1. THE PATENT CLIFF
The 2011 and 2012 patent shreddings—six of the 10 top-selling US brands and a total of $30 billion in sales exposed to generic
competition—have haunted pharma for so long that CEOs may find some relief in their arrival. Says Tollman: "The industry is
so cash rich and its timelines are so glacial that reality never quite hit. It took a long time for companies to dig themselves
into this hole and it will take a long time to dig themselves out."
The disappearance of multibillions of dollars in revenue at a bevy of world-class drugmakers is an unprecedented event, and
not even the experts can safely predict the fallout. One thing is certain: A reliance on one or two big-ticket products will
not save the future, given the rate at which Phase III failures and FDA rejections continue to mount. Consider AstraZeneca:
With one quarter of its sales falling off the patent cliff by 2015, the British firm had pinned high hopes on its novel bloodthinner
Brilinta, with proven superiority to Plavix (patent R.I.P.: 2012). But the FDA has put the brakes on approval with a request
for more safety data. AZ's moves over the next 12 months will be carefully scrutinized.
The smart firms are on a long, steep climb toward the rationalized cost structure of any healthy industry. In their favor
is the obvious but oft-overlooked fact that society needs them to succeed: The bankruptcy of companies that make lifesaving
medicines is bad for everyone.
2. THE BUSINESS MODEL
Carolyn Buck Luce, Ernst & Young
|
The familiar question—diversification or pure-play?—will gain increasing urgency as the patent cliff meets new price ceilings.
"What's clear is that it's very unclear which business model is best," says Aitken. "But we are seeing companies placing their bets because they have to. And
it's worth noting that CEOs are more explicitly questioning what others are doing and why."
The move to "grow lean" may come to mean more than just cost cutting. "I think companies will be taking a very close look
at their organizational effectiveness—the many levels of bureaucracy, the low level of employee engagement—and linking it
to the lack of innovation," says Tollman.
Some experts predict that big pharmas will get rid of dead weight by spinning off underperforming divisions—or rebranding
them as "innovative collaborations," as GSK and Pfizer did with ViiV Healthcare. It is even possible that 2011 will see the
first leveraged buyout of a top-50 pharma, with private equity then shutting down R&D and pocketing the cash flow.
Still, pharma innovation abides, even if not powerfully enough to meet Wall Street expectations and its own bottom line. A
handful of important therapeutic advances will come to market in 2011, including the first treatments for triple negative
breast cancer and malignant melanoma, oral drugs for hepatitis C and multiple sclerosis, new drugs for stroke prevention,
and the first new lupus treatment in 50 years (see "Ride the Wave: Pipeline Report 2011," Pharm Exec Dec. 2010). All are expected to reach blockbuster status or better, some rolling out with restricted REMS.
Yet the majority of new drugs remain, at best, incremental advances. Their prospects of success are diminishing as generics
come to define the market. "Most new branded products will be fighting for a third-line rather than a first-line position.
Even a new brand that is first-line is much less likely to be used," says Aitken.
|
PharmExec Blog
Follow Us
RSS
Bookstore
