Cost of Popular Medicines Set to Plunge as Raft of Patents Expire

Jakarta Globe, Linda A. Johnson, July 25, 2011

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The cost of prescription medicines used by millions of people every day is about to plummet.

The next 14 months will see the arrival of generic versions of seven of the world’s 20 best-selling drugs, including the top two: cholesterol fighter Lipitor and blood thinner Plavix.

The magnitude of this wave of expiring drugs patents is unprecedented. Between now and 2016, blockbusters with about $255 billion in global annual sales are set to go off patent, notes EvaluatePharma, a London research firm. Generic competition will decimate sales of the brand-name drugs and slash the cost to patients and companies that provide health insurance benefits.

Top drugs getting generic competition by September next year are taken by millions every day: Lipitor (atorvastatin) is taken by about 4.3 million Americans and Plavix (clopidogrel) by 1.4 million. Generic versions of big-selling drugs for blood pressure, asthma, diabetes, depression, high triglycerides, HIV and bipolar disorder also are coming by then.

The flood of generics will continue for the next decade or so, as about 120 brand-name prescription drugs lose market exclusivity, according to Medco Health Solutions.

In the United States, patients, along with businesses and taxpayers who help pay for prescription drugs through corporate and government prescription plans, collectively will save a small fortune. That’s because generic drugs typically cost 20 percent to 80 percent less than the brand names.

Doctors hope the lower prices will significantly reduce the number of people jeopardizing their health because they can’t afford medicines they need.

Generic medicines are chemically equivalent to the original brand-name drugs and work just as well for nearly all patients.

When a drug loses patent protection, often only one generic version is on sale for the first six months, so the price falls a little initially. Then, several other generic makers typically jump in, driving prices down drastically.

Last year the average generic prescription in the United States cost $72, versus $198 for the average brand-name drug, according to consulting firm Wolters Kluwer Pharma Solutions. Those figures average all prescriptions, from short-term to 90-day ones.

Among the drugs that recently went off patent, Protonix (pantoprazole), often used for severe heartburn, now costs just $16 a month for the generic, versus about $170 for the brand name. And of the top sellers that soon will have competition, Lipitor retails for about $150 a month, Plavix costs almost $200 a month and blood pressure drug Diovan (valsartan) costs about $125 a month. For those with drug coverage, their out-of-pocket costs for each of those drugs could drop below $10 a month.

Generic Lipitor should hit US pharmacies on Nov. 30 and cost around $10 a month.

For people with no prescription coverage, the coming savings on some drugs could be much bigger. Many discount retailers and grocery chains sell the most popular generics for $5 a month or less to draw in shoppers.

The impact of the coming wave of generics will be widespread — and swift.

American insurers use systems that make sure patients are switched to a generic the first day it’s available. Many health plans require newly diagnosed patients to start out on generic medicines. And unless the doctor writes “brand only” on a prescription, if there’s a generic available, that’s almost always what the pharmacist dispenses.

“A blockbuster drug that goes off patent will lose 90 percent of its revenue within 24 months. I’ve seen it happen in 12 months,” says Ben Weintraub, a research director at Wolters Kluwer Pharma Solutions.

The looming revenue drop is changing the economics of the industry. In the 1990s, big pharmaceutical companies were wildly successful at creating pills that millions of people take every day for common conditions, from heart disease and diabetes to osteoporosis and chronic pain. Double-digit quarterly profit increases became the norm. But the patents on those blockbusters, which were filed years before the drugs went on sale, last for 20 years at most, and many expire soon.

Drug companies also are trying to stabilize future sales by putting more sales reps in emerging markets such as China and India, and diversifying into businesses that get little or no generic competition. Those include vaccines, diagnostic tests, veterinary medicines and consumer health products.

As the proportion of prescriptions filled with generic drugs reached 78 percent in 2010, from 57 percent in 2004, annual increases in prescription drug spending slowed, to just 4 percent in 2010. According to the Generic Pharmaceutical Association, generics saved the US health care system more than $824 billion from 2000 through 2009, and now save $1 billion every three days.

The savings are only going to get greater developed nations’ populations age. John Rother, policy chief for AARP, a lobby group for retirees, said people who take their medicines regularly often avoid costly complications and hospitalizations, bringing the system even bigger savings than the cheaper drugs.

In addition, many patients taking a particular brand-name drug will defect when a slightly older rival in the same class goes generic.

Global sales of Lipitor peaked at $12.9 billion in 2006, the year Zocor (simvastatin), an older drug in the same class, went generic. Lipitor sales then declined slowly but steadily to about $10.7 billion last year. That still makes Lipitor the biggest drug to go generic.

Associated Press