[Ip-health] Forbes: The Generic Onslaught

[Amy Nunn]

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The Generic Onslaught
Matthew Herper <javascript:fdcBioWindow('matthewherper')> , 06.23.06, 11:35
AM ET



http://www.forbes.com/business/healthcare/2006/06/23/drugs-patents-expiratio
n-cz_mh_0623generics.html

For the drug industry, today may be the day the floodgates burst.

This is the day that Zocor, the second-best selling drug in the country,
loses patent protection, opening the way for cheaper generic
versions--potentially saving consumers and health plans billions while
cutting into sales for drugmaker Merck (nyse: MRK
<http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=
MRK>  - news  <http://www.forbes.com/markets/company_news.jhtml?ticker=MRK>
- people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=M
RK>  ) and rivals like Pfizer (nyse: PFE
<http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=
PFE>  - news  <http://www.forbes.com/markets/company_news.jhtml?ticker=PFE>
- people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=P
FE>  ) and AstraZeneca (nyse: AZN
<http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=
AZN>  - news  <http://www.forbes.com/markets/company_news.jhtml?ticker=AZN>
- people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=A
ZN>  ). Zoloft, a Pfizer antidepressant with U.S. sales of $2.6 billion,
will follow suit in a week. By the end of the year, the patents will have
expired on 16 drugs--including allergy pill Allegra and cholesterol pill
Pravachol, which have already expired, and Flonase and Biaxin, which could
face generic competition by the fall.

All told, pharmacy benefit manager Express Scripts estimates that giving
generics instead of brand-name pills for common diseases whenever possible
could save up to $25 billion this year alone. Generic versions of pills are
generally between 30% and 80% cheaper than the brand names.

In coming years, things only look worse for Big Pharma--and better for
health insurers and consumers. By 2011, up to a quarter of the drug sales
booked this year will have been eroded by generics. Pfizer's cholesterol
pill Lipitor, the world's best-selling drug (worldwide sales: $12 billion),
and the antipsychotic Zyprexa, Eli Lilly's (nyse: LLY
<http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=
LLY>  - news  <http://www.forbes.com/markets/company_news.jhtml?ticker=LLY>
- people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=L
LY>  ) top seller, are among the nearly two-dozen drugs that could face
patent expiration that year.

Zocor represents a new high watermark for the amount of pain a patent
expiration can cause Big Pharma. Sales losses are expected to extend far
beyond Merck. Cholesterol drugs are the biggest category in America, with
total U.S. sales of $16 billion, according to IMS Health (nyse: RX
<http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=
RX>  - news  <http://www.forbes.com/markets/company_news.jhtml?ticker=RX> -
people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=R
X>  ). Trying to maximize their savings, health plans and pharmacy benefit
managers started to switch patients long before the patent expired. Express
Scripts even removed Lipitor from its formulary entirely, playing hardball
on cost. Since the beginning of the year, Merck has had a boost in Zocor
sales, and Lipitor has seen its market share slump slightly.

Doctors who treat heart attacks are excited at having a new cheap option
that can take a big chunk out of patients' cholesterol. "I'm very happy to
see it," says Jim Stein, a cardiologist at the University of Wisconsin. He
adds that health plans are justified in their efforts to start patients on
generic Zocor before they try brands like Lipitor, Crestor or Vytorin.

The downside is that health plans could intrude too much into medical
decisions. Both Stein and Steven Nissen, interim chairman of cardiology at
the Cleveland Clinic, say they are worried that the drug will be pushed for
patients who have had recent heart attacks and suffer from chest pain, where
the data back a higher-powered drug.

"One of the bigger challenges is, this is happening just at a time when many
of us are beginning to conclude that the lower you can get the cholesterol,
the better," Nissen says. Lipitor and Crestor, from AstraZeneca, are simply
more powerful cholesterol-lowering drugs, he says, and some patients will
need them.

The drop in Zocor's price will get more dramatic as time goes on. For six
months, under U.S. law, Israel-based drugmaker Teva Pharmaceutical
Industries (nasdaq: TEVA
<http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=
TEVA>  - news
<http://www.forbes.com/markets/company_news.jhtml?ticker=TEVA> - people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=T
EVA>  ) will be allowed to sell generic Zocor in widely used doses. Generic
drugmaker Ranbaxy Laboratories will make the biggest, 80-milligram dose,
which is rarely used because of an increase in side effects with high doses
of the drug. Swiss drug giant Novartis (nyse: NVS
<http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=
NVS>  - news  <http://www.forbes.com/markets/company_news.jhtml?ticker=NVS>
- people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=N
VS>  ), which is also one of the biggest makers of generics, has already
sued to try to break Teva's exclusivity and launch its own generic.

Now, Big Pharma is starting to fight back.

Drug firms get a 20-year monopoly on new chemicals they invent, but at least
half that time is usually eaten by tests to prove safety and effectiveness.
To try to extend the lives of a pill, a company may patent it multiple
times, protecting not only a chemical compound but also manufacturing
methods or uses for the drug.

U.S. law gives a lucrative six-month exclusivity to any generic firm that
knocks down a patent on a branded drug. That has resulted in almost constant
lawsuits from generic drug firms trying to copy blockbusters early. Late
last year, Pfizer won a victory over one such challenge, from Ranbaxy on
Lipitor.

Some other firms have chosen to try settling with the generic makers, as
Bristol-Myers Squibb (nyse: BMY
<http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=
BMY>  - news  <http://www.forbes.com/markets/company_news.jhtml?ticker=BMY>
- people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=B
MY>  ) and Sanofi-Aventis (nyse: SNY
<http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=
SNY>  - news  <http://www.forbes.com/markets/company_news.jhtml?ticker=SNY>
- people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=S
NY>  ) are attempting on lawsuits related to their blood thinner Plavix. But
that strategy can run into problems: Catherine Arnold at Credit Suisse First
Boston wrote in a note to investors this morning that there is a good chance
Plavix will run into problems with the Federal Trade Commission.

When fighting and settling don't work, many drug firms are starting to try
competing in ways that will make the six-month exclusivity less lucrative.
Merck is actually selling Zocor to some health plans at such a big discount
that they are using it instead of the generic, cutting into Teva's profits.
Pfizer has long used a similar strategy, using an in-house generics firm to
sell copycats of its own drugs after they lose patent protection.

More big pharmaceutical firms may enter the generic drug business, both to
spite copycat firms and to take advantage of a booming market. The
percentage of prescriptions that are generic is expected to increase to 75%
in 2011 from 56% now.

2006: 16 drugs face patent expiration
Total sales at stake: $14 billion
Biggest losses: Zocor for high cholesterol (maker: Merck, U.S. sales: $3.1
billion)
Zoloft for depression (Pfizer, $2.6 billion)
Pravachol for high cholesterol (Bristol-Myers Squibb, $1.3 billion)
Toprol XL for high blood pressure (AstraZeneca, $1.3 billion)



2007: 23 drugs face patent expiration
Total sales at stake: $11 billion
Biggest losses: Norvasc for high blood pressure (maker: Pfizer, U.S. sales
$2 billion) Ambien for insomnia (Sanofi-Aventis, $2 billion)
Zyrtec for allergies (Pfizer, $1.4 billion)
Lotrel for high blood pressure (Novartis, $1.1 billion)



2008: 14 drugs face patent expiration
Total sales at stake: $11 billion
Biggest losses: Advair for asthma (maker:GlaxoSmithKline, U.S. sales: $2.8
billion)
Effexor XR for depression (Wyeth, $2.2 billion)
Risperdal for schizophrenia (Johnson & Johnson, $1.5 billion)
Fosamax for osteoporosis (Merck,$1.5 billion)



2009: 12 drugs face patent expiration
Total sales at stake: $8.5 billion
Biggest losses: Prevacid for ulcers (makers: Abbott Laboratories and Takeda,
U.S. sales: $3.3 billion)
Lexapro for depression (Forest Laboratories, $1.9 billion)
Topamax for epilepsy and nerve pain (Johnson & Johnson, $1.3 billion)
Lamictal for epilepsy and bipolar disorder (GlaxoSmithKline, $1 billion)



2010: 17 drugs face patent expiration
Total sales at stake: $5.5 billion
Biggest losses: Cozaar/Hyzaar for high blood pressure (maker: Merck, U.S.
sales: $5.5 billion)
Abilify for schizophrenia (Bristol-Myers Squibb and Otsuka, $1.1 billion)
Aricept for Alzheimer's (Eisai and Pfizer, $600 million)
Flomax for enlarged prostate (Abbott Laboratories, $600 million).



2011: 21 drugs face patent expiration
Total sales at stake: $15 billion
Biggest losses: Lipitor for high cholesterol (maker: Pfizer, U.S. sales: $6
billion)
Protonix for ulcers (Wyeth, $2 billion)
Actos for diabetes (Takeda, $1.6 billion)
Zyprexa for schizophrenia (Lilly, $1.6 billion)
Levaquin for bacterial infection (Johnson & Johnson, $1.3 billion)



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