Generic drug makers want congress to fix loopholes

Generic drug products cost up to 60 percent less their brand name counterparts.  Generic drug makers are arguing that Congress needs to fix a patent-law loophole that favors the brand name competitors.

The patents on name-brand drugs worth $16 billion annually are set to expire this year.

"As a lot of the big blockbuster drugs from the '90s have come off patent, it has created an opportunity for generics," said Herman Saftlas, analyst with Standard and Poors.

"To counter that opportunity, the branded companies have come up with new ways to salvage as much of their business as possible."

Among the blockbusters scheduled to expire in the next two years are Schering Plough's allergy treatment Clarinex, Merck's osteoporosis drug Fosamax and Pfizer's hypertension drug Norvasc.

A legal loophole allows name-brand manufacturers to launch cheaper versions of drugs just as they lose patent protection. That's a loophole the generics want lawmakers to close.

As such, three senior Senate Democrats and a bipartisan group of House members have introduced bills to put an end to this practice.

Promoting generic drugs is seen as one way to keep government spending in check.

Still, policy analysts say generic drug makers face extensive adversity in changing the patent law, and they must prepare for a fight on another front - proposed regulatory fees for their drug applications.

Under the president's budget released earlier this month, generic drug makers would pay a fee each time they submit a new product for review. The Food and Drug Administration hopes to raise nearly $16 million through this particular program in fiscal 2008.

Given that the FDA has a backlog of more than 1,200 generic drug applications, policymakers say user fees are worth considering.

Lobbyists for the generic manufacturers are using the proposed fees to draw attention back to the patent-law loophole they say must be fixed.

The FDA approves generic versions of drugs when either the patent of the original drug has expired or a generic company has shown the patent to be invalid. Because the first company to bring out a generic version of a blockbuster drug can expect massive profits, generic firms spend considerable time and money challenging patents.

More importantly, the first company to successfully challenge a patent can market the generic exclusively for six months.

However, the law can't stop the original patent holder from launching an "authorized generic" through a subsidiary or a third party.

According to research by Merrill Lynch analyst Greg Gilbert, the sales of an authorized generic drug during the exclusivity period can cut the generic maker's profits by 59 percent.