A recent report has detailed the challenges facing the pharma industry as the generic flood gates open, with the constant advice to start planning early still apparently not heeded by a bewildering number of firms.
Generics manufacturers are coming of age as branded drugs worth billions of dollars come off patent and open the way for cheaper versions to cash in on established patient populations.
According to IMS Health, sales by generic manufacturers in 2006 amounted to $54.1bn, over 2.5 times the value just eight years earlier. By 2011, drugs worth over $60bn are expected to come off patent, with existing generics already commanding 60 per cent of US prescriptions.
The branded pharmaceutical industry is feeling the heat, with firms well aware that the cushion of patent protection will not last forever and when the generic wave breaks, revenues will be hit hard.
2007 saw numerous firms forced to 'restructure' as a result of generic challenges and a difficult environment in the sector, and according to a recent report by Cutting Edge Information, many pharma firms still fail to think far enough in advance to mitigate the impact of generic competition on their revenue streams.
"Companies regularly wait too long…to prepare for generic competition," say the report authors.
"Now, with generics manufacturers exhibiting legal aggression and a willingness to file [abbreviated new drug applications] years before patent expiration, it is imperative to start planning early for the loss of market exclusivity."
66 per cent of companies surveyed for the report tended not to even begin generics planning until at least two years after product launch, with a paltry 34 per cent thinking ahead and planning for generic competition at the launch of a branded drug or earlier.
"A majority of survey respondents scramble to think about generics in the final four years before patent expiration," the authors state.
"Because options that rely on scientific and clinical development often take years to execute, companies with a lifecycle management strategy that incorporates counter-generics planning at least four to six years before patent expiration afford themselves the most options in retaining revenue."
While this advice might seem obvious, the number of companies forced to make cutbacks in spending and staffing this year as a result of generic competition and "current market conditions" reads like a Who's Who of the industry, with numerous branded firms suffering as generics manufacturers plunder the rich revenue streams with their cheaper products as patents expire.
There are of course options for those companies with patent expirations looming on the horizon, but again, forward planning is the buzz phrase for pharmas hoping to avoid brutalisation of their sales.
The most popular option, despite the extended time required for R&D, is to develop new formulations of existing drugs, with different dosages or extended release profiles. 58 per cent of the report's survey respondents indicated that their company had launched a new formulation of an existing product.
Line extension tactics such as this can help switch patients from older, threatened brands to newer products with extended market exclusivity, but come with the added risk and expense of clinical, regulatory and commercial hurdles.
The report authors suggest that another way of helping to prepare for generic competition is by involving multiple stakeholders in counter-generic planning activities:
"More groups involved in a brand's fortunes means that more parties are interested in the brand's total lifecycle," the report suggests.
"A diverse group of stakeholders helps to ensure that counter-generics planning occurs at an early point in brand life. Clinical development groups will consider next-generation options, for example, while market research models the impact of patent expirations for the brand and its competitors."
Sound counter-generics planning is likely, however, to combine a number of different strategies ranging from short-term responses to imminent challenges to more long-term lifecycle management tools, as well as acknowledging the potential of authorised generics, generics subsidiaries or over-the-counter (OTC) possibilities.
"A multi-tiered counter-generics plan positions companies to attempt high-risk, high-reward opportunities while building contingency options."
Generic competition is understandably more intense for blockbuster drugs, seemingly promising guaranteed riches for the generics manufacturers who make it to market with an cheap, attractive alternative.
One year after patent expiry, the average blockbuster faces twice as many competitors as a typical drug with less staggering sales. Blockbusters also experience more severe sales deterioration, and can lose as much as 75 per cent of their previous market share in the 12 months following patent expiry. It's no wonder Pfizer is anxious over the imminent body blows Lipitor's patent expiry is likely to land from 2010.
Though the challenges posed by generics companies are significant, there are not necessarily insurmountable. Innovator companies have a number of tools to hand which, if used wisely and with due appreciation of the time factor, can help preserve revenues and extend patent life.
Further details of the Cutting Edge Information report can be found here .