Things have been going very well for the pharmaceutical industry over the past decade or so. A series of “blockbuster” drugs has been bankrolling the industry players fortunate enough to own the rights to those drugs and at the same time financing their search for the “Next Big Drug”. Global spending on pharmaceutical drugs exceeded a record US$643 billion in 2006. In the US, the pharmaceutical industry has been the most profitable industry for many years running. Nascent pharmaceutical industries in countries such as China, South Korea, Mexico and Russia have been virtually guaranteed double digit annual growths.
However, all that may soon come to an end. The years 2011 and 2012 will usher in the patent expiries of a record number of blockbuster drugs. Pfizer’s cholesterol busting drug Lipitor, which has been their best seller with sales of US$12.4 billion in 2008 (making it the top-selling branded pharmaceutical drug in the world at that time) is due for patent expiration in the US in June 2011. Via a licensing arrangement with Indian generic drug company Ranbaxy, Pfizer has delayed this deadline a further five months. This means that a generic version of Lipitor will be available sometime in late 2011.
Another star drug about to fall into a sea of generics is Eli Lilly’s US$2 billion antipsychotic drug Zyprexa, which is set to lose market exclusivity in 2011. If we peek a little further we find Johnson & Johnson’s Levaquin and Concerta, as well as Pfizer’s Protonix having their patents expire in 2011.
All told, the year 2011 will see more than US$15 billion being dispersed to generics in the US alone. This figure would have been even larger if not for a few developments that effectively delayed the entrance of generics for several drugs to the following year. The blood thinner Plavix, marketed by Bristol-Myers Squibb and Sanofi-Aventis, was granted a six-month patent extension, effectively catapulting the expiry date into the middle of next year. Japanese pharma company Takeda, which owns patent rights to the diabetes blockbuster drug Actos, has succeeded in shifting the drug’s patent expiry from 2011 to 2012 after a number of patent litigation settlements.
The reason that all this is possible is that the big guns of the pharmaceutical industry do not always play a fair game of patents. While the innovators of the big drugs will fight teeth-and-claw to keep infringers at bay during the term of the patent, when the patent is due to expire they will not refrain from seeking extensions and other means to maintain exclusivity. One must of course look at it from all points of view, and in the defense of the big pharma companies, the hard truth is that the creation and development of new drugs are extremely costly affairs. Add to that the lengthy time it takes for the relevant authorities to test the drug before it is approved for sale (more than 10 years in many cases), and one cannot help but feel that the standard 20 year patent term is simply not sufficient for them to recover their R&D costs. But I digress.
All these extensions mean that, if 2011 was a bad year for patent owners in the pharma industry, 2012 will be a truly awful year. Roughly US$33 billion will be lost to generics in the US alone, more than double the 2011 figure.
No less than 10 blockbuster drugs will lose market exclusivity in 2012.
Apart from the drugs already mentioned above, there is AstraZeneca’s Schizophrenia drug Seroquel (US$3.7 billion loss in US sales), Merck & Co.’s Singulair, an asthma drug (US$3.2 billion loss in US sales), the autoimmune treatment Enbrel by Amgen (US$3.3 billion loss in US sales), Novartis’ Diovan (US$2.5 billion loss in US sales), and the list goes on.
This does not mean that everything will be back to normal after 2012. While the total loss in value due to patent expiries will not be as high as in 2011 and 2012, some of the real-world effects, including erosion of branded sales, will be felt up to around 2016 and even farther if the pharma companies do not come out of their current research rut and expedite development of future blockbuster drugs.
Interestingly, all this is actually a positive turn of events for countries like India and Malaysia whose pharmaceutical industries rely heavily on the production of generic versions of drugs. The expiry of these blockbuster patents will open up entire sectors of industry solely focused on manufacturing generic versions of those drugs, providing a huge boost to the economies of these developing nations.
This will also make drugs more available and affordable for developing nations that had lacked the financial prowess to purchase original versions of those drugs. Some nations have jumped the gun and forced compulsory licensing of important drugs. Thailand, a country with an estimated 220,000 people diagnosed with HIV, was one country that did this, making the generic AIDS drug Efavirenz, later followed by Kaletra, available under compulsory licensing. Although this type of compulsory licensing, namely that of life-saving medicines, is allowed under WTO rules and affirmed by the DOHA Declaration, many pharmaceutical companies are understandably not pleased when this happens and often try to fight it in some way or other. So when these patents expire, more of the world population is going to have access to the life-saving drugs they protect.