COVER STORY
INNOVATION Generic companies rely on R&D to bring generics to market rapidly.
GENERIC TIDE IS RISING Expiring patent protections and pressures on makers of brand-name drugs bode well for the generic pharmaceutical industry A. MAUREEN ROUHI, C&EN WASHINGTON
T HAS BECOME A RITUAL. M O R N I N G S AND EVENINGS, I TAKE
one tablet of gemfibrozil to regulate the level of triglycerides in my blood. Like many baby boomers, I now must take certain medications regularly to stall diseases associated with aging. At drugstore.com, a year's supply ofgemfibrozil currently costs $156, compared with $1,038 for Lopid, the equivalent brandname product. The 85% savings reflects gemfibrozil's wide availability because of multiple sourcing. In 2000, the average cost of a prescription filled with a generic drug was $1933, versus $65.29 for a brand-name product. It HTTP://PUBS.ACS.ORG/CEN
behooves anyone who has to pay the full cost—uninsured patients, senior citizens without prescription benefits, health insurance companies, states, and national health systems—to insist on generic drugs if available. Growing expenditures on drug prescriptions fuel the clamor for generics. The Centers for Medicare & Medicaid Services estimates that prescription drug spending in the U.S. was $117 billion in 2000,175% more than in 1999. Although the growth of this spending is forecast to slow from 2001 and on, the rate will stay at double digits, and spending will reach $366 billion in 2010. Meanwhile, blockbuster drugs with global sales of almost $82 billion in 2001 will have lost U.S. patent protection by C&EN
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COVER STORY 2007, according to a new report by Datamonitor, a business information company This is bad news for brand-name drugs, because generics quickly erode their sales. For example, in 2001, sales of Bristol-Myers Squibb's Glucophage (metformin hydrochloride) were more than $2 billion, according to Neal Hansen, the report's lead author. The diabetes drug lost patent protection lastJanuary and within one month, more than 85% of the market was taken over by generics, he tells C&EN. For generic companies, Glucophage itselfwas not a huge opportunity because 12 generic versions were launched in two weeks, Hansen says. Abetter opportunity is something like AstraZeneca's Prilosec (omeprazole), for which Andrx, of Fort Lauderdale, Fla., has final Food & Drug Administration approval to market a generic version. In this case, Andrx has first-to-file exclusivity on the 40-mg formulation. When this Andrx product hits the U.S. market, it will be the only generic 40-mg Prilosec allowed for 180 days. Andrx enjoys this exclusivity because it challenged AstraZeneca's unexpired patents protecting Prilosec (see page 53). 'Andrx does not need to drop the price so much for a while. They could make $900 million in six months," Hansen says.
the government to meet a certain voljust for starters, Hansen says. "Companies ume of generic prescriptions. will be looking to make generic versions of the $500 million drug and the $50 milDatamonitor projects a higher growth lion drug. W h e n you start considering of generics in Europe than in the U.S. U.S. what's beyond the blockbuster market, the generic firms "have not bothered to enter market opportunity is huge." European markets, because it is a drag to get approval country by country" Hansen Generic companies also can seize opsays. But regulatory changes are portunities that result from the under way that will make it easuneven penetration of generics in various markets, especially ier to launch generics across the in Europe. For example, the European Union. market shares of generics in Belgium, France, Italy, and GENERIC COMPANIES are poSpain were each less than 4% sitioning themselves for a share in 2001. However, growth rates of the coming bounty Success of generics from the previous will depend on innovation. year were highest in these Commodity generics require countries, ranging from 53% in little or no innovation, are easy France to 2 9 1 % in Italy, acto manufacture, and yield only SPECIAL cording to estimates of Stada slim profits. Many companies REPORT Arzneimittel, a German generavoid these products, preferring ic drugmaker based in Bad Vilbel. only specialty products—that is, generic drugs that have some barrier to entry France, Italy, and Spain traditionally For example, the entire generics porthave been unreceptive to generics befolio of Biovail, Toronto, consists of oral, cause in those countries generic drugs once-daily controlled-release medications. usually have been priced only slightly The technological barrier to entry in this lower than innovator products, accordsegment is significant, according to Kening to Enrico T Polastro, a vice presineth G. Howling, Biovail's vice president d e n t and senior i n d u s t r y analyst at of finance. Arthur D. Little Benelux. Physicians, Impax Laboratories, Hayward, Calif, also concenWORLD LEAD ERS IN 2001 trates on products requiring Top 10 sold more than $9 billion worth of generic drugs "THE CLIMATE is verygoodif controlled-release technoloSALES GENERICS' you're a generic drug compagy. "The more difficult a $ MILLIONS TOTAL SHARE GENERICS ny," Hansen says. "Globally, product is, the more interTeva $2,077 71% $1,475 cost containment in health esting it is for us," Cornel C. Novartis Generics 3 18,988 8 1,442 care is a high priority. Any Spiegler, Impax' chief finanb c Barr 1,171 94 1,104 move to increase the use of cial officer, tells C & E N . Mylan d 971 1,104 88 generics is very much faSpiegler cites as examples Ivax 1,215 73 893 vored." Especially if a MedClaritin D-12 and Claritin Merck KGaA 6,740 12 828 ratiopharm icare prescription drug beneD-24, Schering-Plough's 12na na 806 c Hexal 716 100 716 fit is passed, generic drugs are and 24-hour extended-reWatson 1,146 52 597 poised to be more dominant lease antihistamine/decon975 58 Alpharma 569 in the U.S. pharmaceutical gestant combos. These prodTOTAL $34,132 25% e $9,401 market than they have ever ucts are so difficult to make been before. that only two companies, a Generics sales include industrial business, b For year ending June 31, 2002. c Estimate, d Fiscal year ends March 31. e Calculated from totals, excludes ratiopharm. Impax and Andrx, have deT h e global market for na = not available. SOURCE: Datamonitor veloped generic versions so generics was $27 billion in far, he says. 2001, up 11.3% from 2 0 0 0 , Although Andrx has been expanding its according to the Datamonitor report. That pharmacists, or patients thus have little presence in the immediate-release market, rate of growth is higher than the 8% estiincentive to accept generics, he says. But "we believe there is more revenue and profmated for the global pharmaceutical marthe situation is changing. Many Euroit opportunity in developing sustained-reket as a whole. The $82 billion opportunity pean countries are moving toward inlease versions" of drugs, says Richard J. from expiring blockbuster drugs—those creased use of generics. In France, for Lane, Andrx' chief executive officer. with sales of at least $1 billion per year—is example, doctors are being required by
"The main aim of generic companies is to even out the boom-and-bust cycles by generating a sustainable revenue stream and a sustainable increase in profitability/' 38
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COVER STORY Andrx has a suite of sustained-release made $311 million in the first six months. generics in European markets, where technologies that it applies to different generic drugs maintain relatively high marBut when the exclusivity ended, sales products in various ways. Its generic ket shares for a long period. Take, for exdropped to $54 million in months seven Prilosec is an example. AstraZeneca's ample, the topfivegeneric products of Stathrough nine, and sank to $2.5 million in patent for delayed-release Prilosec specida: omeprazole, lactulose (a synthetic sugar months 10 through 12. fies a three-layer coating, Lane explains. to treat constipation), ranitidine (a drug to However, the scenario is different for Andrx designed around that, protreat heartburn and acid reflux), ducing delayed-release omepraamoxicillin, and ibuprofen. "All EXPIRATIONS zole that has only two layers. In these products are still growing," Thirty-five blockbusters a r e coming off patent by 2 0 0 7 addition to Prilosec and Claritin a spokesman says. Even ranitidine, GLOBAL 2001 SALES GLOBAL 2001 SALES D-24, other products for which which has been on the market for $ MILLIONS $ MILLIONS Andrx has designed around the 10 years, grew 36% from 2 0 0 0 to 2004 BEFORE 2002 patents of innovator companies 2001. That's because, in Europe, Premarin Procrit $3,430 $2,074 Prozac Epogen 2,108 1,990 include Wellbutrin SR (sustainedgeneric companies have well-or1,577 Lovenox 1,301 Allegra/Telfast release buproprion hydrochloganized sales forces that visit docTaxol 1,066 Diflucan 1,197 ride), an antidepressant from tors and cultivate product loyalty Neoral/Sandimmun 1,084 GlaxoSmithKline, and Tiazac the spokesman explains. Humulin 1,061 2005 (extended-release diltiazem hyBooms in revenues elate in6,670 Vasotec/Vaseretic 1,050 Zocor drochloride), an antihypertensive vestors, and busts turn them sour. Prevacid 2,951 drug from Biovail. "The main aim of generic compa2002 2,366 Zoloft Other products with signifiPrilosec/Losec 1,829 5,684 nies is to even out the boom-andNovolin Claritin Zithromax 1,506 3,267 cant barriers to entry are inbust cycles by generating a susGlucophage 1,159 2,682 Biaxin jectable drugs and drugs with spetainable revenue stream and a Augmentin 2,047 cial regulatory requirements, such sustainable increase in profitabilIntron 1,447 2006 as a patient-monitoring system to ity" Hansen says. Prinvil 3,582 Norvasc 1,260 track side effects. "The key is to have a very acZestril 2,674 Paxil 1,097 tive development program," says 2,173 Pravachol TO MAXIMIZE profits from their 2003 Marvin Samson, president and Melavotin 1,621 Cipro/Ciprobay 1,486 1,758 Oxycontin technological expertise, many CEO of Sicor, Irvine, Calif. " % u Neurontin 1,364 Neupogen 1,751 generic companies make it a top can't rely on just one product be1,092 Plavix 1,350 Imigran priority to be the first to file a ing approved." Flovent 1,318 generic version with patent chalSicor specializes in a market Advair 1,224 2007 lenges so that they can enjoy the with few players —injectable Celexa Risperdal 1,845 1,087 six-month marketing exclusivity drugs, which are some of the most Levaquin 1,760 1,052 Fosamax This strategy can bring massive difficult to manufacture. "We Rocephin 1,542 Effexor 1,006 revenues in the short term. won't be in the situation of gener$81,588 TOTAL For example, when Barr Laboic Prozac," Samson says. W h e n ratories, Pomona, N. Y, launched Barr's exclusivity on Prozac exSOURCE: Datamonitor a generic version of Prozac, it pired, 18 other companies jumped
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COVER STORY in, and prices plummeted in the ensuing bloodbath. O n the other hand, for every product it develops, Sicor has at most four competitors, and price erosion is not severe, he explains. Developing products t h a t are m o r e userfriendly is another focus of Sicor. For example, Sicor's oncology p r o d ucts are ready-to-use liquids in unbreakable plastic, r a t h e r t h a n glass, vials. A glass vial would break when dropped, spilling a potentially toxic drug, w h i c h m i g h t have to be cleaned using special procedures. An additional part of Sicor's strategy is to develop branded products. T h e s e could b e improved old drugs—for example, a drug that must be injected once a day might be formulated for once-a-week application—or brand-new drugs. Although Sicor will not
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The demand for low-cost medicines is enormous, the number of megabrands coming off patent is significant, and the opportunity to build and create value is wonderful."
MORE RECENTLY, Andrx has ventured into branded products by improving off-patent drugs. Last July, the company launched Altocor, which is an extended-release version of the choles-
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