What’s it with patents in the pharmaceutical industry? You spend billions in dollars and months in time, manage to come up with a ‘protected’ branded formula that has the potential of earning you a few billion bucks, and then much before you have derived complete pleasure out of your R&D efforts, other competitors who have been eyeing your revenue basket for years together, start relishing the fruits of your risks and sweat drops. Unfair, as many say; fair enough feels the US Federal Drug Agency (USFDA).
Today, the biggest of names in the world of pharma have their back to the wall when it comes to the future of some of their best-selling patented drug brands, with a hard-fought battle against generic drug makers ahead of them. And life has already become difficult. Take Pfizer for example – during the past ten years, the acquisitions of Warner-Lambert (in 2000 for $90 billion) and Pharmacia (in 2002 for $60 billion) proved to be glorious moments (the first deal gave Pfizer a control over the world’s no.1 selling $11.4 billion-a-year drug Lipitor, while the latter helped it pocket its now third-bestseller Celebrex, which earns $2.5 billion-a-year); but CEO Jeffrey Kindler, the very same deals are now giving nightmares of a dry drug pipeline.
While its patent right over its largest revenue earning brand Lipitor patent will expire a year later, its third-largest selling drug Celebrex will go generic in 2013; combine these two, and you are talking about an erosion of $11.74 billion in the drugmaker’s annual revenues per year (as per research by Evaluate Pharmacy, the loss of revenues, post-patent expiry for a formulation, is estimated at 85%). Market reports suggest how by 2014, generic drug companies would be staging a grand stampede on 14 of Pfizer patents, representing 70% of its sales revenues; there is clear and present danger for Pfizer.
Kindler is running a hard to win race against time, and for the near future, there seems to be no new blockbuster brand that can heal Pfizer’s wounds, not even its most recent $68 billion acquisition of Wyeth. Viagra, which is the drugmaker’s $2 billion-a-year earning brand is also going off-patent in 2012. In the very first week of its launch in April 1998, Viagra had received 4.3 million prescriptions by medical practitioners. By the end of 1998, more than 200,000 doctors had written 7 million prescriptions and the brand was being marketed across 40 countries. Very few drug brands in history had attained such widespread use so quickly. Come 2012, and Viagra’s dream run will end, with generic brand makers launching cheaper versions of the formula. “Pfizer has a number of downward revenue revisions. You have to believe board members are scratching their heads,” says David S. Moskowitz, Analyst at Friedman, Billings, Ramsey Group Inc. In short – a $50 billion-a-year Pfizer to about a $15 billion-a-year skeleton; and that appears a possibility!
The case is the same with many other patented drug brands, as Luis Hector, Analyst, Credit Suisse says, “The current scenario reflects an acknowledgment that insufficient drugs have moved onto the market.” AstraZeneca’s rights over two billion dollar drugs are set to die out fast. It will lose patent rights over both the $4.5 billion-a-year earning Crestor and the $4.9 billion-a-year Seroquel brand by 2012. Eli Lilly’s Zyprexa, which garners $4.9 billion in annual revenues, will expire by 2011. The list of patent expiries of products is long, with names like Advair (owned by GSK, with annual sales of $7.8 billion), Plavix (Sanofi-Aventis & Bristol-Myers Squibb, $4.9 billion), Singulair (Merck, $4.1 billion), Cozaar (Merck, $3.3 billion), Levaquin (J&J, $1.8 billion), Zometa (Novartis $2.1 billion) and many more – all brands over which exclusive marketing rights would have been lost by 2013!
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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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