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Formulary Management and LCM Patent Strategies: A Complex Interaction

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The 1984 passage of the Hatch-Waxman Act improved access to generic drugs primarily through an abbreviated new drug application (NDA) process. In the ideal scenario envisioned by Hatch-Waxman, introduction of generics would follow a straightforward timeline.

Planning to add generic drugs to a formulary is often a complicated endeavor.

Patent protection lasts for 20 years from time of patent filing, which may happen up to 10 years before a new drug goes on the market. For the remaining time on patent, the drug generally enjoys market exclusivity to allow drug developers to profit and recoup the costs of drug development.

Ideally, following patent expiration and loss of exclusivity, a generic drug would go on the market at a lower cost, but with its own 180-day exclusivity period. After that, additional generics would enter the market, bringing prices down further. In reality, however, the process is rarely that straightforward, which makes formulary management complicated.

Patents and Market Exclusivity May Not Run Concurrently

In theory, a drug patent could be issued or expire before, during, or after FDA approval. Exclusivity is granted only upon approval of a drug by the FDA. Consequently, the patent term and exclusivity may not run concurrently. Patents last 20 years from filing (but are subject to extension), while exclusivity is granted based on drug type, and typically lasts from six months to seven years. Exclusivity does not affect the patent term.

Effective formulary management depends on accurate prediction of the introduction of generics, and just knowing when patent expiration occurs, or when loss of exclusivity occurs is not necessarily enough information to make this prediction. Knowing both helps, but there are still no guarantees as to when generics will be introduced.

Factors Increasing Uncertainty of Generic Introduction

Extending a drug’s lifecycle is profitable to drug manufacturers. As patent expiration approaches, brands may attempt to extend a drug’s lifecycle by filing patents on isomers, metabolites, new drug delivery methods, and other modifications, whether or not they improve effectiveness, safety, or patient compliance. Such product enhancements can extend patent protection and forestall introduction of generics.

Generic drug makers take a considerable risk by launching before court cases over patent extensions are settled, so most choose to wait.

Generic drug companies can contest such lifecycle extensions in court, but there are no guarantees they will win. Regardless, generic introduction is usually postponed while cases are tied up in court. Generic drug makers can still introduce drugs at their own risk, but if they ultimately lose in court, they may have to compensate the branded manufacturer. Most generic manufacturers don’t want to take that risk.

How Formulary Managers Plan During Uncertainty of Generic Introduction

Understanding when patent expiration and loss of exclusivity occur can help those responsible for formulary management, as can following court cases over patent extensions by branded drug manufacturers.

Formulary managers can fight back against some tactics, like “product hops” by branded manufacturers. “Product hops” happen when brands substitute, rather than add new branded formulations of existing drug versions. Extended-release drug versions are popular in product hops. By taking away access to the original branded drugs, brands hope to forestall generic competition.

Increasingly, however, formulary managers simply refuse to include the new branded drug version, unless there are clear and explicit reasons to include it on their formularies. Formulary managers rarely position “hopped” products as preferred agents, and courts have increasingly been ruling against attempts at brand extensions based on product hops.

Introduction of generic drugs is often not as straightforward as formulary managers wish it were, due to non-concurrence between patent expiration and loss of exclusivity, brand extensions through reformulations, and court cases that discourage generics from moving forward.

However, by closely tracking patent expiration and loss of exclusivity, as well as court cases involving branded manufacturers and generics, formulary managers can sometimes make more accurate predictions. Understanding and following trends in court rulings can help as well. It isn’t easy, but with sufficient information, formulary managers can be prepared to introduce cheaper generics to their formularies at the first opportunity, helping facilities, payers, and patients save money.

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