Forecast 2007: At Sea - Pharmaceutical Executive

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Forecast 2007: At Sea


Pharmaceutical Executive


With IMS projecting 13 to 14 percent growth in the generic market, established companies are kicking their operations into high gear. "Generics are poised to ship the day the patent expires," Wertheimer says. "The rate at which generics drive down the price of brands is growing exponentially." And new manufacturers are popping up like mushrooms.

Meantime, generic giants continue to bankroll platoons of lawyers to overturn blockbuster patents. Bristol-Myers Squibb's disastrous pay-for-delay deal with Apotex not only cost CEO Peter Dolan his job and the company its goldmine drug, but "may have a chilling effect" on future reverse-payment agreements, according to Gregory Glass, principal with consulting firm Gregory Glass Associates.

On another front, health plans are increasingly launching their own raid on brands. In an effort to control runaway costs, they're not only bargaining hard for formulary position, says Frederick Frank: "Third-party payers are pushing more and more subscribers to switch to generics"—for example, with timely "reminders" to consumers whose brands are going off patent that a cheaper alternative is available for a smaller copay.

"The most powerful force rebalancing growth in the worldwide market is pressure from public and private payers to limit their expenditures on drugs," says Murray Aitken. "Their influence is offsetting much of the growth that stems from rising demand and innovation. Manufacturers increasingly must strengthen the evidence that their therapies deliver 'value for the money' based on direct health outcomes."

To defend their brands, companies are shifting focus from the courtroom to the lab in hopes of squeezing every penny out of their prized molecules. Lifecycle management is emerging as a key R&D requirement. According to Datamonitor, 39 percent of new products from the 50 top manufacturers between 2002 and 2005 were reformulations. That trend will travel, the group says.

Experts expect to see a big jump in head-to-head studies, as companies vie to demonstrate that their own brand is best in class. But even the most carefully designed study can be a scientific crapshoot, so a safer strategy is to go head-to-head with generics by marketing brands as knockoffs. Novartis pioneered this approach, and Pfizer is test-driving it with Zoloft this year before buying it for Lipitor.

THE DEMOCRATS ARE COMING!

Based on the post-election headlines—and more than a few industry insiders—you'd think that House Speaker Nancy Pelosi (D-CA) were a larger-than-life harpy poised to unleash a swarm of legislative, regulatory, and investigative furies on the industry.

The truth is that even before the Democrats announced their "first 100 hours" agenda, the 2007 congressional calendar was a Pandora's Box of pharma legislation, most notably FDA reform, drug safety, and the Prescription Drug User Fee Act (PDUFA) reauthorization.

Following a huddle of industry execs in Washington, DC, a week after the Dems' sweep, PhRMA head Billy Tauzin gave a refreshingly sober assessment of the group's 2007 outlook: "We all recognize that we can't just say no to every new proposal or regulation anymore. If we want to start being seen as part of the solution—rather than the problem—we need to be proactive."

The Dems haven't ruled over both houses since 1994, and no one denies that the shift in power may be seismic. But while pharma saw its profits soar over the past 12 years, it also saw its reputation tank. The pro-business Republicans didn't exactly serve pharma's best interests by encouraging its worst instincts. Whether pharma ends up playing rope-a-dope to a Beltway slapdown this year will likely depend as much on the industry's own actions as on campaign politics.


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