Para IV_Note_ Nitin Mehetre_ April 2008

A Para I filing is made when the innovator has not made the required patent information
in the Orange Book. A Para II filing for the launch of a generic drug is made when the
drug is already off patent. A Para III filing is made when the ANDA applicant does not
have any plans to sell the generic drug until the original drug is off patent. A Para IV
filing is made when the ANDA applicant believes its product or the use of its product
does not infringe on the innovator's patents listed in the Orange Book or where the
applicant believes such patents are not valid or enforceable.

In the case of Para IV filings, patents are validly circumvented. This involves a lot of
research to find out the loopholes in the patents. But the gains are also the most in
this case. The Hatch Waxman Act 1984 allows 180 days of exclusive marketing rights to
the first ANDA filed and approved. For instance, Dr Reddy's Laboratories' Fluxotene (a
40 mg generic version of Pfizer's blockbuster drug Prozac) was cleared by the FDA and it
made $10 million per month in the exclusivity period.

Litigation is inevitable if a company wants to make a Para IV filing by targeting an

existing patent holder (on the basis of certain loopholes in the patents filed in the Orange
Book, which may allow the company to launch a generic in the new drug dosage form or
a different drug delivery form).

Litigations can cost $15-18 million for a single Para IV filing. If successful the generic
drug company gets an exclusive marketing right (EMR) for 180 days to sell the drug if
not the entire amount invested in litigation goes waste. Para IV filings are risky business
and cannot be depended on always to bring in the revenue.

The Global R&D process

It can be safely said that the pharmaceutical industry is more research-intensive, as

compared to the any other industry. One of the activities of research and development of
the companies is directed towards finding newer molecules as a cure for diseases.

The innovator company synthesizes a New Chemical Entity (NCE), which can probably
be a cure for a disease. The synthesis of a NCE takes place in the pre-clinical testing
period. The innovator company, after synthesizing a NCE, files an Investigational New
Drug (IND) application, prior to commencing clinical trials. The FDA grants patent to the
NCE at this stage.

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The drug discovery process

Source: PhRMA

As can be seen above, after the IND filing it takes around 10 years for a NCE to pass
through the three phases of clinical trials, attain the final FDA (Food & Drug
Administration) review approval and post marketing tests to ultimately launch the
product. As already mentioned, the FDA grants patent to the NCE at the time of the IND
filing and the duration of such patent is around 20 years. In this context, a drug ultimately
enjoys patent protection after its market launch for only around 10 years, to recover its
costs.

After the expiry of a patent, generic companies immediately launch the products and
consequently, there is a sharp downward correction in the price of the particular drug.
The fall in prices can be as much as 90% depending upon the number of generic
manufacturers and the nature of the drug. The fall in prices also result in a fall in the
margins for the branded drug. The generic market has witnessed significant growth over
the years. While generics account for around half of the prescriptions in the US, it
accounts for only around 10% of the pharmaceutical market in the US in value terms. The
reason for the same is low realizations of generics vis-à-vis patented drugs.

Generics

A generic drug has similar effects in terms of its rate and extent of absorption of an
approved product, which has to be proved by the generic company. In other words
the generic drug has similar effects in curing a disease as the approved product. The
generic approval process is called Abbreviated New drug Application (ANDA).

While filing an ANDA, the generic company has to choose one of the following four
options (referred to as paras)

• Para I - The drug has not been patented

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• Para II - The patent for the drug has already expired

• Para III - The patent for the product exists but the generic company wants to enter
the markets after the date of patent expiry passes.
• Para IV - Patent is not infringed upon or is invalid

In a Para III filing the company acknowledges the patent of the approved drug and
intends to enter the market after the patent for the approved product expires and there
exists a scenario of falling prices for the drug, whereas in Para IV filing the company
claims that the generic product of the company does not infringe upon the existing patent
or the patent of the branded product is invalid and the company strives to win an
exclusivity of 180 days during which the margins for the product are very high. For
instance, recently Dr. Reddy's filed an application with the US FDA to market a generic
form of Eli Lilly's schizophrenia drug ‘Olanzapine’ in the United States.

In all the generic filings, the FDA has 180 days to deem the generic application complete
and accept it for review, or incomplete and reject for filing.

In case of Para I and Para II filing, once the application is deemed complete, it is simply
processed for approval. In case of Para III the application is processed for approval,
however its approval status depends upon the products patent expiry. Apparently Para IV
filings are the most lucrative, tedious, time consuming and expensive of the above.

The approval process of the Para IV is as provided below:

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Post 2005 scenario

After the patent regime is implemented in India in 2005 no company would be allowed to
launch products patented after 1995. In other words Indian companies will still be
allowed to launch NCE patented before 1995 in the market. As already discussed it takes
around 10 years for a NCE to be commercially launched, as a result of which the Indian
companies will have additional cushion in terms of time to gear up fully for the patented
regime

Already Indian companies have forayed into basic research and their success has so far
been very very limited. However, as it is said, the secret of getting ahead is getting started
and every small step by Indian companies will raise their probability to succeed in the
future.