The squall over authorized generics continues to swell. Congressmen are squabbling, the Federal Trade Commission is investigating, Congress has legislated, and the Supreme Court may yet get the last word. "The issue has proponents on both sides," said Edward Thwaite of E.W. Thwaite Associates, a generic industry consulting firm in Totowa, N.J. "There are strong feelings everywhere."

Appearing at the Generic Pharmaceutical Association annual meeting in Florida in February, Sen. Orrin Hatch and Rep. Henry Waxman, who cosponsored the 1984 law that virtually created the $28 billion-a-year generic industry, took diametrically opposed views on authorized generics. Waxman told participants that the practice discourages innovation and might be illegal. Hatch, on the other hand, said authorized generics are allowable under the Hatch-Waxman Act. According to published reports, the Senator told the conferees that brand drugmakers "knew they had to do something to fight back competition" from generics and so they came up with the idea of authorized generics.

Authorized generics are produced under agreements between a brand drugmaker and either an independent generic firm or a subsidiary. The Food & Drug Administration treats the new drug as a brand product and that allows the new manufacturer to market it during another generic firm's 180-day market exclusivity period. The generic firm with the authorized product then splits the profits with the brand firm. Generic manufacturers say the process is a violation of antitrust laws. The loss of the 180-day exclusivity "is like a needle in the back of much of the generic industry," said Thwaite.

Many think he's right. Waxman's attitude was greeted more sympathetically than his colleague's by the GPhA conferees. "These drugs are brand products that masquerade as generics," said Kathleen Jaeger, GPhA president and CEO. "They are brand products marketed under a different label. They lead to fewer generic applications and fewer products on the market, which is ultimately bad for consumers."

Thwaite said the view from the other side is, of course, quite different. "Brand-name manufacturers claim that these drugs bring more generics to the market, lowering price somewhat through greater competition. And they say there's plenty of money to be made here," he said. "The authorized products usually look just like their brand-name counterparts, so dispensing is easier, and pharmacists say they like that."

Whatever their reasoning, brand manufacturers claim they really have no option. More than $121 billion worth of brand patents end over the next five years. According to Jon Hess of the research firm Cutting Edge Information in Research Triangle Park, N.C., brand manufacturers lose 80% of their business immediately after a generic equivalent comes to market. "It's the only way they can win a share of that," said Hess. "Not being able to participate would inhibit trade."

Perhaps, but two recent regulatory and legislative developments are bringing GPhA some joy. Following a request by a bipartisan group of Senators, the Federal Trade Commission agreed last November to study the competitive effects of authorized generics. FTC informed the Senators that it would examine:

• the competitive conditions leading to when authorized generics are launched
• the effect on pricing and availability during the 180-day exclusivity period
• the long-term effect of generic drug entry on drug prices in light of authorized generics