Glaxo serves up 20% payer discounts on Advair to soften generic blow

GlaxoSmithKlineBuilding
GlaxoSmithKline has negotiated 20% Advair discounts with payers that will last, in some cases, through 2018.

Mylan is inching closer toward its FDA decision date for generic Advair. But thanks to some crafty payer negotiating from GlaxoSmithKline, it may be a while before Mylan's knockoff can gain serious traction, even if it wins approval on time.

Some payers have taken an “exploding offer” from GSK, agreeing to a 20% discount on the med through all of 2017—and, in some cases, 2018, Bernstein analyst Ronny Gal wrote in a Friday note to clients. And that means the first copycat of the respiratory blockbuster won’t be able to rattle the market immediately upon arrival, no matter how it’s priced.

Of course, that buffer won’t last forever. Eventually, “the respiratory market prices will sharply come down,” Gal wrote, and “impact will extend to other major products.” AstraZeneca’s Symbicort and Merck’s Dulera fall into that group, for two. And Teva’s AirDuo RespiClick—a fixed-dose product approved by the FDA in January that contains the same active ingredients as Advair—in particular “will have an uphill battle.”

Glaxo, for its part, has been preparing for the long-delayed arrival of generic Advair for years, and the company spent last year insisting that payer pressure on the respiratory space had already mimicked the effect of generics. Still, in its 2017 guidance, the company said that if a knockoff hits the market midyear, it expects core earnings to come in flat or decline by a single-digit percentage.

Of course, that’s still an “if,” and it may continue to be until Mylan’s March 28 decision date has come and gone. As Evercore ISI analyst Umer Raffat has written to clients, there are a couple potential issues with the candidate—including the fact that Mylan’s trial was in patients older than 18 years, when FDA guidance asked for a trial of patients over 12 years.

Mylan, however, thinks it’s got the situation under control, and it’s targeting the midyear launch that Glaxo guided toward. Mylan has “addressed this question on an earnings call saying they believe their trial is in-line with FDA requirements,” Raffat said earlier this month.

And even if Mylan does get held up, Glaxo won't be in the clear. Jordan-based Hikma Pharmaceuticals has its own Advair generic coming up for an FDA decision by May.