Study: Delaying authorized generics is on the decline

The practice of a brand manufacturer delaying the launch of an authorized generic medication has declined over recent years, and its effects on the market can be both positive and negative depending on the circumstances, according to a recent study published in Health Affairs.

In 2011, the Federal Trade Commission (FTC) released a report that found when a brand manufacturer authorizes a generic medication, the price of the brand medication and the authorized generic increase in the 180-day window after the generic medication comes to market.

“The brand manufacturer’s decision about launching an authorized generic can affect both the start date and the number of generic competitors. An authorized generic is the only generic that can compete with a traditional generic during its 180-day exclusivity period,” Keith Drake, of Greylock McKinnon Associates, and colleagues explained.

However, the decision on when to launch an authorized generic can also be used as a bargaining chip for settlement negotiations from brand manufacturers to manufacturers of generic medications, the authors noted, and the concern there is that the settlement might contain a “transfer of value to the generic manufacturer that induces it to delay its entry” or come with a “no-authorized-generic agreement.”

“The manufacturer’s pledge not to launch an authorized generic potentially harms purchasers twice: by inducing the traditional generic to delay its entry and by reducing generic competition during the exclusivity period,” Drake and colleagues wrote.

Using data from 146 oral-solid generic drugs with an abbreviated new drug application (ANDA) that entered the market between the third quarter of 2016 and the second quarter of 2023, the researchers identified 69 new authorized generic drugs that entered the market and were not present in the FTC report. A majority of authorized generics (73.9%) launched in the 30 days after a generic ANDA medication entered the market, while 8.7% launched over 180 days after a generic ANDA medication’s market entry. For first-time ANDA market entries, 43.0% were authorized generics.

When comparing authorized generic launches by year, the researchers found 34 of 56 generics (60.7%) launched between 2016 and 2018 contained an authorized generic, while 5 of 40 generics launched between 2021 and 2023 had an authorized generic (P = .001). Compared with no patent litigation settlement, an authorized generic was significantly less likely to enter the market following a patent litigation settlement (P < .001).

Drake and colleagues found 32 drugs (62.7%) with pre-generic brand sales totaling at least $500 million per year did not have an authorized generic in the 180-day period after a generic was brought to market, while 14 of 24 top-selling drugs (58.3%) with one ANDA drug that entered the market did not have an authorized generic.

Authorized generics tended to reduce the initial price for generic drugs, the researchers found. They noted that the generic for a brand drug was an average of 80% of the brand price in cases where authorized generics were not present in the market. There was an 8.4% to 10.3% reduction in drug prices as measured by Medicaid data where single ANDA drugs and authorized generics were present (P < .05), and a 13.0% to 18.2% reduction in on-invoice prices (P < .05) for these drugs as measured by data from the National Average Drug Acquisition Cost.

The researchers noted that about half of sales went to an authorized generic in the first 180 days when there were two generic products on the market, and the authorized generic captured about 30% of sales after that. There was a similar breakdown for markets where an authorized generic was not present. “These results are consistent with those of the FTC report and with prior research showing that when there is an adequate supply of generic product, the number of suppliers does not hasten generic substitution,” the researchers said.

Drake and colleagues said limiting the practice of withholding authorized generics “could lead to substantial savings for drug purchasers.”

For instance, 8 drugs evaluated that underwent patent litigation settlement may have contained no-authorized-generic agreements. These no-authorized-generic agreements “may have substantially affected drug purchasers’ spending, as the brand-name drugs involved had more than $17 billion in combined annual pregeneric sales,” Drake and colleagues said.

Health Affairs Drake et al.

Study: Delaying authorized generics is on the decline

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