Among Mylan's products is Lorazepam, a form of the brand name drug Ativan, taken to relieve anxiety.

By Matthew Perrone
The Associated Press WASHINGTON -- With the new Democratic Congress promising to lower health-care costs, makers of inexpensive generic drugs sense a unique opportunity to level the playing field with their brand-name rivals.

Generic manufacturers such as Barr Pharmaceuticals and Canonsburg-based Mylan Laboratories know, however, that sympathy on Capitol Hill will go only so far. So lobbyists are using a Bush administration threat of new regulatory fees to the industry's advantage, arguing that Congress must first fix a patent-law loophole that favors brand name competitors.

The legislative gambit is driven by rising financial concerns: U.S. generic drug companies are facing shrinking profit margins as global competition accelerates in the roughly $60 billion market for discounted pills to treat everything from impotence to high cholesterol.

With patents on drugs selling roughly $16 billion worth annually scheduled to expire this year alone, brand-name manufacturers such as Pfizer Inc., Merck & Co. and GlaxoSmithKline are increasingly competing head-to-head with generic companies.

Yesterday, Mylan said the Food and Drug Administration gave it tentative approval for its generic version of GlaxoSmithKline's Zofran tablets, which are used to treat nausea in cancer patients receiving chemotherapy.

"As a lot of the big blockbuster drugs from the '90s have come off patent, it has created an opportunity for generics," said Herman Saftlas, analyst with Standard and Poors. "To counter that opportunity, the branded companies have come up with new ways to salvage as much of their business as possible."

Among the blockbuster drug patents scheduled to expire in the next two years are Schering Plough's allergy treatment Clarinex, Merck's osteoporosis drug Fosamax and Pfizer's hypertension drug Norvasc. A decision is pending from U.S. District Judge Terrence F. McVerry in Pittsburgh about whether Mylan may offer a generic version of Norvasc.

Generic companies want lawmakers to close a legal loophole that allows their branded rivals to launch cheaper versions of drugs just as they lose patent protection. Three senior Senate Democrats -- Jay Rockefeller of West Virginia, Charles Schumer of New York and Patrick Leahy of Vermont -- and a bipartisan group of House members have introduced bills that would put an end to this practice.

Promoting generic drugs is seen as one way to keep government spending in check because they can typically cost up to 60 percent less than brand-name drugs.

Still, policy analysts say generic drug makers face long odds in changing the patent law, and that they must prepare for a fight on another front -- proposed regulatory fees for their drug applications.

Under the president's budget, generic drug makers would pay a fee each time they submit a new product for review. The Food and Drug Administration hopes to raise nearly $16 million through the program in fiscal 2008.

Given that the FDA has a backlog of more than 1,200 generic drug applications, policymakers say user fees are worth considering.

Lobbyists for generic manufacturers are using the proposed fees to draw attention to the patent-law loophole they say must be fixed.

The FDA approves generic versions of drugs when either the patent of the original drug has expired or a generic company has shown the patent to be invalid. Because the first company to bring out a generic version of a blockbuster drug can expect massive profits, generic firms spend considerable time and money challenging patents.

More importantly, the first company to successfully challenge a patent may market the generic exclusively for six months.

However, the law can't stop the original patent holder from launching an "authorized generic" through a subsidiary or a third party. Sales of an authorized generic during the exclusivity period can cut the generic maker's profits by 59 percent, according to research by Merrill Lynch analyst Greg Gilbert.