The global pharmaceutical market is witnessing a change as many patents of key blockbuster drugs have expired in last few years. The patent expiration of blockbuster drug fuel the growth of global generic drug pharmaceutical market. Many branded pharmaceutical companies drugs expired in last few years like Lipitor, Cozaar, Concerta, Crestor, Levaquin and Zyprexa. Market leaders such as Teva, Sandoz and Mylan are increasingly focused on generics, as this segment provides a competitive edge and presents huge profit margins. Patent expiration opens the door for generic versions which make the healthcare available to the consumers at cheaper costs as compared to the patented drugs.
Earlier people use to look down at the generic versions as compared to the popular brands. People were still trying to figure it out which is better. There is a misconception that the generic products may be less effective, especially in pharmaceuticals. There also may be inferior ingredients that affect taste, texture or other aspects of the products. But as the awareness increases there has been a shift of demand from popular brands to the generic version as generic brands are much cheaper and have the same quality as the popular branded drug.
When a branded drug is joined in the market by its generic equivalent, prices of branded drug fall rapidly. Last year Lipitor, the cholesterol-reducing medication, went off patent. This year also several big drugs will go generic, including Actos, Plavix, Seroquel, Lexapro, Tricor, Actos, Diovan and Singulair. Many strategies are taken up by the branded drug companies to fight the competition in market from generic versions.
Last year as the patent expires for Lipitor, Pfizer reduced its cost by 80%. Pfizer made many plans to keep hold on the market share. It negotiated with insurance providers to block pharmacies from dispensing a generic Lipitor product and offered insured patients a discount card that will allow them to purchase Lipitor for $4 a month. Pfizer was undertaking a massive Lipitor marketing campaign. Pfizer has spent more than $87 million to promote the medicine. But all these strategies have failed in yielding profits.
Recently, Pfizer is no more making new contacts to sell Lipitor to health plans. The insurance companies are now selling generic versions at far lower prices. The company has also stopped sending sales representatives to promote Lipitor to doctors and halted all its advertising in print, on television and online. Pfizer was paying hefty amounts for all these strategies which it realized after a period of time is waste as generics have already captured the market. Lipitor, which at its peak generated $12.9 billion in annual sales for Pfizer, began facing generic competition as soon as its patent expired last November.
Typically a branded drug maker gives up the marketing of its patented drug once the cheaper generic rivals enter the market. But Pfizer still made an effort to keep hold on the market. But all was in vague. Prices will fall again when more generics will enter the market.
Similarly Eli Lilly introduced the antipsychotic Zyprexa in 1996 which is approved by the FDA for the treatment of schizophrenia and bipolar disorder. The shares of Eli Lilly dropped as the patent expired. Johnson & Johnson also faced the loss of patents on the major drugs, Risperdal, Topamax, Levaquin, Duragesic and Concerta which saw aggregate sales drop from $5.8 billion in 2009 to an estimated $2.2 billion in 2012.
Hence the pharmaceutical companies should move forward and identify the right strategies to maintain the levels of profitability. The companies should embrace the changes like patent expiration as inevitable and should develop a vision for several potential future scenarios. Pfizer realized it and instead of spending money on patent expired drugs it is developing new drugs and are seeking approval by U.S. Food and Drug Administration (F.D.A). Pfizer will be granted an approval by F.D.A for Tofacitinib, a treatment for patients with rheumatoid arthritis. Pfizer is also selling its infant-nutrition business to Nestlé SA for $11.85 billion.