Big blockbuster drug brands that once promised billions for big pharma are fast entering the generics zone. The victims are many and their brand pipelines are dry!
As estimated by Datamonitor (an industry research firm), about $160 billion worth of ‘patented drugs’, globally, will lose their patent protection by 2016! According to a report by Evaluate Pharma, by January 1, 2011, 15% of revenues that global pharma companies are currently earning from patented brands, will be lost to generic drugmakers. Could the situation for pharma giants get worse?
Past researches have proven that the loss of revenues, post-patent expiry, for a particular formulated brand, can reach up to 85%! Therefore Pfizer, which earned $11.4 billion from its Lipitor drug in 2009, will be able to garner only $1.7 billion per year once its patent on Lipitor expires in 2011, giving rise to competition which will kill price. And this is only the tip of the iceberg. If competition grows unhealthy, the drugmakers could earn slimmer figures.
Loss of market share is another concern. As per the research study sponsored by Merck Foundation titled, ‘Dynamic Competition in Pharmaceuticals: Patent Expiry, Generic Penetration, and Industry Structure’, drug brands typically lose 50% of their market share within a year of patent expiry.
High cost risk associated with drug discovery (which could run into billions of dollars for any formulation), is a big reason why the discoveries of new blockbuster formulations have been arrested. As per a report by E&Y, “The low probability of proceeding from the pre-clinical phase to new drug approval illustrates the high risk inherent in pharmaceutical R&D. Only 2% percent of projects in the pre-clinical phase are expected to make it to Phase I testing and, of these, only one in five are likely to be approved.” So the average success rate of a pre-clinical compound being comercially sold after finding a place as a pill in the market is just 0.4%!
A high chance of losing dollars, but the bait has to be thrown, as John Anthony, a Massachusetts-based pharma analyst says, “You can’t lead by following a dying strategy: generics are the K-Mart part of the Walmart curve. You don’t lead by following.”
Despite a consistent rise in R&D investments over time, the count of patent approvals granted by the FDA per year, have dwindled. And what was once their pride, has now become a cause to worry; and the wrinkles, despite luck and hardwork, don’t appear to be disappearing fast for big pharma. The truth is – with patents on blockbusters brands vanishing faster than ever, there is a clear and present danger.
As estimated by Datamonitor (an industry research firm), about $160 billion worth of ‘patented drugs’, globally, will lose their patent protection by 2016! According to a report by Evaluate Pharma, by January 1, 2011, 15% of revenues that global pharma companies are currently earning from patented brands, will be lost to generic drugmakers. Could the situation for pharma giants get worse?
Past researches have proven that the loss of revenues, post-patent expiry, for a particular formulated brand, can reach up to 85%! Therefore Pfizer, which earned $11.4 billion from its Lipitor drug in 2009, will be able to garner only $1.7 billion per year once its patent on Lipitor expires in 2011, giving rise to competition which will kill price. And this is only the tip of the iceberg. If competition grows unhealthy, the drugmakers could earn slimmer figures.
Loss of market share is another concern. As per the research study sponsored by Merck Foundation titled, ‘Dynamic Competition in Pharmaceuticals: Patent Expiry, Generic Penetration, and Industry Structure’, drug brands typically lose 50% of their market share within a year of patent expiry.
High cost risk associated with drug discovery (which could run into billions of dollars for any formulation), is a big reason why the discoveries of new blockbuster formulations have been arrested. As per a report by E&Y, “The low probability of proceeding from the pre-clinical phase to new drug approval illustrates the high risk inherent in pharmaceutical R&D. Only 2% percent of projects in the pre-clinical phase are expected to make it to Phase I testing and, of these, only one in five are likely to be approved.” So the average success rate of a pre-clinical compound being comercially sold after finding a place as a pill in the market is just 0.4%!
A high chance of losing dollars, but the bait has to be thrown, as John Anthony, a Massachusetts-based pharma analyst says, “You can’t lead by following a dying strategy: generics are the K-Mart part of the Walmart curve. You don’t lead by following.”
Despite a consistent rise in R&D investments over time, the count of patent approvals granted by the FDA per year, have dwindled. And what was once their pride, has now become a cause to worry; and the wrinkles, despite luck and hardwork, don’t appear to be disappearing fast for big pharma. The truth is – with patents on blockbusters brands vanishing faster than ever, there is a clear and present danger.
Steven Philip Warner
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Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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