2016 is going to be a big year. We’ll elect a new president, see our best athletes head to the summer Olympics in Rio de Janeiro and celebrate a leap year. However, 2016 is also a year to watch in the pharmaceutical industry. Several highly profitable drugs are going off-patent in 2016, losing the protection of the company that has held all rights to the drug – and ensuring that it won’t be long until cheaper generic alternatives hit the shelves.
What exactly does going off-patent mean? When a pharmaceutical company develops and “brands” a drug, it’s held under patent protection. Only the pharmaceutical company that holds the patent is allowed to manufacture, market and sell the drug. Patents in the United States usually run about 20 years, but patents are applied for well before the clinical trial begins, so the shelf life of a patent in the United States usually is about seven to 12 years.
What Happens When Patents Expire?
Manufacturers desiring to sell the now-generic version of a drug that has gone off-patent do not need to prove the safety and efficacy of the drug since that has already been done. Instead, they submit a New Drug Application (ANDA) to the Food and Drug Administration (FDA) intended to demonstrate that the proposed generic is the same as the previously approved drug. While it is commonly believed that the FDA’s drug approval process is slower than its foreign competitors, it is often faster and more willing to approve certain drugs. Seventy-five percent of the new drugs approved by both the FDA and European Medicines Agency (EMA) between 2006 and 2010 were first approved in the United States, while the FDA approved 32 of 35 prospective cancer drugs from 2003-2010. The EMA approved only 26.
What’s at Stake?
At Dickson, we’re all about data, and when it comes to intellectual property in the pharmaceutical industry, the numbers are staggering.
- Estimates vary on how much it costs to bring a new drug to market, but a recent study from the Tufts Center for the Study of Drug Development (CSDD) pegs the average total at $2.9 billion. However, 95 percent of medicines fail during development, and only two in 10 recoup their research and development costs.
- Once drugs lose patent protection, generics siphon off up to 90 percent of sales.
- The average annual savings from switching to generic medications is estimated to be $420 per consumer.
Because of the high cost of research and development, pharmaceutical companies advocate for strong patent protection. The US is an outlier, however, with patent duration coming under scrutiny during the recent Trans Pacific Partnership (TPP) negotiations.
Who Stands to Lose Out?
AstraZeneca is one company in 2016 that is losing two major drugs from patent protection—Cestor and Seroquel XR—worth a combined annual revenue $7.34 billion. The top five biggest patent losses in 2016 per holder after AstraZeneca are Daiichi Sankyo, Merck, Abbott and ViiV.
Of course, there’s room here for consumers to gain. Four major HIV drugs also are going off-patent in 2016: Epzicom, Trizivir, Norvir and Kaletra, with a current cost-per-pill at $39.57, $11.07, $8.83 and $7.22, respectively. The good news? Costs for generics are 80 to 85% lower on average than those of patented drugs. It’ll make 2016 a big year for consumers who are in need of such medication.