Bruce Downey is chairman and CEO of Barr Laboratories, a major producer of generic drugs.
SUSAN DENTZER: How will [a generic version of Prozac, or fluoxetine,] be priced?
BRUCE DOWNEY: Generally, the--a sole source generic is discounted 25 to 40 percent off the brand price.
SUSAN DENTZER: So consumers could expect to see substantial savings, then?
BRUCE DOWNEY: They can see--their savings will come in two steps. The first step is when we're on the market as an exclusive generic, it will be less expensive than the Lilly product, and then once that six months of exclusivity expires, additional competitors are authorized to enter the market and there'll be another substantial discount at that time. So their discounts will be seen over two periods, one now and one six months from now.
SUSAN DENTZER: And how much competition are you expecting to come in in that time.
BRUCE DOWNEY: I think there are seven or eight companies ready to, to enter the market once the exclusivity runs. So there'll be substantial competition at that point in time.
SUSAN DENTZER: And at that point what happens to this product in terms of what it does for your profitability?
BRUCE DOWNEY: Well, it'll reduce it. We expect--we do, however, expect to remain the, sort of the dominant player in the Prozac, generic Prozac market. We'll be in every drug store in America. We'll be defending that market share against competitors, and, and we'll continue to be the market leader in the product.
SUSAN DENTZER: What lessons does this whole experience tell us about--there are many large drugs which are about to come off patent in future years, and Lilly's behavior, as you said has been somewhat unusual.
What, what--what do you think? What lessons can we derive from this whole experience about future patent expirations?
BRUCE DOWNEY: Well, I would expect in future expirations, expiries, you'll see companies more aggressive than Lilly's been. I mean, that's my expectation in terms of preserving their market. But I think this shows a couple of things. One, a determined generic company in this market does have the resources and the will to take on these challenges and bring the products to market, and I would expect not only Barr, but many of our larger competitors to, to continue to press these issues and bring products to market, and so I think consumers can rest assured that they'll get access as they expect to.
I'd add one other lesson, is that it shows that the provision of the law that grants six months of exclusivity as a reward for successfully challenge the patents--whoops--I mean, if it wasn't for that reward period, there'd be no willingness on our part, or any other large company's part, to invest all of the money and time, and effort into the patent challenge.
You'd simply pursue other product opportunities and, and sit back and wait for the patents to expire, and that would allow these strategies of getting add-on patents to be successful. So the reward system here really is the key to what's happened and I think it shows that, that it works.
SUSAN DENTZER: Why is this a less challenging issue, converting people, now, over to the generic formulation?
BRUCE DOWNEY: Well, I think that there are two reasons. One, they're such--so, so visible and so well-publicized, that people understand the availability of the product, earlier in the product life cycle than a normal generic launch. So the awareness of pharmacists and patients, of its being on the shelf, will bring them to accept the, the, you know, to ask for the generic product or dispense it, and there's a corollary to that. Because it's such a large product, there are financial incentives on, in the pharmacies to ensure the patients are aware of the product, and dispense the generic, because pharmacists, frankly, earn a higher margin or higher profit on, on generics than they do brand products, and so I think that those two factors combined will make this substitution easier than most.
SUSAN DENTZER: So for the CVS's of the world, the Rite Aids of the world--
BRUCE DOWNEY: They have, they have--you know, it's a great service to their patients and their customers to offer the equally good product at a lower cost, and it's good business sense for them to do that because they earn a higher profit, so--
SUSAN DENTZER: You don't think that the name Prozac is going to be of such power, that it's going to block any of this transition to the generic formulation?
BRUCE DOWNEY: I think it will have very little impact; yes.
SUSAN DENTZER: You're gonna earn a fair amount of money for at least six months off of this product.
BRUCE DOWNEY: Yes.
SUSAN DENTZER: What are you going to do with the proceeds of that?
BRUCE DOWNEY: Well, we have a very active R&D program, particularly on our proprietary side. We also are in a proprietary business and we have a number of clinical studies underway, or planned in the future, and this is going to allow us to accelerate our development in that area, and I think we'll be able to make very good use of the proceeds.
SUSAN DENTZER: And in general terms, what areas of drug development are you engaged in?
BRUCE DOWNEY: For the most part, our efforts are centered on women's health care, we have a proprietary oral contraceptive currently in development, we're looking at some other--we just agreed to merge with Duramed. They have a hormone replacement product that we think's a very good product, and some add-on products yet that, that need funding for the clinical trials. So we're gonna continue to focus our proprietary efforts for the time-being in women's health care, and that's where the proceeds will go.