Many patents are now nearing expiration. This phenomenon, dubbed the “patent cliff”, has pharmaceutical giants trembling.
In one fell swoop, several billions of dollars were wiped from the earnings of the US group, Pfizer. Sales of its star cholesterol-lowering drug Lipitor, one of the most sold drugs in the world, had reached the colossal sum of $10.7 billion in 2010. The product then came into the public domain in November 2011, leading to the arrival of less-expensive generics. The company subsequently saw its revenue from Lipitor slashed by over half.
The case of Lipitor illustrates a global trend. The pharmaceutical industry has been confronted by an unprecedented wave of patent expiries since 2012. This phenomenon, dubbed the “patent cliff”, will likely continue until 2018. The consulting firm EvaluatePharma estimates that the total sum at stake is $230 billion for the 2013-2016 period. Swiss giants Novartis and Roche are affected as well, in particular due to the loss of exclusivity for many oncological products.
“Many drugs for preventing cardiovascular diseases (against cholesterol, diabetes and hypertension) were created in the 1990s,” says Thierry Buclin, physician in chief of the Clinical Pharmacology Division at the Lausanne University Hospital (CHUV). “Used by many patients all year round, they have been hugely successful. These preparations are now coming into the public domain.” In the pharmaceutical industry, patents last 20 years and serve as a means of ensuring profit for the laboratories which invest – $1 billion on average – in the development of a new drug.
Faced with these massive losses in revenue, one might expect to see the pharmaceutical laboratories double their innovation efforts. Not so: expenditure on research has been slowing since 2008. “The chances of finding the next blockbuster are very small because treatments for chronic diseases – the most profitable – are already on the market,” says Lisa Urquhart, chief editor of EP Vantage, a specialised publication. “Moreover, regulations for approving new products are much stricter than in the past. The fields of cancer and Alzheimer’s disease remain very promising, but they involve research that is very difficult to conduct.”
On the other hand, companies are devoting energy to prolonging the effect of existing patents for as long as possible, a strategy called “evergreening”. “They release slightly modified versions of a medicinal product on the market, for example with a new formulation or manufacturing process,” says Nathalie Vernaz, a pharmacist at Geneva University Hospitals (HUG) who conducted a study on the matter, published in the American journal PLOS Medicine. “With clever marketing, they redirect consumers toward these products.” Another tactic of the pharmaceutical companies is that they aim to diversify their activities, for example by launching into the manufacture of medical equipment or generics, as Novartis has done with its subsidiary Sandoz.
And what about the patients? What do they get out of the “patent cliff”? Peter Beyer, senior advisor in the Department of Public Health, Innovation and Intellectual Property at the World Health Organisation (WHO), has this to say: “Just because a drug sells well doesn’t necessarily mean it is very useful. The ‘patent cliff’ affects only a few drugs considered essential by the WHO. But these patent expiries are good news in terms of health costs.”
For Thierry Buclin (picture), the health system could reduce costs by revising its law on drug reimbursement.
IN VIVO Are we seeing an influx of new generic drugs thanks to the “patent cliff”?
Thierry Buclin New generics have been appearing on the market regularly for years. The “patent cliff” phenomenon is speeding up their rate of appearance. But this does not represent a massive change in the total quantity of preparations available.
IV Does the Swiss health system benefit from the phenomenon?
TB Having access to equivalent preparations that cost less is good news. Unfortunately, the potential for generics is under exploited in Switzerland. There is a problem of acceptability, sometimes for highly subjective reasons: people prefer the original to the copy. In reality, problems caused by generics are extremely rare, but they are intentionally blown out of proportion by the large pharmaceutical groups who are trying to protect their own interests. There is also a price issue: generics remain relatively expensive, more expensive than everywhere else in Europe.
IV What is the reason behind this price difference?
TB Once a drug has come into the public domain, the different companies that distribute it are in competition with each other, which should make the price fall. But this mechanism does not work well in Switzerland because of the reimbursement conditions laid down by the law. To be covered by basic insurance, generics must be only 10% to 60% cheaper than the original preparation, depending on their market volume. This rule allows manufacturers to tacitly agree on prices. In Great Britain, for example, some generics are 90% cheaper than the original. So in Switzerland there are possibilities for reducing costs which are not being exploited.
Thierry Buclin is physician in chief of the Clinical Pharmacology Division at the CHUV.
From: Abbott Laboratories
For: Treating HIV
Norvir will lose its patent in 2015, much to the delight of defenders of public health. “It’s a drug that is commonly used as a ‘booster’ in combination with other drugs for treating HIV,” says Peter Beyer, senior advisor in the Department of Public Health, Innovation and Intellectual Property at the WHO. “It is considered as essential by the WHO. With the end of the patent, prices will go down, which will benefit patients and humanitarian aid programmes. The product is already being marketed at lower prices in developing countries. The change to generics will have an impact in middle-income countries in particular.” In 2012, Norvir made $405 million for Abbott Laboratories, the American group that markets the drug.
For: Treating cancer
Swiss giant Roche still has a few years’ respite. Rituxan, sold under the name MabThera in the United States, will lose its patent in 2018. Rituxan is one of the group’s blockbuster drugs, used to treat certain lymphomas. Its sales totalled over $7 billion in 2012. Rituxan is not a chemical treatment, but a biological treatment, which makes it more difficult to copy. This feature offers some protection against competition from generics manufacturers.
Experts estimate that when a patent expires for a chemical product, revenue decreases
by 80% to 90% in two years.
For biological one, the reduction is around 30% to 50%.
For: Treating gastric ulcers
Nexium is considered a prime example of “evergreening”. The drug is the successor of Omeprazole, a similar treatment against gastric ulcers. The British laboratory AstraZeneca launched Nexium on the market in 2001, before the end of the Omeprazole patent. By charging lower prices and thanks to intensive marketing to doctors, AstraZeneca was able to redirect its customers to the new drug, thus protecting itself from genetic product competitors. Numerous specialists have complained that the product is not really any different from its predecessor. Despite the criticism, Nexium, which will enter the public domain in 2014, is a commercial success. The drug made $3.9 billion for AstraZeneca in 2012. According to data published by the Swiss Federal Parliament, Nexium was second on the list of most highly sold drugs in Switzerland in 2008.