is that these authorized generics are not likely to reduce spending on drugs by most payers,” Dusetzina says. The same reasoning applies to patient spending, she adds.

Ashraf Shehata, partner and advisory industry leader for health plans at consulting firm KPMG, says he expects to see more authorized generics in the short term “to help soften some of the impact of the transparency issues that are going to arise” as a result of drug pricing policy initiatives. “Longer term, I do think authorized generics are here to stay.”

This will be part of a “broader competitive position” for drug manufacturers as managed care starts to roll out different programs around drug classes and therapeutic areas, Shehata tells AIS Health. “It might be a venue for brands to basically get themselves into these more difficult negotiations.”

F. Randy Vogenberg, Ph.D., principal at the Institute for Integrated Healthcare in Greenville, S.C., agrees that authorized generics are a useful tool for drug manufacturers, although they’ve generally been used only sporadically.

“In the old days — the heyday of blockbuster brand product pipelines — brand manufacturers couldn’t be bothered with authorized generics. They were onto their next new entity,” Vogenberg tells AIS Health. “Today, with pressures from third-party payers and government, maintaining the cash flow through life-cycle profit makes all the sense in the world, especially in markets where new entities are now few and far between for select conditions.” This tactic could spread elsewhere in the health care supply chain, he says.

Most authorized generics have been non-biologic products, Vogenberg says, “due to the clarity in determining substitution at the point of care along with FDA regulations on switching. That being said, the real opportunities lie with biologic and gene therapy products that are the key drivers of high-cost claims in most plan sponsor plans. The problem with biologics is that there are biosimilars but not fully interchangeable generic products.”

As market dynamics shift toward biologic and gene-based therapies, it could limit the future value of using authorized generics for drug manfacturers, Vogenberg points out.

The JAMA viewpoint outlined three strategies that the authors say underlie the timing and other factors surrounding authorized-generic entry:

Brand-name drug manufacturers may seek to introduce an authorized generic, either at the same time as a traditional generic drug is first marketed or later, to maintain market share and related revenue despite competition from one or more traditional generics.

Manufacturers of brand-name drugs may strike a “pay for delay” deal with a generic manufacturer, and link delayed generic entry with a promise not to launch an authorized generic during the 180-day generic exclusivity period.

Brand-name manufacturers may seek to launch authorized generics even when substantial patent life remains on the brand-name drugs. “Epinephrine, insulin and medications for hepatitis C are examples of drugs for which high launch prices or substantial list price increases were the subject of congressional investigations,” the authors wrote. “Manufacturers of these products likely used authorized generic entry with large list price reductions to allay public pressure for the federal government to take more meaningful steps to decrease the price of prescription drugs.”

Out of the three strategies outlined in the paper, Dusetzina says it’s likely most common for manufacturers to use authorized generics to compete with traditional generic drugs for market share. A 2011 report from the Federal Trade Commission indicated this practice was common, she says, “especially for name-brand drugs with high sales volumes.”

Benefits Grow After Patents Expire

“From the limited evidence available, it seems that authorized generics provide benefits [to payers and patients] when they compete with traditional generic drugs after the brand-name drug’s patent has expired,” Dusetzina says, noting that this competition results in lower prices both for the branded drug and the authorized generic.

However, “when authorized generics are used in pay-for-delay, that is harmful for patients and the system,” she says. “As far as authorized generics competing with brands, when no other generic is available, it isn’t clear yet how much they might benefit patients. For patients paying cash or high deductibles, they can provide some financial relief, though prices may still be too high in those cases.”

For example, the JAMA viewpoint noted, in 2018 the list price for the authorized generic version of a full course of Epclusa for treatment of chronic hepatitis C was $24,000 compared with $74,760 for the branded medicine. “Despite a substantial list price reduction, this treatment would likely remain unaffordable for most people without health insurance,” the authors wrote.

Authorized generics may not save money for health plans, which may in turn exclude them from formularies, the viewpoint authors wrote: “Estimated rebates for brand-name insulins and hepatitis C medications…exceed 50%. If net prices for health plans (after accounting for manufacturer rebates) are lower for a brand-name drug than its authorized generic, there is no incentive to offer authorized generics, despite their lower list prices.”

Vogenberg also is skeptical about the benefits for plan sponsors. “Whether or not an individual payer (third party administrator) or benefit plan sponsor (insurer or employer) benefits from an authorized generic is also hard to determine for any individual drug product, including authorized generics,” he says. “Typically, the answer is ‘very little,’ and akin to what happens to the patient. Such highly variable experiences by plan sponsors and patients places the pressure back on the manufacturer rather than the intermediator (third party administrator or pharmacy benefit manager), and that does not help anyone.”

Direct-to-Consumer Could Alter Market

Still, Shehata points out, as medical cost trends revert to more-normal levels post-pandemic, plans will continue to transfer more drug spending to members, and authorized generics could help to lower patient out-of-pocket costs.

Authorized generics might actually find another market in direct-to-consumer loyalty card and purchasing card/purchasing club programs, Shehata suggests. “As these programs take off — the ones that we’ve seen with Amazon and others — that could open up a whole new market for authorized generics, especially if there’s a little bit more transparency on the brand of the drug and the manufacturer.”

Dusetzina argues that more research is needed into authorized generics’ effects on drug pricing and patient access. “There are some ongoing efforts to understand how authorized generic drugs are used and how much they impact total drug spending,” she says. “Ultimately, it isn’t clear that they would reduce spending for health plans, or by how much. There are also outstanding questions about whether the threat of authorized generic entry could reduce traditional generic entry, which further complicates this question.”

Read the JAMA viewpoint at

by Jane Anderson

© 2024 MMIT
Freelance Reporter

Freelance Reporter Freelance Reporter

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