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FDA rule change may aid generics firms

By Sangita Shah in Mumbai
June 24, 2003 12:39 IST
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The generic drug makers of the country are set to benefit from the recent changes made by the United States Food and Drugs Administration to the new drug application/generic application rules.

The stocks of these companies may well see an uptrend following this benefit, analysts said.

The US FDA has announced significant changes to the new drug application/generic application rules, which streamlines its approval process for both the patent holder as well as the generic pharmaceutical companies.

The changes place specific emphasis on preventing evergreening of patents, which have delayed generic launches in the past.

It also stresses on the importance of reducing unnecessary delays in approval of generic products.

The changes come into effect from August 19, 2003, with prospective effect.

The pharmaceutical stocks have been witnessing consistent upward trend in the last few months beginning March.

The new US FDA norms are likely to add more zing to the northward movement of the stocks.

The stock price of Dr Reddy's Laboratories which closed on Monday at Rs 1038.20 has appreciated sharply from Rs 888.30 on March 3.

The stocks of pharmaceutical companies such as Alembic closed today at Rs 238.70 has jumped from Rs 142.75 on March 3.

Similarly, Aurobindo Pharma has increased at Rs 336.55 (Rs 234.10 on March 3), Wyeth Lederle at Rs 236.50 (212), Duphar Interfran at Rs 120.65 (118.75), Merck at Rs 257.60 (239.10), Fulford (India) at Rs 99.60 (81.50), GlaxoSmith Pharma at Rs 357.00 (310.85), Aventis Pharma at Rs 340.65 (267.95), Ipca Laboratories at Rs 297.15 (179), JB Chemicals at Rs 204.05 (164.45), Kopran at Rs 33.20 (27.95), Lupin at Rs 229.60 (153.65), Morepen at Rs 13.56, Orchid Chemicals at Rs 139.75 (167.30), Ranbaxy Laboratories at Rs 713.85 (631.55). Only Cipla has declined at Rs 752.35 (774.10).

According to a report by Alchemy Research, the new rule announced by the US FDA is a positive step for the generic drug industry.

The generic companies like Dr. Reddy's Labs may benefit more than the others due to its emphasis on patent challenges.

The underlying purpose of the changes is to ensure quicker introduction of generic drugs for the benefit of the consumers.

These changes will ensure that patent holders do not get unnecessary patent protection due to ever greening of patents.

Only one 30-month stay per abbreviated new drug application or a 505(b)(2) application is expected to reduce the time taken for settlement of patent litigation as well as the cost of such litigation.

The numbers of patent lawsuits are also expected to gradually decline in the coming years due to the strict patent listing criteria under the new rules.

Patent holders will not be able to prevent generic competition by listing frivolous patents for packaging of the drug, changing the colour of the drug, etc.

The FDA has also proposed hiring of additional employees in its generic drug review program, who will guide generic applicants to ensure that rejections are reduced to a minimum and as a consequence squeeze the time required for approving generic applications.

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Sangita Shah in Mumbai

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