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US Bill a challenge for Indian generic firms

US Bill a challenge for Indian generic firms
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First Published: Tue, Dec 29 2009. 10 06 PM IST

Updated: Tue, Dec 29 2009. 10 06 PM IST
Will the passage of the US healthcare reform Bill benefit Indian generic pharmaceutical companies or harm them? One can get some clues from the reaction of two leading industry bodies representing two different sides of the debate.
The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the interests of Big Pharma and the Generic Pharmaceutical Association (GPhA) represents generic pharmaceutical companies operating in the US. PhRMA welcomes the passage of the Bill in the Senate, saying it expands the scope of healthcare coverage and also encourages innovation. GPhA, however, is disappointed and says that the Bill benefits branded drug companies rather than improve access to cheaper medicines.
The House and Senate versions of the Bill need to be reconciled before the final version is signed into law. For now, the innovator companies seem to have the upper hand. They had pledged a $80 billion reduction in healthcare costs over 10 years to the government and this has helped them.
Investors need to keep a watch on the developments as the Bill’s impact can be significant on Indian generic firms too. The US market is the main market for large Indian pharmaceutical generic firms.
One key issue is with respect to biogenerics, where innovator companies will get an exclusivity period of 12 years compared with the five-seven years that was originally being considered. This will considerably delay the entry of biogenerics into the market. It has no immediate impact but limits the potential that biogenerics offers to Indian companies. Most companies have been eyeing this segment as one of the new areas to drive growth.
Another proposal involves reducing the initial payments needed to be made by patients before the insurance coverage kicks in. Apparently, since patients had to pay a higher sum from their pocket, they preferred generic drugs, whereas now, that incentive may be lower.
But the most damaging proposal for the Indian industry could be one that seeks to ban the settlement deals they enter with the innovator drug companies. Initially, companies were fighting the patent challenge battles in court. But over the past few years, the all-or-nothing approach has given way to a middle path. Details of these settlements, especially financial, are seldom disclosed. But they could involve an upfront payment, the innovator firm authorizing the generic firm to launch a drug ahead of the patent expiry or some multiple drug marketing agreements.
This practice has been frowned upon as these settlements prevent cheaper drugs from reaching patients. If this makes it to the final version of the Bill, it will be a blow for Indian generic drug makers.
Eventually generic companies may benefit, too, as will innovator companies, because the Bill seeks to widen the scope of insurance coverage. It may be too premature to conclude that generic companies will be harmed but what is certain is that there are no unequivocal benefits for them either.
Write to us at marktomarket@livemint.com
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First Published: Tue, Dec 29 2009. 10 06 PM IST
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