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Watson, Teva Positioning for Generic Biotechnology Drugs

Watson Pharmaceuticals Inc., a drug maker just over the county line in Corona, and Israel’s Teva Pharmaceutical Industries Ltd., which has nearly 840 workers in Irvine, are expected to be among the first producers of generic biotechnology drugs, according to reports.

Congress now is considering a proposed law that would allow biotech generic drugs to be produced and marketed, according to an article on CBS MarketWatch.

Biotech drugs use living cells to treat diseases and disorders, as opposed to traditional drugs, which are made up of synthetic chemicals.

The law could be adopted in 2011, but industry watchers don’t expect generic biotech drugs to take off for a while because of costs and because many biotech drugs don’t come off patent protection until late 2010.

But generic players are getting ready.

Several large generic drug makers now are capable of producing biotech drugs, Kathleen Jaeger, president of the Arlington, Va.-based trade group Generic Pharmaceutical Association, told MarketWatch.

Besides Watson and Teva, other generic companies that could get into biotechs include Mylan Inc. of Canonsburg, Pa., and Sandoz Inc., part of Switzerland’s Novartis AG.

Figures from Biocom, a San Diego-based trade group with an Irvine office, show that biotech drugs generally take 10 to 15 years to produce and cost upward of $1 billion.

Barriers to entry in what are dubbed biogenerics are high, given the time they take to produce and their costliness, according to healthcare analyst Les Funtleyder of New York investment bank Miller Tabak + Co.

Quality control issues and doctors who are reluctant to take seriously ill patients off drugs they now are taking also will deter entry, Funtleyder said.

But many lawmakers want generic biotech drugs on the market to inject some competition and to help lower prices.

Yearly costs for branded biotech drugs can range from $14,000 for multiple sclerosis treatments up to $250,000 for drugs such as Cerezyme, which is made by Cambridge, Mass.-based Genzyme Corp. and is used to treat Gaucher disease, a rare genetic disorder.

Many lifetime users of biotech drugs end up financially ruined and on Medicaid, Timothy Wentworth, group president for employer accounts at Franklin Lakes, N.J.-based drug benefits manager Medco Health Solutions Inc., said in the MarketWatch article.

Figures from Medco show that up to 15% of the $300 billion spent in the U.S. in 2008 on prescription drugs was on biotechs.


Life After Bankruptcy

In the Sept. 21 issue of the Business Journal, I wrote a story about how LifeMasters Supported SelfCare Inc. is filing for bankruptcy as a way to solve a dispute with the federal government.

After the Irvine-based disease management company emerges from bankruptcy, it’s going to diversify, according to its new president, George Pillari.

LifeMasters filed for Chapter 11 reorganization earlier this month as a way to negotiate with the Centers for Medicare and Medicaid Services, its largest creditor. The centers, which are owed $125 million by LifeMasters, contend LifeMasters and other disease management companies that they awarded pilot projects to didn’t successfully execute them and want repayment.

LifeMasters said it expects to be a viable company after its emergence from bankruptcy, and it plans to go after a new business: “population health management,” Pillari said.

Population health management is when insurance companies and employers hire disease management companies to cover a large group, rather than a narrower group of people with specific conditions such as diabetes, according to Pillari.

Employers want their healthcare costs “to be lower than healthcare growth trends,” Pillari said.

Managing the health of customers’ full workforces or membership is “a little bit of an expansion and diversification from where the traditional roots of the company have been,” he said.

LifeMasters, which had revenue of $80 million in 2008, wants to sell population health management services to some of its traditional customers, such as healthcare trusts run by labor unions and businesses that take on insurance risks themselves rather than using outside carriers.


Bits and Pieces:

Alliance Imaging Inc., a Newport Beach medical scanning and cancer treatment company, earlier this month appeared at the Baird 2009 Health Care Conference in New York. Paul Viviano, the company’s chief executive, and Howard Aihara, its chief financial officer, appeared on behalf of Alliance Tustin-based Radient Pharmaceuticals Corp.,formerly AMDL Inc.,said it has started a subsidiary, AMDL Diagnostics Inc., which will concentrate on the research, development, manufacturing and international sales of Onko-Sure, its cancer test. Radient changed its name last week I-Flow Corp., a Lake Forest-based maker of post-surgery pain relief devices and wound care products, said it released a full line of On-Q Silverdressings that will be used to fight infections that occur after surgeries.

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