Generic Drug Cos. make Big Gains
$64-$100 Billion worth of Drug Patents expire over the next 5 years
The high price of prescription medicine may finally see a reversal of fortune for both the manufacturer and the consumer.
A list of some 70 major drugs will loose their patents over the next 5 years (2007 – 2011) and drug companies will see profits erode while consumers will see prices drop. The catalyst for both actions will come in the form of generic bioequivalent drugs. Dr Peter Norman, industry analyst and author of a URCH Publishing report on patent expiry markets, is quoted in a Pharmafocus Article on May 4th 2007, “this tremendous growth in the generics market at 10-15% per annum is being primarily driven by the imminent patent expirations of many blockbuster drugs.”
Research
Research into new drugs is an expensive undertaking and drug companies are given 20 years of a drug monopoly to recoup their research costs for their particular drug and make sufficient profits. Even still there have been legal loopholes that have allowed drug companies to extend this 20 year exclusivity period by as much as 40 months or more. In 2002 the Schumer McCain Bill (S.812) was designed to eliminate these loopholes; however, intense lobbying by brand drug companies resulted in a watered down bill that still allowed many of these extensions.
None the less even extensions have limits, many limits are approaching and the generic industry, along with the public, stands to gain big! Scott Gottlieb, deputy FDA commissioner for medical and scientific affairs, said in a Washington Times article: "As generic drugs continue to play an increasingly prominent role in the health of Americans, we need to also continue to make sure that the generic drug program remains on stable financial footing,"
Competition
Competition for the drug industry is not limited to US and EU generic manufacturers. Thriving economies like Brazil and India are also entering the market with well developed generic programs. In an article in Research and Markets the authors claim, “There were 66 producers [in Brazil] with registrations of generic medicines in 2006…”
India too has a ready made industry. Criticized for years for illegally copying brand drugs their industry is poised to legally reap benefits once patents expire. Abid Aslam’s March 23, 2005 One World article said: “It stemmed from India's membership…which enhances the South Asian powerhouse's participation in global commerce but requires the country to tighten patent rules for its $5 billion [generic] pharmaceutical industry.”
Problems
The benefits to all but the brand manufacturers come with downsides. The brand industry is already set for the onslaught of generics and the drastic drop in corporate profits. Peter Loftus and Elena Berton of the Wall Street Journal said: “The tough times for drug makers are leading to more belt-tightening, as the industry adjusts to generic competition and a shortfall of new medicines.”
And while corporate profits are still at record highs, it will change. In a February 22, 2007 article in Drug Researcher.com, Anna Lewcock repeats Dr. Peter Norman's statement: “Patent expiration can cause revenues for the supplier to drop 10-fold over a period of just two years.” AstraZeneca PLC and Bristol-Myers Squibb Co. have already announced massive job cuts to offset this looming problem.
In the end, patents will end, prices will come down and the consumer will benefit at least in the short term. More drugs will be available at lower costs and estimate to save the health industry $5 billion annually.
