In announcing US release of Airduo Respiclick, the Israeli group said it would also be marketing an authorized generic of that selfsame branded asthma medication. This authorized generic is to be priced at less than a third of the cost of the brand, and could help Teva take market share from Glaxo by getting preferred positions in payer formularies.
Two different boxes
In January, the FDA approved Airduo, which contains the same active ingredients as Advair, fluticasone propionate and salmeterol xinafoate, but with Teva’s proprietary Respiclick inhaler. This was approved on the 505(b)(2) pathway, so cannot be directly substituted by pharmacists, but it can still compete on price with cost-conscious payers.
At the time, Mylan’s (NASDAQ:MYL) directly substitutable Advair generic – using a copycat of the Diskus inhaler – was still under review at the FDA. Its rejection last month opened an opportunity for Teva to become the generic alternative (Advair lives another day, March 30, 2017).
Despite having the market to itself, Glaxo has seen Advair revenue fall off a cliff as it has cut prices to preserve its formulary position (Event – Glaxo mounts final push as US Advair generics loom, March 7, 2017).
Before Airduo’s launch, Teva had been expected to try to differentiate the product from Advair in an attempt to command an above-generic price. “Originally the expectation was that this product would be priced intermediately between branded and generic price and be detailed based on its clinical safety (lower dose = less side effects),” Bernstein analyst Ronny Gal wrote yesterday.
For the branded version of Airduo, Mr Gal wrote that the company had reported a wholesale acquisition cost of $285 – similar to the $265 price Glaxo charged in 2016 to government agencies that buy from the federal supply schedule for its one-month 250mcg fluticasone/50mcg salmeterol version.
The generic version of Airduo, however, will be priced at $80, Mr Gal wrote. This should be low enough to earn a place on tier one of most payer formularies, where enrollee cost-sharing is lowest.
Two types of buyers
The differing prices will allow Teva to market to payers who have different strategies – those that look at the absolute price and those basing their buying strategies on paying a higher price but then seeking a rebate, he wrote, adding that Teva expected most of the volume to come from the authorized generic.
Mr. Gal forecasts $150m in US sales by 2020. In any case, he believes that most payers will wait for a real generic – Mylan’s, which might not be launched until 2018, or Hikma’s, an FDA decision date for which is due in 19 days. Glaxo might have been betting on this when it cut prices to keep payers on board through 2018.
Teva is trying to give its Advair competitor the best chance to thrive in a commoditized market. But it is telling that in respiratory care a me-too drug with some narrow differentiation has to be launched on the same terms as a pure generic.