Patent expirations will cost pharma billions
With patent expirations looming for some of the world's top-selling brand name drugs, the outlook for the global pharmaceutical industry is negative, said Moody's in its annual Industry Outlook report, released in June.
"Patents on a number of the largest-selling drugs will expire in late 2011 and in 2012, which is increasing pressure on most branded drug companies at a time when the quality of the late-stage pipelines remains relatively weak," said Marie Fischer-Sabatie, vice president and senior analyst of Moody's Corporate Finance Group, in a statement.
The top five drugs set to lose their patents in 2011 are Lipitor, Zyprexa, Levaquin, Concerta and Protonix, which collectively generated nearly $11 billion in U.S. sales in 2010. In 2012, Plavix, Seroquel, Singulair, Actos and Enbrel, which collectively generated nearly $20 billion in U.S. sales in 2010, will lose their patents.
The cholesterol drug Lipitor, the bestselling prescription drug of all time, has been a major boon for Pfizer, the world's biggest drug company. At its peak in 2006, Lipitor's global sales reached $12.9 billion, accounting for 27 percent of Pfizer's revenue. In 2010, it represented nearly 16 percent of the company's revenue.
Drugmakers are working furiously to bring new drugs to market. For example, Eli Lilly & Co. says it will have at least 10 new drugs in final-stage studies by the end of the year.
Lilly's blockbuster anti-psychotic medication Zyprexa will lose its U.S. patent in October. This and other patent expirations will cost Lilly an estimated $7 billion in annual sales, according to a statement released by the company. Zyprexa had more than $5 billion in sales in 2010.
According to IMS Health, a market research firm that monitors the healthcare industry, nationwide spending on medicines exceeded $307 billion in 2010, and more than $100 billion in annual brand-name drug sales are at risk when generic competition hits the market between 2011 and 2015.
"In the simplest terms, it's a success penalty," said Michael Kleinrock, research director at the IMS Institute for Healthcare Informatics, a subsidiary of IMS Health.
"American consumers are extremely aware of generic options and are actively looking for them," said Kleinrock. "Seventy-eight percent of all prescriptions in the U.S. are for generics."
Gone are the days when patients relied solely on their healthcare providers for information on generics. "Consumers are Googling for information on patent expiries so they can make the shift as soon as possible," said Kleinrock.
Bad news for the pharmaceutical industry is good financial news for consumers, who will see substantial savings of up to 90 percent when generic competition hits the market.
Kleinrock warns against looking at this issue solely from a financial perspective, however.
"The pharmaceutical industry is based on research and development. Investors can't expect pharmaceutical companies to replace revenue dollar for dollar," he said.
"If looked at only from an economic viewpoint, the general public may miss part of the bigger picture. We need new innovation with drug research to develop the drugs we all want and need," said Kleinrock.
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