Mylan Laboratories Inc., is engaged in developing, licensing, manufacturing, marketing
and distributing generic and brand pharmaceutical products. We conduct business
through our generic (“Generic Segment”) and brand (“Brand Segment”) pharmaceutical
operating segments.
Prescription pharmaceutical products in the United States (“U.S.”) are generally
marketed as either brand or generic drugs. Brand products are marketed under
brand names through marketing programs that are designed to generate physician
and consumer loyalty. Brand products generally are patent protected, which provides
a period of market exclusivity during which they are sold with little or no
competition. Additionally, brand products may benefit from other periods of
non-patent, market exclusivity. Exclusivity generally provides brand products
with the ability to maintain their profitability for relatively long periods
of time. Brand products generally continue to have a significant role in the
market after the end of patent protection or other market exclusivities due
to physician and consumer loyalties.
Generic pharmaceutical products are the chemical and therapeutic equivalents
of reference brand drugs. A reference brand drug is an approved drug product
listed in the U.S. Food and Drug Administration (“FDA”) publication entitled
Approved Drug Products with Therapeutic Equivalence Evaluations, popularly known
as the “Orange Book.” The Drug Price Competition and Patent Term Restoration
Act of 1984 (“Waxman-Hatch Act”) provides that generic drugs may enter the market
after the approval of an Abbreviated New Drug Application (“ANDA”) and the expiration,
invalidation or circumvention of any patents on the corresponding brand drug,
or the end of any other market exclusivity periods related to the brand drug.
Generic drugs are bioequivalent to their brand name counterparts. Accordingly,
generic products provide a safe, effective and cost efficient alternative to
users of these brand products. Growth in the generic pharmaceutical industry
has been driven by the increased market acceptance of generic drugs, as well
as the number of brand drugs for which patent terms and/or other market exclusivities
have expired.
Generic Product Development
FDA approval of an ANDA is required before marketing a generic equivalent of
a drug approved under an NDA, or for a previously unapproved dosage strength
or delivery system for a drug approved under an ANDA. The ANDA approval process
is generally less time-consuming and complex than the NDA approval process.
It does not require new preclinical and clinical studies because it relies on
the studies establishing safety and efficacy conducted for the drug previously
approved through the NDA process. The ANDA process does, however, require one
or more bioequivalency studies to show that the ANDA drug is bioequivalent to
the previously approved drug. Bioequivalence compares the bioavailability of
one drug product with that of another formulation containing the same active
ingredient. When established, bioequivalency confirms that the rate of absorption
and levels of concentration in the bloodstream of a formulation of the previously
approved drug and the generic drug are equivalent. Bioavailability indicates
the rate and extent of absorption and levels of concentration of a drug product
in the bloodstream needed to produce the same therapeutic effect.
Brand Product Development
The process required by the FDA before a previously unapproved pharmaceutical
product may be marketed in the U.S. generally involves the following:
laboratory and preclinical tests;
submission of an investigational new drug application (“IND”), which must become
effective before clinical studies may begin;
adequate and well-controlled human clinical studies to establish the safety
and efficacy of the proposed product for its intended use;
submission of an NDA containing the results of the preclinical tests and clinical
studies establishing the safety and efficacy of the proposed product for its
intended use, as well as extensive data addressing such matters as manufacturing
and quality assurance;
scale-up to commercial manufacturing; and
FDA approval of an NDA.
Preclinical tests include laboratory evaluation of the product, its chemistry,
formulation and stability, as well as toxicology studies to help define the
pharmacological profile of the drug and assess the potential safety and efficacy
of the product. The results of these studies are submitted to the FDA as part
of the IND. They must demonstrate that the product delivers sufficient quantities
of the drug to the bloodstream or intended site of action to produce the desired
therapeutic results before human clinical trials may begin. These studies must
also provide the appropriate supportive safety information necessary for the
FDA to determine whether the clinical studies proposed to be conducted under
the IND can safely proceed. The IND automatically becomes effective 30 days
after receipt by the FDA unless the FDA, during that 30-day period, raises concerns
or questions about the conduct of the proposed trials as outlined in the IND.
In such cases, the IND sponsor and FDA must resolve any outstanding concerns
before clinical trials may begin. In addition, an independent institutional
review board must review and approve any clinical study prior to initiation.
Customers and Marketing
We market our generic products directly to wholesalers, distributors, retail
pharmacy chains, mail order pharmacies and group purchasing organizations within
the U.S. We also market our generic products indirectly to independent pharmacies,
managed care organizations, hospitals, nursing homes, pharmacy benefit management
companies and government entities. These customers, called “indirect customers”,
purchase our products primarily through our wholesale customers. Approximately
65 employees are engaged in servicing Generic Segment customers.
Brand pharmaceutical products are marketed directly to health care professionals
in order to increase brand awareness and prescriptions written for the product.
However, these products are generally sold through the same channels and customers
as generic products. Approximately 270 employees are engaged in marketing and
selling the Brand Segment’s products, as well as servicing Brand Segment customers.
Consistent with industry practice, we have a return policy that allows our
customers to return product within a specified period prior to and subsequent
to the expiration date.
Competition
The pharmaceutical industry is very competitive. Our competitors vary depending
upon therapeutic and product categories. Primary competitors include the major
manufacturers of brand name and generic pharmaceuticals.
The primary means of competition are innovation and development, timely FDA
approval, manufacturing capabilities, product quality, marketing, customer service,
reputation and price. To compete effectively on the basis of price and remain
profitable, a generic drug manufacturer must manufacture its products in a cost-effective
manner. Our competitors include other generic manufacturers, as well as brand
companies that license their products to generic manufacturers prior to or as
relevant patents expire. No further regulatory approvals are required for a
brand manufacturer to sell its pharmaceutical products directly or through a
third party to the generic market, nor do such manufacturers face any other
significant barriers to entry into such market.
The pharmaceutical market is undergoing, and is expected to continue to undergo,
rapid and significant technological changes, and we expect competition to intensify
as technological advances are made. We intend to compete in this marketplace
by developing or licensing brand pharmaceutical products that are either patented
or proprietary and that are primarily for indications having relatively large
patient populations or that have limited or inadequate treatments available
and by developing therapeutic equivalents to brand products that offer unique
marketing opportunities.