Generics of GlaxoSmithKline's antidepressant Paxil have captured 65% of the market for new paroxetine prescriptions, Apotex said.

Apotex said it holds 40%-45% of generic paroxetine new prescriptions, while Par's "authorized" product holds the other 55%-60%, roughly five weeks after the generics were launched Sept. 8. GSK's Paxil holds 35% of the total paroxetine market.

Apotex launched its generic "at risk," with patent litigation still underway in a Philadelphia trial court and GSK appealing a Chicago court's noninfringement ruling (¹ Also see "Apotex Generic Paxil Priced At 7% Discount Following “At Risk” Launch" - Pink Sheet, 15 September, 2003., p. 3).

The Apotex launch triggered a side agreement between GSK and Par, allowing Par to begin selling a generic under GSK's NDA.

The market share figures reported by Apotex suggest the commercial logic behind the "authorized" generic agreement.

The Par/GSK royalty split is believed to be 50/50, Apotex said. Par also pays Pentech a royalty, believed to be 20% of net sales.

Neither GSK nor Par has disclosed the terms of the royalty agreement. However, in a recent Securities & Exchange Commission filing, Par noted that its gross margin on paroxetine will be in the 25%-29% range, "significantly lower than our historical average gross margin."

A 50/50 split would mean GSK is receiving between a quarter and a third of the revenues in the generic paroxetine market for new scripts, in addition to revenues from Paxil's remaining 35% share.

In essence, GSK has been able to hold onto more than half of the revenues generated by sales of paroxetine products.

When brand name companies experimented with "authorized" generics in the early 1990s, most concluded that the only impact was a more rapid erosion of the market. However, given the extraordinarily rapid generic penetration rates for blockbuster drugs today, there may be less of a downside to the "authorized" generic route.

Apotex maintains that the generic penetration rate has been faster for paroxetine than it was for fluoxetine (Lilly's Prozac ). The difference, however, appears to be slight. Prozac generics quickly reached a 70% share for the most popular 20 mg dose (² Also see "Par Fluoxetine 20 Mg Tabs Have 18% Share Of New Prescriptions" - Pink Sheet, 3 September, 2001., p. 20).

GSK is not the only company returning to the "authorized" generic strategy. Just in the SSRI category, Pfizer has an agreement to allow Ivax to launch an "authorized" version of Zoloft by 2006 (³ Also see "Pfizer Zoloft “Authorized” Generic Will Be Available From Ivax By Mid-2006" - Pink Sheet, 4 August, 2003., p. 6) and Forest is planning to launch its own generic version of Celexa (see ⁴ Also see "Lexapro Switch Takes New Twist: Forest Launching Celexa Generic In 2005" - Pink Sheet, 20 October, 2003.).

Par estimates that its sales of paroxetine will total $180 mil. in 2003. Based on Apotex' market share estimates, and assuming similar pricing and trade inventories, that suggests that Apotex' product is on track for roughly $150 mil. in sales.

Apotex maintains that the net impact of the "authorized" generic agreement has been to diminish the reward it should have received from fighting the complex patent litigation filed by GSK. Apotex may be preparing to pursue those claims by opening a new front in the litigation in the form of an antitrust suit challenging the "authorized" generic deal.

Par's SEC filing discloses that "Apotex and one of its subsidiaries, TorPharm Inc., indicated to us that they intend to file a complaint against Par in the federal district court in the Eastern District of Pennsylvania alleging violations of the state and federal antitrust laws as a result of the GSK settlement and the GSK supply agreement."

Par said it would "defend vigorously this action if brought, and might assert counterclaims against Apotex and claims against third parties."

The Federal Trade Commission is keeping a close eye on Paxil. The agency subpoenaed documents from GSK as part of an investigation of "late-listed" patents for the product, cited the company's use of the "Orange Book" process as questionable in a 2002 report, and took the unusual step of issuing a press release applauding Apotex' generic launch.

However, FTC may view the Par/GSK deal as pro-consumer because it makes another generic readily available.

Paxil Generics Grab 65% Of New Scripts; Apotex May Sue Over Par/GSK Deal

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