Insurers and Health Care and Insurance and Generic drugs and Health Care Businesses and WellPoint and Health Care & Life Sciences and Health Care & Insurance

WellPoint won’t put brand-name Lipitor on generics list

December 1, 2011

Indianapolis-based WellPoint Inc., the largest U.S. health insurer by enrollment, won’t put Pfizer Inc.’s brand-name Lipitor drug on its generics list and will instead favor a copy made by Watson Pharmaceuticals Inc., Kristin Binns, a spokeswoman for the insurer, said in an e-mail.

Lipitor, the cholesterol medication that is Pfizer’s biggest product, began facing generic competition Wednesday. The drugmaker has been making agreements with insurers and pharmacy benefit managers to favor its brand version and block generic competitors in return for price cuts.

Ranbaxy Laboratories Ltd. won approval to sell generic copies of the $10.7 billion cholesterol pill in the United States.

The U.S. Food and Drug Administration’s clearance for Ranbaxy, India’s biggest drugmaker, followed a dispute over whether the company could produce the copies given questions about its manufacturing plants. A deal to share profits with Teva Pharmaceutical Industries Ltd., a generic-drug maker based in Israel, helped overcome that hurdle.

“It could well be that the Lipitor ingredients could come from Teva,” said Bino Pathiparampil, an analyst at IIFL Ltd. in Mumbai. In that scenario, “Ranbaxy will assemble the drug at their factory in New Jersey.”

The approval gives Ranbaxy exclusive rights to sell copies for 180 days, competing with Lipitor and a Pfizer-authorized version sold by Watson Pharmaceuticals. Pfizer, the world’s biggest drugmaker, has moved to hold on to market share of Lipitor by offering the branded medicine at the same price, or lower, than copycats in agreements sealed over the last two months with insurers and pharmacy managers.

Copycat Lipitor may generate as much as $650 million for Ranbaxy in its first 180 days of sale, according to the median estimate of five Mumbai-based analysts surveyed by Bloomberg.

Ranbaxy, 64 percent-owned by Daiichi Sankyo Co. and based near New Delhi, sought to convince the FDA that approval shouldn’t be thwarted by an ongoing dispute about plant violations in India. The FDA approval may have been contingent on the Teva deal, Pathiparampil said.

Spokesmen at Ranbaxy and Teva declined to elaborate and terms of their agreement haven’t been disclosed.

Pfizer’s marketing strategy includes agreements with the health insurer UnitedHealth Group Inc., of Minnetonka, Minn., and the pharmacy benefit manager Catalyst Health Solutions Inc., of Rockville, Md., to block the copycat versions in return for lower prices on brand-name Lipitor. The effort has had mixed results.

WellPoint said it would favor Watson’s copy with a $10 to $15 co-payment, while charging patients $20 to $35 for brand-name Lipitor.

“It’s in the best economic interests of our members for several manufacturers to make atorvastatin,” Binns said in an e-mail. The agreement applies to WellPoint’s 10.5 million-person commercial market, as well as the insurer’s Medicare patients.

Three U.S. senators said Wednesday in a letter sent to New York-based Pfizer that they’ll look into the drugmaker’s agreements with the insurers and pharmacy benefit managers. They’re questioning whether the deals will artificially prop up patient costs, the letter said.

“By working with manufacturers to push brand-name drugs, drug-benefit companies may be abusing Medicare to boost their profits and deny generic alternatives to patients—a practice that needs to end immediately,” said Senator Max Baucus, a Montana Democrat who leads the Finance Committee.

The senators’ letter follows a demand by Maryland Rep. John Sarbanes that the U.S. Federal Trade Commission review the agreements.

For Teva, approval of Ranbaxy’s Lipitor copy is a psychological positive, said Jason Gerberry, an analyst with Leerink Swann & Co. in Boston. It’s a “modest negative” for Pfizer and Watson, Gerberry said in a report to clients.

“The uncertainty of Ranbaxy’s situation created a segment of customers that held off on procuring normal inventory stocking in the hope that Ranbaxy would get approved and offer lower pricing,” Gerberry said.

Ranbaxy may have sought a marketing deal with Petach Tikva, Israel-based Teva in case it didn’t win timely approval, said Priti Arora, an analyst at Kotak Institutional Securities in Mumbai.

“There is something more in this deal than meets the eye,” Arora said. “My feeling is that they allied with Teva as a backup measure in case approval was held back due to its manufacturing issues.”

Watson began selling a copy of Lipitor in the U.S. at 12:01 a.m. New York time Wednesday under the agreement with Pfizer. Watson’s version didn’t require FDA clearance because Pfizer is providing the drug to sell without the brand label in return for a share of the revenue.

As the first generic to challenge Pfizer’s patent, Ranbaxy is allowed six months under a 1984 law before other generic versions can come on the market.
Mylan Inc. of Canonsburg, Pa.; Dr. Reddy’s Laboratories Ltd. of Hyderabad, India; and Teva are among generic-drug makers seeking FDA approval to sell Lipitor copies after Ranbaxy’s six-month exclusivity expires, according to U.S. court filings.

The U.S. enforcement actions against Ranbaxy, India’s biggest drugmaker, began in 2008 when the FDA cited manufacturing defects at two of the company’s plants in India and subsequently barred the company from importing about 30 different drugs. The following year, the agency said one of those plants, in Paonta Sahib, India, falsified data used in drug applications.

Making generic Lipitor in the U.S. instead of India will reduce the amount of profit Ranbaxy makes on each dollar of sales, Kotak’s Arora said.
“Margins for manufacturing in the India are around 60 percent compared to about 40 percent from the U.S.,” she said. The brokerage had estimated Ranbaxy would generate $560 million in generic-Lipitor sales during the six months of exclusivity.

In approving the deal, Janet Woodcock, director of the FDA’s Center for Drug Evaluation and Research, said in a statement it was “important to have affordable treatment options.”
 

ADVERTISEMENT

Recent Articles by Bloomberg News

Comments powered by Disqus