Mylan Duragesic Generic Launches Into “Irrationally” Priced Market

Mylan's ability to recoup profits lost to early competitive pricing on Duragesic generics could depend on the timing of other ANDA approvals and Johnson & Johnson's ability to supply an "authorized" generic, CEO Robert Coury said Feb. 3.

The long-awaited launch of Mylan's fentanyl transdermal system is being negatively impacted by "irrational pricing," the company said.

The pricing pressure resulted from "premarketing" by other ANDA filers and regulatory uncertainty that gave Sandoz an advantage in marketing an authorized generic, Coury said during an earnings call.

Mylan's generic launched upon final ANDA approval Jan. 28, five days after J&J lost pediatric exclusivity on Duragesic.

The approval came with FDA's denial of four citizen petitions that sought to delay market entry of Duragesic generics. Sandoz entered the market the same day with an authorized generic.

Mylan holds the only approved ANDA for transdermal fentanyl. Companies with pending ANDAs include Watson and Noven, which has licensed marketing rights to Endo.

During the earnings call, Coury described the "phenomenon" of other ANDA filers "premarketing" their generics based upon the expectation they would receive final approval in January. The CEO expressed similar observations in October (¹ (Also see "Duragesic Competition Could Add To Mylan’s “Authorized” Generics Fight" - Pink Sheet, 1 Nov, 2004.), p. 18).

"In my last call, I told you I didn't know how other companies without a tentative approval could predict when the FDA was going to approve their product," he said. "However as we moved closer and closer to market formation, the companies began...premarketing their particular product expecting that they were going to have approval."

The pricing effects from premarketing activities were compounded by the anticipated entry of an authorized generic, Coury said.

"When you had all the citizens' petitions, no one, none of us could predict which way the FDA was going to go," Coury said.

"So Sandoz' marketing position was, 'look, while the FDA's trying to figure out and while no one knows which way the citizens' petitions are going to go and how they're going to be ruled upon, one thing I can guarantee you if you sign up now is supply.'"

"So they began marketing as the authorized generic, locking up their supply at prices that were anticipating four or five competitors," the CEO said.

Even though Mylan was the only ANDA to receive approval, Sandoz "decided to maintain pricing levels that" were based upon "four or five or six competitors," he said.

Coury declined to discuss specific pricing metrics on Duragesic generics, and would not confirm one analyst's estimate that the marketplace is seeing generic discounting of 40%-50%.

Mylan's 25 mcg/hour patch carries an average wholesale price of $14.42, a 10% discount to Duragesic, according to Medi-Span's Price Alert.

Coury suggested that the timing of FDA approval of other Duragesic generics could allow Mylan to recover some of the early profits lost on the drug. The CEO previously has speculated that no other ANDAs would be approved until the end of March at the earliest.

The exec also cited potential supply problems for J&J and Sandoz.

"The innovator had problems with supply in the calendar year 2004 and...it's the innovator that is supplying the authorized generic," he said. Furthermore, "this is a Class II DEA drug, and there's only certain quantities that the [Drug Enforcement Agency] allows on Class II drugs."

"So if the innovator themselves have had supply problems when they were out there on their own, then you can only imagine with the authorized generic out there and depending upon when" other ANDAs are approved "there could be some opportunities going forward to potentially recover some of the misses, I think, that we've seen in terms of the price at market formation."

The Duragesic generic pricing environment was the "primary" factor in Mylan's downward revision of its earnings guidance. The company estimates earnings for fiscal year 2005 (ending March 31) will be 75¢-80¢ per diluted share.

The revision marks the second time Mylan has downgraded its FY 2005 earnings guidance. The company originally projected EPS of $1.30-$1.40, but suspended that guidance in June after FDA announced that Mylan's Duragesic generic could not enter the market until J&J's pediatric exclusivity expired (² (Also see "J&J Duragesic Pediatric Exclusivity Blocks Mylan Generic Until January" - Pink Sheet, 28 Jun, 2004.), p. 14).

Mylan announced revised 2005 EPS guidance of 80¢-90¢ in October.

Mylan's road to launching generic Duragesic has been a long and twisted one.

Its ANDA initially received final approval in November 2003, but the product did not launch due to pending patent litigation with J&J.

Mylan lost the patent case, and its generic was prohibited from entering the market until J&J's patent expired (³ (Also see "Mylan Loses Duragesic Case; Generic Launch Timing Dispute Moves To FDA" - Pink Sheet, 5 Apr, 2004.), p. 10).

Mylan sued over FDA's subsequent determination about the preclusive effect of J&J's pediatric extension. Mylan lost that case both at the trial and appellate court levels, and also lost its appeal in the patent case.

The practical effect of the rulings meant that Mylan would not enjoy 180 days of generic marketing exclusivity because the Duragesic patent expired before Mylan entered the market.

The generic's approval was delayed for another five days after J&J's pediatric exclusivity expired due to FDA's review of the citizen petitions.

Four petitions, including one filed by J&J's Alza on Nov. 12, requested FDA take specific actions before approving ANDAs for fentanyl transdermal systems.

Alza said fentanyl transdermal systems that employ a matrix design, such as that used by Mylan, should be characterized as a different dosage form and should not be AB-rated to Duragesic, which features a reservoir design.

⁴ Alza's petition also stated that matrix systems pose a "greater relative abuse potential" and FDA should require a "specially tailored risk minimization plan" for such products.

In response, FDA said the fentanyl transdermal matrix system should not be classified as a different dosage form from the Duragesic reservoir system because the agency does not base dosage form descriptions on release mechanisms.

"The petitioners argue that the matrix system may be subject to more abuse than the reservoir system because the fentanyl can be more easily extracted from the matrix system and that this difference distinguishes the two types of products as different dosage forms," the agency said.

"However, these concerns go to the safety of the formulation, not the sameness of the dosage form or the pharmaceutical equivalence of the products."

Furthermore, there is insufficient evidence to conclude that a matrix delivery system has "a higher abuse potential" than Duragesic's reservoir system, the agency said.

"We conclude that both matrix and reservoir formulations may be subject to abuse, although the methods of abuse and/or misuse may differ," FDA said.

The agency suggested risk management programs eventually may be warranted for all fentanyl transdermal systems.

"Although we are denying the petitions, we intend to continue to monitor incidents of abuse, misuse and diversion associated with all fentanyl transdermal systems," ⁵ FDA's response states.

"Based on this evaluation, we may also consider whether to request a voluntary risk management plan for both the innovator and generic fentanyl transdermal systems and encourage manufacturers to consider the advisability of developing and implementing an RMP for these products."

"We would support and assist any efforts by a manufacturer to develop an RMP. If FDA concludes that voluntary RMPs are appropriate for fentanyl transdermal systems, the innovator as well as the generic versions will be requested to implement such plans."