Even though the pharmaceutical industry is approaching what most analysts say is the tail end of the patent cliff tumble, the industry is still under pressure to develop strategies to stay profitable in what looks to be a new, non-blockbuster-reliant era.
In the shrinking window between market approval and patent expiration, pharmaceutical companies are coming face to face with the stark realties of revenue erosion. In the United States and Europe, generics — strongly incentivized by payer initiatives — are here to stay, making the strategies brand pharmaceutical companies employ both before and after patent expiration imperative to fiscal survival. In worst-case scenarios, once drugs lose patent protection, generics can erode up to 90 percent of branded drug sales. According to IMS data, by 2020, only 18 percent of traditional drug volumes in developed markets will consist of original branded pharmaceuticals, and 8 percent volume in emerging markets.
2016 will see numerous high-profile drugs going off-patent, as more than two dozen major pharmaceuticals take the plunge off the patent cliff. According to EvaluatePharma data, between 2015 and 2020, a total of $197 billion sales are at risk from patent expiries, but the market currently predicts that only $99 billion of this will actually materialize.
Financially speaking, the good news for the pharmaceutical industry is that prescription (both branded and generic) drug sales continue to rise. EvaluatePharma predicts that the market for prescription drugs, based on consensus forecasts for the leading 500 pharmaceutical and biotechnology companies, will grow by 4.8 percent per year to reach $987 billion by 2020.
Branded pharmaceutical companies have been employing a combination of strategies, often concurrently, to retain market share once generics come into play. Forward-thinking companies have adjusted their business strategies, finding ways to turn dreaded patent expirations into opportunities to innovate and bring new value to patients and populations.
MARKET PROTECTION FUNDAMENTALS
At the most basic level, drugs have two forms of market protection in the U.S. — exclusivity and patent protection. Patents, granted by the U.S. Patent and Trademark Office, generally have a term of 20 years from the date of filing. Beyond the initial patent filings, which protect compositional matter of a new chemical entity, secondary or “follow on” patents can be sought to protect improvements to, additional discoveries through scientific data, or new uses for the pharmaceutical not suggested in the original patent.
Peter Knauer is chief regulatory officer for ARC Experts, a leading consultancy offering specialized services to the pharma, medical device, diagnostics and biotech industries to assist with regulatory, compliance, audits and all risk related issues. Knauer, a veteran of nine successful NDA/BLA approvals, explains, “There is essentially a ‘porfolio’ of patent opportunities that come with each product, so manufacturers can extend patent life years beyond initial patent. But eventually, even that runs out, so where do you take it from there?”
The answer to that for many manufacturers often lies in exclusivity. Given the complexity and length of the drug approval process, there is often little patent protection left on a product by the time the drug hits the market. To provide pharmaceutical companies with a fair chance to recoup R&D investments and incentivize continuing innovation, the Food and Drug Administration offers numerous exclusivity provisions to drug manufacturers. The FDA cannot legally approve a generic drug application for that product until the exclusivity period expires.
“There are unique opportunities that can offer additional and extended exclusivity to encourage a pharmaceutical manufacturer to go after smaller markets, and getting this exclusivity can be very lucrative for a company,” says Knauer.
One trend that continues to gain favor, according to Knauer, is seeking orphan drug exclusivity. Targeted at diseases with high unmet medical needs, orphan drugs have the potential to receive faster approval from the regulatory agencies and higher levels of reimbursement. Companies can request orphan-drug designation of a previously unapproved drug, or of a new use for an already marketed drug — breathing new life into an already existing product.