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The 505(b)(2) Approval Pathway Provides Opportunities for Generics Companies Seeking New Revenue Streams

The “cliff” has passed for pharma but has just begun for generics companies that have benefited from the high number of drugs going off patent. CEOs of generics companies report they are considering a spectrum of solutions to bridge the revenue gap, but perhaps none are more valid than the U.S. FDA’s 505(b)(2) approval pathway, which can offer accelerated approval, reduced development costs, lower risk and, in certain cases, market exclusivity.

Recent trends in the pharma industry suggest that large pharma companies are focusing R&D efforts on the development of new biological medicines. Generics developers, however, are taking different approaches. Neal Hansen, managing director of Align Strategy, explained that generics companies are 1) working to identify and develop hard-to-make or hard-to-copy products that will discourage other generics companies from getting into the market and 2) engineering barriers to competition, such as the longer exclusivity possible through the FDA’s 505(b)(2) approval process. Hansen also remarked that many generics companies are finding it challenging to identify the pathway that makes financial sense for their business.

Given the benefits, many generics developers are leveraging 505(b)(2) to carve out niche markets because there are opportunities for specialization; 505(b)(2) development is more than a regulatory pathway, it is a competitive strategy.

Types of Applications Allowed Under 505(b)(2)

Modification Examples
Route of administration Intravenous to oral administration
Change in active ingredient Different salt, racemate, enantiomer
Dosage form Oral to transdermal patch
Strength Lower or higher strength
Combinations Change one ingredient in previously approved combination or new combination of previously approved drugs
Formulation Different quality or quantity of excipient; does not fit 505(j)
Dosing regimen Change from twice daily to once daily
New molecular entity Prodrug of a previously approved drug
Indication Expansion of diseases drug is approved for
OTC A previously approved drug switched to OTC or a change in an existing OTC drug
Naturally derived or recombinant product New form of approved drug from new manufacturing source (not biologics)
Bioinequivalence Controlled-release version of a drug

OTC = over the counter. (data from FDA guidance, Applications Covered by Section

505(b)(2), 1999 (5))

Aside from identifying products for their marketability, generics companies are choosing appropriate development models to suit their pipelines. Developers are pursuing acquisitions, partnerships, outsourcing and licensing, or combinations of all of these, to augment their in-house capabilities. While outsourcing is often a must for smaller generics companies, recent activities by the largest companies (e.g., Activis, Teva, Mylan) suggest that acquisitions may even be preferred over partnership in most cases.

While 505(b)(2) development may present a greater opportunity than ever for many generics developers, the way those companies go about identifying the right opportunities is where the most value is being added to the process.