Attorney General Press Release Header
September 4, 2014
AG Jepsen to FDA: End Bottleneck Preventing Generic Nexium from Entering the Market
Cites evidence that drug-maker Ranbaxy is delaying generic,
hurting consumers by inflating cost of second highest-selling drug in the U.S.
In comments to a Citizen Petition filed with the Food and Drug Administration (FDA) today, Attorney General George Jepsen called on the federal agency to expeditiously end several years of delays preventing the sale of a generic form of the drug esomeprazole magnesium ("esomeprazole"), currently marketed under the brand name Nexium. Nexium is the second highest-selling pharmaceutical drug in the United States, and delays in approving generic versions have cost consumers and government healthcare payers billions of dollars.
In his comments, Attorney General Jepsen alleges that an agreement between drug manufacturers Ranbaxy and AstraZeneca Pharmaceuticals LP, Nexium’s brand-name manufacturer, has prevented other drug-makers from launching a generic version of the drug, ultimately harming all consumers by artificially inflating prices. Ranbaxy was first-to-file with the FDA for approval of a generic form of Nexium. AstraZeneca sued Ranbaxy for patent infringement, and the dispute was settled by an agreement that provided financial incentives for Ranbaxy to delay entry of its generic into the consumer market.
In accordance with the requirements of the Hatch-Waxman Act, Ranbaxy’s first-to-file status requires other generic manufacturers of esomeprazole to wait 180 days after Ranbaxy comes to market before they can get FDA approval for their products. The Attorney General is asking the FDA to exercise its discretion to immediately waive the 180-day waiting period and approve the sale of other generic Nexium alternatives.
The Attorney General's action addresses an important national health policy issue: access to affordable generic drugs. "A systemic problem has developed in the pharmaceutical industry whereby some branded and generic drug manufacturers have rigged the system through agreements to delay entry of generic drugs for as long as they possibly can," Attorney General Jepsen said. "Although their methods and forms of these ‘pay for delay’ deals have been evolving in an attempt to avoid government enforcement or regulation, the results have been the same: consumers pay significantly more for branded drugs while lower-cost generic alternatives are kept out of the market."
Nexium is FDA-approved for the relief of heartburn and other symptoms associated with gastroesophageal reflux disease, for the healing of erosive esophagitis and for treatment of ulcerative disease. Nexium sales were approximately $5.99 billion nationwide in 2013. It is also among the drugs with the highest utilization in Connecticut. Since January 1, 2012, the state of Connecticut has spent nearly $75 million on Nexium through Medicaid and various other state employee and retiree healthcare plans.
In August 2005, Ranbaxy filed an abbreviated new drug application, or ANDA, with the FDA seeking to market generic esomeprazole. As the apparent first-to-file, Ranbaxy would be entitled to 180 days of exclusivity – starting on the day it first started selling the product – to market and sell the generic before other generic manufacturers were allowed to come into the market. Ranbaxy, however, has not yet obtained final approval to sell generic Nexium as a result of manufacturing problems flagged by the FDA at the company’s facility in India. Ranbaxy has not yet resolved those problems, causing even more delay to other potential generic competitors. 
After Ranbaxy filed its ANDA, demonstrating intent to market a generic esomeprazole, AstraZeneca filed a federal lawsuit against Ranbaxy alleging infringement of 10 of the 14 patents the company held on Nexium. While the patent litigation was ongoing, the FDA granted Ranbaxy tentative approval of its ANDA in early 2008, putting the company on track for market entry on April 14, 2008. On April 14, 2008, however, Ranbaxy and AstraZeneca signed numerous agreements, including agreements settling the patent litigation, requiring Ranbaxy to delay the launch of its generic until May 27, 2014 – nine years after filing its initial ANDA – and providing for financial compensation to Ranbaxy for the generic's delay.
Meanwhile, Ranbaxy was experiencing problems with regard to the testing and manufacturing of specific drugs. In January 2012, the FDA entered a consent decree with Ranbaxy that set a period of approximately one to three years – through September 30, 2014 – for the company to remedy certain deficiencies and take other actions. The consent decree set milestones for Ranbaxy to bring certain generic products to market, including its generic Nexium; Ranbaxy agreed to relinquish any exclusivity if it fails to meet certain decree requirements by specific dates and to do so no later than September 30, 2014. To date, Ranbaxy has not met the milestones, yet it has not relinquished the exclusivity.
In 2010, Ranbaxy began to manufacture the active ingredients of Nexium through a wholly-owned subsidiary based in New Jersey and to sell them to AstraZeneca, retaining profits through the agreements signed in 2008.
By the first quarter of 2012, the Attorney General alleges, Ranbaxy was formulating finished Nexium capsules for purchase by AstraZeneca and booking substantial sales revenues – all while retaining its first-to-file ANDA status without actually marketing a generic, and thereby preventing several other manufacturers from bringing a generic form of Nexium to the market.

"Ranbaxy’s actions have stalled FDA approval of any other generic drug alternatives to AstraZeneca's Nexium," said Attorney General Jepsen. "Consumers, including the state of Connecticut's health programs, municipal and private payers and individual consumers have no access to more affordable, lower-priced generic Nexium. The manifest result of this inaction is higher prices and a dead-stop bottleneck preventing more than a half-dozen generic drug manufacturers lined up behind Ranbaxy from entering the market. And there is no end to the delay in sight unless the FDA acts – which it has clear authority to do."
The Attorney General continued, "The unfairness to consumers of the fact that there is no generic Nexium available is further compounded because, in the wake of its delay and FDA scrutiny, Ranbaxy has turned it's first-to-file status (and failure to enter the market for generic esomeprazole) into substantial profits by helping AstraZeneca manufacture and sell branded Nexium. Ranbaxy and AstraZeneca should be competing – instead, they are working together to defeat competition and harm consumers.  I don’t fault the FDA for scrutiny of Ranbaxy’s production facility , but consumers should not suffer as a result of the company’s manufacturing problems – problems that Ranbaxy may not be motivated to resolve as it continues to profit under its deal with AstraZeneca."
Unless the FDA is prepared to immediately grant Ranbaxy's ANDA, the Attorney General asked that the agency determine that Ranbaxy has forfeited or must relinquish any 180-day exclusivity for the manufacture, formulation and supply of generic Nexium and immediately grant final approval to all other pending esomeprazole ANDAs that are otherwise eligible for final approval. Each day in the United States, consumers spend on average $16.4 million on Nexium. He asked that the FDA make an expeditious ruling in order to promptly resolve the matter so that consumers may benefit as soon as possible.
Assistant Attorneys General Joseph Nielsen and Michael Cole, chief of the Antitrust and Government Program Fraud Department, are assisting the Attorney General with this matter.
Media Contact:
Jaclyn M. Falkowski
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860-655-3903 (cell)
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Twitter: @AGJepsen