Big Savings Coming From Emerging Generic Drugs, Patent Expirations

Big Savings Coming From Emerging Generic Drugs, Patent Expirations [Chicago Tribune]

From Chicago Tribune (IL) (May 5, 2011)

May 05--Lipitor. Actos. Plavix.

These are some of the most-prescribed medicines in the U.S., drugs that are so commonplace they are responsible for a huge chunk of the $300 billion spent on brand-name pharmaceuticals each year.

That is about to change as patents on these pricey pills begin to expire, opening the door for generic competition. And that can translate to savings of up to 90 percent, analysts say, making these drugs affordable to more consumers.

Americans will see cheaper copies of some of the biggest drug names starting this fall. Out-of-pocket costs of the generic form of Lipitor, a widely used and advertised cholesterol drug that loses its patent protection in November, will be reduced to as little as $4 for a month's supply. Even for a person with health insurance, Lipitor can cost $25 to $40 -- or more -- each month.

In the next two years, six of the nation's 10 best-selling drugs are expected to be available in generic form. They include Lipitor, which lowers levels of the bad (LDL) cholesterol; Actos, a blockbuster diabetes drug; and Plavix, which reduces the risk of deadly blood clots after surgery.

"The human scale of all this is unprecedented," said Michael Kleinrock, director of research development at IMS Health, a market research and information firm that tracks the health care industry. "For most of the last two decades, many of the most popular drugs were for large populations in the primary setting. When those drugs go off patent and become available, there are going to be big savings coming for patients."

More than $100 billion in annual brand-name drug sales will be at risk for generic competition from 2011 to 2015. That's about one-third of the annual spending on all prescription drugs in the U.S., according to IMS data.

Pharmacies and health insurance plans are expected to step up marketing and education to get consumers to use generics.

"You are going to see more and more people being pushed to generics," said Linda Bannister, health care analyst with Edward Jones in St. Louis. "For patients, I see a big dividend for the research the drug companies put in in the late 1980s and 1990s."

As for consumers' concerns about the effectiveness of generic drugs, doctors say the cheaper versions have the same active ingredients as their brand-name counterparts. Also, the Food and Drug Administration requires that these cheaper copies be as safe and effective as the patented versions.

The primary reason generics are cheaper is because the companies that make them don't have the expenses tied to bringing a drug to the market.

"The medical profession has struggled to dispel the perception that generics are somehow inferior, but it is simply bogus," said Dr. Caleb Alexander, an internist at the University of Chicago Medical Center and a pharmacoepidemiologist who studies the quality of prescription drugs as well as pharmaceutical cost issues. "(Generics) are the same."

Many of the brand-name drugs were launched in the 1990s, a golden age for the pharmaceutical industry when breakthrough treatments for some of the most chronic health conditions such as diabetes, high cholesterol and hypertension became available to the masses.

They have been credited with helping to reduce deaths as well as the need for expensive surgeries. The volume of open-heart surgery, for example, has dropped nationally since 1998, according to statistics from the American Heart Association.

But these expensive medications also have been blamed for a spike in health care costs. And their price has made them prohibitive for many Americans.

Certain brands cost $3 to $5 a pill, which quickly adds up for consumers who need to take them daily to manage their health conditions.

Pharmaceutical companies say they have to charge a premium to recoup their investment for research and development, which can reach into the hundreds of millions of dollars for just one drug. Patents are granted for 20 years, but drug companies have argued they have 10 years or less to market the product exclusively due to the many years it takes to discover, research and develop the drug before it is approved by the FDA.

The biggest impact for consumers will come from generic competition for Pfizer Inc.'s Lipitor, which has grown to be the top-selling drug of all time, generating more than $9 billion in U.S. sales at one point in its history. Competition from other statin drugs has started to make a dent in Lipitor's sales, which slowed to about $7 billion last year -- an early sign of what Pfizer faces when its drug loses patent protection in November.

"Recognizing the significant role Lipitor has played in the cardiovascular health of millions of people with heart disease or risk factors for heart disease around the world, Pfizer is actively exploring how the Lipitor brand can continue to improve cardiovascular health following its loss of market exclusivity," Pfizer said in a statement to the Tribune.

Analysts note that drug companies typically find ways to fend off generic competition for as long as possible. There's the widespread tactic of creating "patent extenders," which involves slightly altering a brand-name drug by developing extended-release versions or prescriptions that require different dosages.

Some also try to protect their patents by taking makers of generic drugs to court, which can delay the release of cheaper copies by months. "The dates are a movable feast because there is always patent litigation, so the dates (of patent expiration) may move a little bit," Kleinrock said.

Meanwhile, makers of generic drugs eagerly await the opportunity to make cheaper copies, a business worth tens of billions of dollars around the world. The generic drug business has become a fast-growing industry, particularly in emerging economies such as India and China where consumers don't have as much money to spend on medical care and generics are a way to provide more affordable treatments.

Drug makers have seen their sales take a hit after their generic versions are launched, often forcing them to cut thousands of jobs. To find other ways to make a profit, many companies have turned their attention to biotechnology drugs, specialized treatments derived from animal or human cells. Such therapies are booming as the medical industry sees biotech drugs to be more effective than older treatments, but they come with a higher price tag.

While biotech drugs are complex to develop and manufacture, making them very expensive for consumers, they can pay off for drug companies.

Take Abbott Laboratories, which bought Knoll Pharmaceuticals in 2001 for $6.9 billion largely to get a single drug.

In that deal, the North Chicago-based drug giant obtained Humira, a drug derived from human cells used to treat a variety of autoimmune diseases such as rheumatoid arthritis and Crohn's disease. Today, Humira is on pace to generate more than $7 billion in annual worldwide sales for Abbott.

Analysts see future drug development moving toward biotechnology as scientists look for ways to treat diseases and conditions that include cancer, multiple sclerosis and Alzheimer's disease.

"A lot of people think drug development is cyclical," Bannister said. "There are a lot of innovative medicines on the horizon. Hopefully, there will be new products."

bjapsen@tribune.com

Twitter @brucejapsen

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Posted: May 2011


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