Surviving the Fall
Big Pharma’s financial outlook may appear unsteady but are they more prepared than their generic counterparts?
This year, Seroquel, Actos, Singulair, and Lexapro have gone or will go off patent. In the coming two years, drugs including Oxycontin, Cymbalta, and Nexium will expire. With the loss of patent protection on so many blockbuster drugs, at first glance the financial position of the big branded pharma firms looks grim.
When a drug is patented, it is protected from being copied for a limited period of time, usually for a period of 20 years. Over the past few years, patents have also expired for Enbrel, Zyprexa, Plavix, Arimidex, and Lipitor.
So the approach of the patent cliff has not been a surprise for the industry, and with many strategic options available for the pharmaceutical industry (mergers and acquisitions, accessing emerging markets etc) to adapt to the new environment, the outlook actually remains encouraging. The number of drugs coming off patent has also encouraged pharmaceutical companies to shift its ‘blockbuster’ mentality towards more diversification in the development pipeline over the last several years. But while the inevitable end to exclusivities affords opportunities for Big Pharma, the same can’t be said for the generics.
Executives for generic drug companies are saying they will no longer be able to depend as much on the exclusivity periods that follow the patent expirations of many drugs as they had become accustomed to. During those six-month periods, companies that are the first to file an application with the Food and Drug Administration (FDA), successfully challenge a patent and show they can make the drug win the right to sell their version exclusively or with limited competition. However, of the drugs that are becoming generic, fewer have exclusivity timeframes dedicated to a single drug maker.
In response, many generic drug makers are anxious to follow the path of the Big Pharma, by revamping their business strategies through internal innovation and seizing market growth opportunities. These panicked companies are looking for a competitive advantage and are attempting to soften the edge of the proverbial precipice in different ways: specialising in hard-to-make drugs, selling branded products, making large acquisitions or expanding into global markets.