Healthy Skepticism Library item: 7274

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Publication type: news

Generic drugmakers bursting with impatience
The Financial Times 2006 Oct 24
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=FT&date=20061024&id=6133366

Abstract:

Medicines worth $40bn in the US and $25bn in Europe stand to lose patent protection in the next two years, but impatient Indian generic drugmakers are pushing to accelerate the pace through patent challenges.

Ranbaxy, India’s largest pharmaceutical company, is trying to push forward the date when it can sell a generic version of the anti-cholesterol drug Lipitor, made by Pfizer, the world’s largest drugmaker.

Pfizer’s patent on Lipitor – which is expected to bring in $13bn in revenues this year – is set to expire in 2011. This summer Ranbaxy won the latest round of a lawsuit to bring forward the US launch date for its generic version to 2010, but Pfizer is trying to counter by ‘fixing’ a technicality that invalidated one of its patents for the drug.

Ranbaxy spends about $25m annually on legal expenses, or about 2 per cent of total revenue, including patent challenges.

These usually involve either the assertion of flaws in existing patents or arguments that generic production methods will not infringe existing patents.

Global sales of generic drugs are expected to rise as US and European healthcare providers look to cut costs; the US generics market alone is expected to grow to $45bn by 2007. The Associated Chambers of Commerce and Industry of India expects Indian companies to grab 30 per cent of the world generics market.

By hastening generic launches, Ranbaxy is pouring salt onto the patent expiry wound – one of the biggest threats to branded drug companies. Pfizer’s sales from four major medicines, for instance, fell by 44 per cent last year after it lost US exclusivity.

In their own way, generic producers also vie for protected status.

The first drugmaker to win approval from the US Food and Drug Administration for a generic is granted 180 days to sell exclusively in the US before other pharmaceutical companies start flooding the market and driving prices down.

Ranbaxy has launched lawsuits in 17 countries to hasten the day when it can sell Lipitor. Pfizer has parried with favourable court rulings in several countries, most recently in Austria and the Netherlands.

This week Dr Reddy’s Laboratories, India’s third-largest drugmaker, settled a patent dispute with GlaxoSmithKline that will let Dr Reddy’s sell a version of the migraine medicine Imitrex in the US by the end of 2008.

Dr Reddy’s launched generic versions of Merck’s cholesterol medicine Zocor and prostate treatment Proscar in June and got rapid results, racking up Rs3.36bn in sales through the end of that month out of total reported quarterly revenue of Rs14.05bn ($310m).

Indian drug companies are also on the acquisition trail to beef up their global sales, distribution, manufacturing and even research networks. Ranbaxy already generates 80 per cent of its sales outside India.

The company is keen to add to its four purchases in Europe this year, including Terapia, Romania’s biggest generic drugmaker, bought for $324m, and GSK’s generics businesses in Italy and Spain. Dr Reddy’s bought Betapharm of Belgium for $571m this year.

Some European markets are particularly promising. Spain’s generic drug market is valued at about $750m and growing about 25 per cent a year, according to research firm IMS Health. The Italian generic market is worth about $420m and is growing 49 per cent annually.

Ranbaxy is aggressively making inroads in Europe and now counts operations in 21 of 25 European Union countries, plus a research centre in Romania through the Terapia acquisition.

Indian drugmakers are also cultivating the larger ambition of discovering original drugs instead of replicating existing ones. But in a recent report on the sector, KPMG pointed out that they are investing far too little in research and development.

It remains to be seen whether Indian players can match the prowess of big pharma companies who can spend about $1bn to develop, test and market new drugs.

India has emerged as a hub for generic drug research and production because of its combination of high-quality scientists and low costs. Research chemists in India typically earn between $4,000 and $15,000, an eighth of their US counterparts, according to a report by Rabobank.

Those cost-savings are not lost on major drug companies such as Pfizer, AstraZeneca, Eli Lilly and Novartis, which are all conducting clinical trials in India.

Most notably, as a result of WTO negotiations, India introduced a landmark law last year that allows products such as medicines to be patented, rather than just the processes to make them.