FDA strikes a blow for Glaxo

Glaxo Wellcome, the British pharmaceuticals giant, was boosted yesterday by a landmark decision by the US Food and Drug Administration to extend drug patents to bring them into line with international standards.

The decision, which is the latest episode in the company's fight against manfacturers of generic rivals, lifts months of uncertainty hanging over Glaxo's top-selling drug, Zantac.

The FDA decision was made to comply with a law signed by President Bill Clinton following last year's Gatt agreement on world trade. But the move drew protests from consumer groups and makers of generic drugs, anxious to challenge branded drugs as their patents expire.

From 8 June the FDA will award patents for 20 years from the time of application, rather than the existing period of 17 years from the time of approval.

Companies with existing patents will be allowed to choose the longer of the two periods. For Glaxo's blockbuster ulcer drug, Zantac, the ruling will mean its patent expires in July 1997 instead of December this year. This will have a big impact on the drug maker's earnings, as Zantac makes up more than 40 per cent of its total world sales. The US is by far the biggest market for the drug.

The decision means a setback for companies such as Geneva and Novopharm, which are poised to enter the market with generic versions of Zantac.

According to Merrill Lynch, sales of branded Zantac could fall by as much as 40 per cent in the US following the patent expiry in July 1997. Merrill Lynch estimates sales of the drug could reach $1.36bn for the 12 months to 30 June but forecasts sales of only $696m for the year from July 1997, coinciding with the first 12-month period after the patent expiry.

Its prediction for the following year is $278m as the generic alternatives establish themselves in the marketplace.

These figures suggest that the 19-month extension granted by the FDA will be worth well over pounds 1bn of extra sales to Glaxo. Its shares rose 2.5p to 729p.

Some US congressmen have expressed anger at the FDA decision, saying it will mean higher costs for the taxpayer as patients on federal programmes such as Medicare and Medicaid continue to pay higher prices for Zantac and about a hundred other branded drugs that stand to benefit from patent extensions.

Senator David Pryor of Arkansas, the ranking Democrat on the Senate's special committee on ageing, suggested legislation might be introduced to correct what he sees as a windfall to the big drug companies. Other congressmen consider the FDA has little choice but to comply with Gatt standards.