Triangle Business Journal -- RALEIGH – Imagine if sales of your company’s marquee product effectively disappeared overnight. That’s what many pharmaceutical companies face when patents expire on their largest-selling drugs.New Jersey pharmacy benefits manager Medco Health Solutions estimates that up to 95 percent of patients switch to generics within the first week of a drug losing patent protection. And the effect isn’t just on the maker of that drug – managed care companies pressure the makers of rival drugs still under patent protection to lower their prices or face losing their business to generics.
Kevin Barnett, senior vice president at Raleigh-based consulting firm Campbell Alliance, says few pharmaceutical companies are immune to this challenge. “This is a huge issue affecting many blockbuster drugs,” he says.
Barnett adds that in the next five years, up to $65 billion worth of drugs in the U.S. will lose their legal protection to generic substitutes. The drug categories most affected by this trend will be the crowded ones – those with many competing, similar drugs, he says.
Among Triangle companies, at least two firms GlaxoSmithKline and Salix Pharmaceuticals, will have to deal with the issue. GSK faces patent expirations on Lamictal, which treats epilepsy, and Imitrex, a migraine treatment. The pharma giant is backing a combination drug with Chapel Hill-based Pozen as a possible successor to Imitrex.
Salix is set to lose exclusivity for two drugs, Xifaxan and Osmoprep, in 2009.
SEVERAL STRATEGIES
Patent expirations are an industrywide problem. When sleep aid Ambien’s patent expired in 2007, maker Sanofi-Aventis lost about 90 percent of the drug’s approximately $2 billion in annual U.S. revenue.
Managed care companies encourage use of generics by waiving co-pays. This has driven up the use of generics to an estimated 60 percent of all U.S. drug consumption, a figure that is expected to increase in the next few years. Connecticut research firm IMS Health found that a 1 percent increase in generic utilization saves patients almost $4 billion. And that means big losses for the makers of patented drugs.
“There is no silver bullet, no panacea in terms of what companies can employ to respond to this challenge,” Barnett says. He listed several strategies as possible responses.
A pharma might launch its own generic version. Or it can fight generics in courts. Other solutions include slashing a drug’s price to compete with generics or to launch follow-on versions of the patented drug with different dosages and in combinations with other drugs. Companies can also contract with managed care firms in advance to prescribe the drug over generics. Companies could also seek extension of the patent.
“The key takeaway is that most of these strategies take a lot of time,” says Barnett, a biotech consultant for 13 years.
When a patent is set to expire, pressure often falls on a pharma’s R&D unit to drum up a new treatment – and on the business development division to strike more deals.
STRIKING DEALS
One company that chose the latter response is Chelsea Therapeutics. The Charlotte-based company bought the rights to Droxidopa, a hypotension drug used to fight low blood pressure, from a Japanese firm that was facing expiration of its international patents. The U.S. Food and Drug Administration in 2007 termed the treatment an “orphan drug,” which extended legal protections for seven years.
Company spokeswoman Kate McNeil says the acquisition made business sense for Chelsea, which does not yet have its own drugs on the market. Droxidopa, which is used to treat Parkinson’s disease, could treat approximately 100,000 patients in the U.S. following approval. Currently, it is available only in especially severe cases.
“It complements our drugs under development, which are higher risk,” says McNeil. Droxidopa produced a revenue stream of $50 million per year in Japan. Chelsea predicts it can generate between $200 million and $250 million in the U.S. per year within the next three to five years.
Barnett says that expiring patents are also causing more mergers and acquisition among pharmaceutical companies.
