Use Of Generic Prescription Drugs Increasing As Patents Expire On Blockbuster Medications; Trend Expected To Reduce Overall Drug Spending

Main Category: Pharma Industry / Biotech Industry
Also Included In: Public Health
Article Date: 10 Aug 2007 - 2:00 PDT


As patents expire over the next five years for brand-name prescription drugs with more than $60 billion in combined annual sales, some health care experts predict that new generic equivalents will maintain single-digit drug price inflation for U.S. consumers, the New York Times reports. Generic drugs typically are 30% to 80% less expensive than brand-name versions, contain the same active ingredients and are approved by FDA under the same standards as brand-name drugs.

Expiring patent protection for some drugs, such as Sanofi-Aventis' sleeping pill Ambien, has been cutting into brand-name manufacturers' revenue, and several blockbuster drugs are set to face generic competition over the next five years, including Fosamax, a drug that slows bone loss, and the cholesterol-lowering drug Lipitor, the Times reports. Some companies, such as pharmacy benefit manager Express Scripts, and Medicare prescription drug plans are encouraging use of generics by lowering copayments for the drugs versus their brand-name equivalent.

Ronny Gal, an analyst for Sanford C. Bernstein, says that by 2010, profits for generic drug manufacturers are expected to grow by 10% to 13% annually. The generic movement is "good for everybody but the branded pharmaceutical companies," Gal says.

Brand-name drug makers are addressing the loss of patent protection by developing new drugs, creating generic subsidiaries and contracting for the production of company-authorized generics. The Pharmaceutical Research and Manufacturers of America says that despite declining profits, the drug makers are increasing research and development budgets each year. However, the Times reports that "there are fewer potential blockbuster drugs" in manufacturers' pipelines that could take the place of drugs that go off patent.

Richard Evans -- a consultant with Avos Life Sciences, which does research and consulting for the pharmaceutical industry -- said, "At the end of the day, it's basically a failure of innovation." Caroline Loew, PhRMA's senior vice president of scientific and regulatory affairs, said, "I don't think we would support the contention that there's a lull," adding that the industry is trying to develop treatments for more complex conditions that take longer to research. However, brand-name drug makers face challenges. "There's a tidal wave of generic drugs, and we are just in the beginning of the tidal wave," Laizer Kornwasser, an executive for drug plan provider Medco Health Solutions, said (Saul, New York Times, 8/8).

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