Ralph Neas’ successor as CEO of the Generic Pharmaceutical Association will face numerous challenges – not because Neas has put the association in a bad spot, but because generic products seem cursed to live in interesting times.

Neas is stepping down in the fall, but “will continue to serve as CEO until a successor is named and will work to ensure a smooth and effective leadership transition,” GPhA announced Jan. 20. He is leaving GPhA “to explore entrepreneurial opportunities and to work on critical issues such as non-partisan election reform.”

The association’s primary initial challenge will be meeting its self-imposed deadline of finding a new CEO by the fall. The most generous seasonal reading of that time peg gives GPhA until Dec. 21 (11 months) to seat a new chief executive, meaning the process would need to be more than 27% faster than the 14-month effort that resulted in Neas’ selection Also see "GPhA's New CEO Ralph Neas Brings Health Reform Advocacy Experience" - Pink Sheet, 12 September, 2011..

While that’s a big increase in speed, there are several factors that could make selecting a candidate easier. Neas’ predecessor, Kathleen Jaeger, left as GPhA was licking its wounds from the legislative debate on biosimilars, and the process that resulted in the selection of Neas was as much soul searching by the association itself as it was head hunting for a new CEO Also see "GPhA After Jaeger: Will Industry Pressures Push Firms Together Or Pull Association Apart? New CEO Must Face Down FOBs" - Pink Sheet, 10 May, 2010..

When Neas joined GPhA some firms were openly questioning whether the biosimilars pathway could even work at all; his successor will likely take the reins following FDA’s expected approval of the first-ever biosimiliar, since Sandoz’s filgrastim just breezed through advisory committee review ([A#00150112013]).

Biosimilars still face profound regulatory and reimbursement hurdles, but at the moment industry is feeling much more comfortable about being able to capitalize on the coming patent cliff for biologics, meaning the new CEO will be serving an industry looking at the products as a business opportunity – not as a legislative defeat, as they were the last time the CEO chair was open.

Still, taming the biosimilar frontier hasn’t been without casualties. Allergan PLC left the association last year over differences in how to approach state pharmacy legislation, and hasn’t shown any interest in coming back even after a détente with brand firms was reached on the issue ([A#00141215005]).

Actavis has been busy transforming itself into a top-10 pharma firm through acquisitions and may not be focusing on generic policy issues Also see "After A Gargantuan Year For Pharma M&A, More To Come In 2015" - Pink Sheet, 12 January, 2015..

A return to membership in GPhA could require a business reorganization – Actavis would have to create a generic subsidiary with operational profit responsibilities – but one gauge of potential changes in the direction of GPhA after the departure of Neas would be if Actavis reconsiders its membership status.

Despite the loss of the hybridizing behemoth Actavis, GPhA’s balance sheet has strengthened considerably under Neas’ stewardship (see chart).

GPhA’s Balance Sheet
The generic trade association’s finances and organizational capacity have grown noticeably during the tenure of outgoing CEO Ralph Neas. The revenue projection for 2015 is $15.2 million.
Category	2011	2014	Percentage Increase
Revenue	$9.5 million	$12.7 million	34%
Net Assets	$3.2 million	$6.5 million	103%
Staff	15	22	47%

The Hard Part Of The Job

So the next CEO will take over a stronger organization supporting an industry that sees new growth products and an expanding customer base thanks to demographic aging and insurance coverage expansion under Obamacare. But that doesn’t mean the job is going to be easy.

Neas’ successor will face legislative and regulatory challenges that could fundamentally alter the generic industry’s business model. FDA’s pending labeling rule could essentially remove the product liability shield that has allowed firms to deflect customer injury suits ([A#14140618002]).

GPhA has succeeded in getting language in the report of the Congressional year-end funding bill that calls on FDA to hold a listening meeting between the regulated industries and the agency within 30 days of enactment to consider alternative solutions to the proposed rule, but that may serve only to slow the process of finalizing the reg, which would basically undo Supreme Court decisions that have protected generic manufacturers from suits.

In fact, the Supreme Court just declined to hear an appeal by Teva of an unfavorable state court decision, which could weaken industry arguments that FDA’s reg goes against legislative and judicial precedent ([A#14150120005]).

One potential avenue for a sturdier legislative fix on the product liability issue would be the 21^st Century Cures initiative under development by the House Energy and Commerce Committee. Enshrining the generic industry’s understanding of liability would seem to be within the scope of the project, which aims to transform how medical products are discovered, developed and delivered.

However, it seems unlikely that the initial draft will address ANDA labeling, and it could actually contain something profoundly worrisome to generic companies – increases in exclusivity for brand firms, which have been proposed as the committee developed the legislation ([A#14140611005]).

As if a frontal assault on Hatch/Waxman weren’t enough for a new CEO to deal with, the legislative calendar also will include the renewal of the biosimilar and generic user fee program in 2017. Negotiations with the agency on the structure of the user fees and performance goals will begin well before then, a task complicated by their novelty.

This will be the first renewal of those programs; right now industry and FDA are on what amounts to a user fee first date – thrilled that it’s happening; nervous about how it will turn out.

Where’s The Biggest Need?

Even with these worries, generics have been steadily growing market share, but the sheer size of the industry means that it’s hard for FDA to provide bespoke service, even with the new user fees. Generic applications that began arriving in October are now on a review clock for the first time, meaning FDA has a set number of months in which to make approval decisions.

But so far, a surprisingly small number of applications seem to have come in to take advantage of the swifter review times. Many seem stuck on the other side of the line, having rushed to submit their applications to avoid stricter stability testing requirements that kicked in over the summer.

The upshot is that the generic industry is paying a lot in user fees to FDA, but so far hasn’t seen faster reviews as a result ([A#00150105008]). New anti-counterfeiting requirements set to be rolled out in the next few years won’t help margins either ([A#14141229003]).

The industry also faces unpleasant headlines about product quality and allegations of price gouging. All this while the next wave of products set to see patent expirations seems harder to copy and more challenging to substitute. Demand for generics isn’t going away, of course, but it seems like it’s getting more expensive to sell cheap drugs.

How GPhA’s board weighs the importance of these various challenges may help shape the criteria for the association’s next CEO. A search committee is still being put together, and one of its first tasks may be to consider what kind of executive the association needs. A technocrat who can speak FDA’s language? A political veteran who can lead legislative battles? An experienced organizational leader who can drive operational efficiencies?

Whatever the association’s board thinks is most important, it’s also a certainty that the next CEO will have to confront new problems that firms can’t even anticipate.

GPhA’s Next CEO Will Face Political, Regulatory Headwinds

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