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Panel Backs OTC Sale of Prilosec

Pharmaceuticals: The FDA is likely to follow the advice, a boost for the popular AstraZeneca drug, which is facing generic competition.


A Food and Drug Administration advisory committee on Friday recommended that the heartburn remedy Prilosec, one of the world's bestselling prescription drugs, be sold to consumers over the counter.

The FDA is not bound by the panel's advice but usually follows it. The recommendation means that AstraZeneca, Europe's No. 2 drug maker, is a step closer to preserving some market share for a blockbuster drug that is facing competition from generic manufacturers.

Prilosec, whose main patent expired in October, has brought AstraZeneca $26 billion in sales since it was introduced in the U.S. in 1989.

The FDA action is significant for consumers and employers who have complained about high Prilosec prices. The over-the-counter version might cost one-fourth as much as the prescription version.

The move to make Prilosec an over-the-counter drug, which was initiated by Procter & Gamble Co. and AstraZeneca through an agreement in which P&G will market the drug, could undercut its generic competitors. Those rivals are locked in a bitter court fight over the patents for prescription Prilosec. The fight also illuminates the strategy of a powerful pharmaceutical company fighting to preserve profit until it can bring another blockbuster drug to market.

Sources said P&G and AstraZeneca would split profits 60-40, favoring AstraZeneca.

The FDA panel voted 16 to 2 in favor of the recommendation but added two caveats: It wanted a more clearly defined label for the nonprescription version and proof that consumers would understand how the drug is to be used and for what purposes. The panel also suggested just two or three 14-day regimens of the drug over the course of a year. The lone consumer representative on the panel voted against an over-the-counter version, fearing that advertisements would persuade too many people to try it.

The prescription version of Prilosec is the familiar, $4 purple capsule prescribed for heartburn, acid reflux and erosion of the esophagus that can occur in severe cases. At its height in 2000, Prilosec accounted for $6 billion in one year of worldwide sales. Sales last year were $3.7 billion in the U.S.

With so many blockbuster drugs at or nearing the end of their patent protections, brand-name drug companies have employed a variety of strategies to fend off generic competition.

AstraZeneca has taken a three-pronged strategy on Prilosec based on the knowledge that generics could eat up 80% of Prilosec sales in a year or less, according to analysts who follow the company.

First, AstraZeneca is running an aggressive direct-to-consumer advertising campaign that is pushing new customers and current Prilosec users to Nexium, a new version of the drug that the company says is superior.

The company also is suing four generic competitors in federal court in New York--Andrx Corp., Merck KGaA, Schwarz Pharma and Dr. Reddy's Laboratories Ltd.--arguing in part that the capsule's coating is integral to the drug's effectiveness and also deserves patent protection.

Finally, AstraZeneca is making a bid to bring the first of this type of heartburn medication to drugstore shelves, where Prilosec would compete not only against a future generic version but also against traditional antacids such as Tums and nonprescription medications such as Pepcid and Zantac.

Andrea Hotz, an analyst with Sanford C. Bernstein, said the effect of an over-the-counter version of Prilosec competing against a generic version would be "neutral to slightly positive" to AstraZeneca's bottom line.

"That maybe adds 1 cent in earnings per share over a year. It would be higher, 4 cents a share, if a generic version does not come to the market," Hotz said. She added that one benefit of an OTC version would be to draw more customers to other AstraZeneca heartburn drugs.

Andrx Chief Executive Dr. Elliot F. Hahn said he expected at most a minimal effect on sales of a generic version of Prilosec. Andrx and GenPharm International are the two companies that share the lucrative first rights to market the generic equivalent to Prilosec for six months before other competitors can step into the market.

Jim Coyne, AstraZeneca's senior manager of public affairs for its gastrointestinal group, said the OTC version of Prilosec would be a magnesium salt tablet with the same prescription strength--20 milligrams once a day--as the Prilosec prescribed by doctors.

AstraZeneca shares closed at $40.35, up 64 cents. Procter & Gamble shares were unchanged at $93.85.

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