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Pharmaceuticals

Pharma Reformulates

Sales grew in the past year, but the pharmaceutical industry saw many major products come under fire and was challenged in moving new ones forward

by Selena Class, IMS Health
December 5, 2005 | A version of this story appeared in Volume 83, Issue 49

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Credit: Photodisc
Credit: Photodisc

The luster of the pharmaceutical industry has dimmed. Sales continue to grow, but many leading products are in decline owing to competition from generics or safety concerns. The latter has contributed to a waning public confidence in drug marketers and regulators and has helped to tarnish the industry's reputation. New product approvals remain near a 25-year low, and major companies are increasingly dependent on external sources of innovation. Niche blockbusters and personalized medicines hold some promise, but companies face a struggle to burnish the industry's image and create sustainable business models.

This past year offered no major change in either sales growth or outlook for the global pharmaceutical industry. Looking back, global sales for 2004 grew 7% to reach a record $550 billion, according to IMS Health.This performance is compared with 9% growth in 2003, when the worldwide drug market reached $492 billion. In 2004, the U.S. market grew 8%-the first drop below double-digit growth since 1995-partly affected by a mild influenza season and an increased use of nonprescription antiulcerants and antihistamines.

The U.S. is still by far the dominant market, and individual country rankings remained unchanged from mid-2004 to mid-2005. The U.S. lead, however, was eroded slightly from 46.0% in June 2004 to 44.7% in June 2005 by significantly increased sales in China. Nevertheless, in the 12-month period, U.S. sales grew 7% to $246 billion. China's sales rose 30%, to reach $8.6 billion-still relatively small in total, but given the huge population and economic boom there, IMS expects China to see above-average growth.

Reflecting increasing cost-containment in Europe, sales growth slowed in the U.K., Italy, and Spain. Meanwhile, Canada and Mexico saw healthy sales increases, while Japan, the world's second-largest market, maintained modest growth.

Biotechnology products, up 17%, and generics, rising 10%, outstripped overall industry growth in 2004. Generics, however, accounted for only 8% of 2004 sales by value in North America and Western Europe, even though they now represent more than 30% of the market by volume in the U.S., Canada, Germany, and the U.K. Growth in the pharmaceutical market has been moderated by pressures and uncertainties over pricing, safety, and regulatory issues, although there was still strong underlying demand and pockets of higher growth.

Just as the pharmaceutical industry was recovering from the shock of Merck withdrawing its blockbuster cyclooxygenase-2 (COX-2) inhibitor arthritis drug Vioxx at the end of September 2004, more bad news surfaced and continued through 2005. A long-term cancer prevention trial revealed that Pfizer's COX-2 inhibitor Celebrex has its own cardiovascular safety issues, and it now carries stronger warnings on its label. Then Pfizer's second such compound, Bextra, was withdrawn in April 2005, owing to the risk of Stevens-Johnson syndrome, a severe skin reaction, and its injectable parecoxib, marketed as Dynastat in some European countries, was rejected by the Food & Drug Administration in September 2005.

Pfizer, the world's largest pharmaceutical manufacturer, was not alone in having such problems. Following a much-heralded launch in November 2004, Elan and Biogen Idec's novel multiple sclerosis therapy Tysabri was withdrawn in February 2005 after some patients also using Biogen Idec's Avonex developed progressive multifocal leukoencephalopathy (PML), a rare demyelinating disease of the central nervous system. Later in the year, FDA ordered Purdue Pharma to withdraw its analgesic Palladone after just six months on the market because of concerns about fatal adverse reactions if used in conjunction with alcohol.

Safety warnings or efficacy doubts also arose for products such as Eli Lilly's attention-deficit hyperactivity disorder (ADHD) drug Strattera, Johnson & Johnson's (J&J) heart failure drug Natrecor, and AstraZeneca's lung cancer treatment Iressa. Meanwhile, the phosphodiesterase V inhibitors for erectile dysfunction, including Pfizer's Viagra, were associated with a rare form of blindness, though no firm link has been established.

Still more drugs didn't even reach the U.S. market: FDA rejected the likes of AstraZeneca's anticoagulant Exanta, Solvay's irritable bowel syndrome therapy cilansetron, J&J's leukemia drug Zarnestra, Abbott Laboratories' prostate cancer treatment Xinlay, and Pfizer's selective estrogen receptor modulator Oporia for preventing osteoporosis.

Even novel drug therapies failed to impress regulators, who did not approve J&J and Pharmaceutical Product Development (PPD)'s dapoxetine, which would have been the first drug treatment for premature ejaculation, and Bristol-Myers Squibb (BMS) and Merck's oral antidiabetic Pargluva, which would have been the first dual alpha and gamma modulator of peroxisome proliferator-activated receptors, affecting both insulin resistance and blood lipids. After a negative advisory panel vote, thanks to poor efficacy data and risk queries, Procter & Gamble withdrew the application for Intrinsa, a transdermal testosterone patch developed with Watson Pharmaceuticals for the treatment of hypoactive sexual desire disorder in women.

Failures at the Phase III trial stage included Corgentech and BMS's edifoligide for artery bypass grafts; Takeda's antidiabetic TAK-559; Serono's onercept for psoriasis and Canvaxin, the therapeutic vaccine for melanoma developed with CancerVax; Daiichi Sankyo's atherosclerosis product pactimibe (CS 505); and Lundbeck and Cephalon's CEP-1347, a Parkinson's disease therapy. Questions also hang over an important new therapy class, the HIV CCR5 inhibitors, after GlaxoSmithKline (GSK) halted trials of Ono Pharmaceutical's aplaviroc and Schering-Plough ended a trial of vicriviroc.

Therapeutic Shifts. Among leading therapeutic classes, the main development in the 12-month period up to June 2005 was the replacement of cephalosporin antibiotics in 10th position by antineoplastics. This was a result of the success of products such as Biogen Idec, Genentech, and Roche's Rituxan for non-Hodgkin's lymphoma; Novartis' Gleevec for chronic myeloid leukemia and gastrointestinal stromal tumors (GISTs); Sanofi-Aventis' Eloxatin, licensed from Debiopharm, for colorectal cancer; Genentech and Roche's breast cancer antibody Herceptin; Genentech and Roche's Avastin, launched for use in colorectal cancer in February 2004; and ImClone Systems and BMS's Erbitux, another monoclonal antibody for colorectal cancer. The first four products each had sales in excess of $1 billion, and the class grew by 30% in the 12-month period.

Not surprisingly, the class of antirheumatic nonsteroidals, which had incorporated Vioxx and its $2.5 billion in annual revenues, underwent a significant decline. The antidepressant category also saw a slight drop, as generic versions of GSK's Paxil and Forest Laboratories' Celexa, licensed from Lundbeck, arrived in the U.S.

A strong performance from Amgen's second-generation erythropoieitin (EPO) product for anemia, Aranesp, helped propel the EPO class up the rankings, while antipsychotics and antiepileptics also had healthy growth. Other classes growing significantly included the angiotensin II antagonists for hypertension (the largest disease area by sales) and therapies for erectile dysfunction and urinary incontinence. Also doing well were vaccines and drugs for Alzheimer's disease, asthma, osteoporosis, HIV/AIDS, autoimmune diseases, and ADHD. If Sanofi-Aventis' novel cannabinoid antagonist Acomplia is approved, the obesity therapy class is expected to see a strong increase in sales.

Some of the fastest growing therapy classes in the 12 months up to June 2005 included specific antirheumatic agents, thanks to the tumor necrosis factor (TNF) inhibitors Enbrel, from Amgen and Wyeth, and Abbott's Humira. Like J&J and Schering-Plough's similar product Remicade, which is classified as an immunosuppressant, these products have seen a steady broadening of their use from the original indication for rheumatoid arthritis to include other autoimmune conditions, such as psoriatic arthritis, ankylosing spondylitis, and psoriasis.

A class encompassing other hormones was boosted by the arrival of Lilly's Forteo, an injectable recombinant human parathyroid hormone for osteoporosis, while a class of other cardiovascular products gained through Actelion's pulmonary hypertension therapy Tracleer. Other alimentary tract and metabolism products saw strong growth in the 12 months up to June 2005 as more enzyme replacement therapies for rare inherited disorders were launched. This class contains such products as Genzyme's Cerezyme, Fabrazyme, and Aldurazyme, the latter codeveloped with BioMarin, plus Shire's agalsidase beta product Replagal and Actelion's Zavesca.

Industry leaders. As with the therapy classes, there was only one departure from the top 10 global pharmaceutical product rankings in the 12 months up to June 2005: Pfizer's selective serotonin reuptake inhibitor (SSRI) for depression, Zoloft, dropped out of 10th position to be replaced by J&J's antipsychotic Risperdal. But Pfizer's cholesterol-lowering drug Lipitor easily held onto the top position.

Within the top 10, Lilly's schizophrenia therapy Zyprexa, Pfizer's calcium channel blocker for hypertension Norvasc, and J&J's EPO Procrit all fell in the rankings. Plavix, the platelet aggregation inhibitor from Sanofi-Aventis and BMS; AstraZeneca's second-generation proton pump inhibitor (PPI) Nexium; GSK's combination asthma drug Advair; and Prevacid, the PPI from TAP, Takeda, and Abbott, all rose.

The makers of the top 10 products, with the exception of Lilly and Takeda, also rank among the top 10 companies. Sanofi-Aventis joined the ranking, moving straight into third place, after the rather eventful merger of the French companies Sanofi-Synthelabo and Aventis in August 2004. Lipitor helped Pfizer stay on top by a healthy margin, although one that declined slightly from the previous 12-month period. Again reflecting the withdrawal of Vioxx, Merck slipped two places in the rankings, as did BMS, whereas Novartis, Roche, and Abbott all rose. With its acquisitions of generics manufacturers Hexal and Eon Laboratories in 2005 and its planned acquisition of Chiron, Novartis looks set to continue its climb up the chart.

Outside the top 10, the fastest growing corporations in the 12 months up to June 2005 reflected industry dynamics as a whole. Privately owned Boehringer Ingelheim, Germany's largest manufacturer, was the sole traditional drugmaker among the group. Instead, extraordinary growth is occurring in the biotechnology, specialty, and generics fields in the likes of Gilead Sciences, MedImmune, Alpharma, Kos Pharmaceuticals, Cephalon, Amgen, Teva Pharmaceutical, and Ratiopharm. Icelandic group Actavis is set to acquire the generics business of Alpharma, and Teva is due to merge with Ivax and with it take over the top generics position from Novartis' Sandoz unit.

Generic arrivals. The generics industry is set to have a bumper year in 2006, with six $1 billion-plus drugs to lose U.S. exclusivity: Zoloft, Merck's Zocor, Sanofi-Aventis' hypnotic Ambien, BMS's Pravachol (licensed from Daiichi Sankyo), Novartis' antifungal Lamisil, and GSK's nausea drug Zofran. Only three blockbusters will have lost exclusivity in 2005: J&J's analgesic Duragesic; Pfizer's antibiotic Zithromax, licensed from Pliva; and Sanofi-Aventis' antihistamine Allegra. Overall, IMS estimates that $23 billion in products will lose exclusivity in 2006, and $18 billion or more of that is in the U.S. alone.

Next year seems like a pretty pivotal year for the industry-the biggest year ever in terms of drugs likely to lose their patents in key markets, says IMS Senior Vice President for Corporate Strategy Murray L. Aitken. The issue in 2006 is whether the generic forms of these products will not only take sales from the branded products but from other products in the therapeutic area.

For example, pharmacy benefits manager Express Scripts has removed Lipitor (atorvastatin) from its preferred 2006 drug list ahead of the arrival of generic simvastatin and pravastatin, meaning that companies will need to do more to justify the cost-effectiveness of their medicines.

We see companies continuing to underinvest in Phase IV trials to demonstrate their product's superior profile, Aitken comments. The Medicare prescription drug benefit, due to come into effect in January 2006, is expected to boost U.S. drug sales by 12% in 2006, but IMS believes that by 2008 even the U.S. will become more aggressive in demanding strong therapeutic advantages and cost savings from pharmaceuticals, which could further increase the use of generics at the expense of branded products.

The enormous bill for the Medicare drug benefit (at least $720 billion per year) is likely to see the U.S. government exert direct or indirect pressure on prices, as it takes on more than 40% of the country's prescription drug expenses. Government agencies such as the National Institutes of Health have been conducting their own studies to demonstrate the safety and efficacy of comparable generic and brand-name drugs. Meanwhile, large employers such as General Motors are campaigning against high health care costs through pressure groups like the Coalition for a Competitive Pharmaceutical Market.

New Blockbusters. Some blockbuster drugs are set to slide down the rankings, and others are waiting to take their places. In the primary care area, drugs such as Wyeth's Effexor XR antidepressant, Merck's oral asthma therapy Singulair, Wyeth's PPI Protonix (licensed from Altana Pharma), AstraZeneca's Seroquel, and Novartis' angiotensin II antagonist Diovan have all seen healthy growth over the past two years. As of June 2005, IMS recorded 86 blockbusters-those with sales in excess of $1 billion-35 of which had sales of more than $2 billion. Fifteen surpassed the $3 billion mark.

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Some new products with potentially huge sales-if approved-include Acomplia, which is for smoking cessation and obesity therapy, and Exubera, an inhaled insulin from Pfizer, Sanofi-Aventis, and Nektar Therapeutics. Also receiving a great deal of preapproval attention are the cervical cancer/human papilloma virus vaccines Gardasil and Cervarix from Merck and GSK, respectively, which may have the potential to virtually eliminate the disease. Speedel and Novartis may successfully develop the first in a novel class of drugs for a chronic condition-hypertension-in the form of aliskiren, a renin inhibitor due for regulatory submission in 2006. Lilly and Daiichi Sankyo are also working on prasugrel, a potential rival for Plavix.

A new phenomenon is that of the niche blockbuster, particularly in the cancer area. Even some large manufacturers are moving more into niche therapy areas. Sales will necessarily be lower than in the primary care field, but they can still be significant. IMS believes that the global cancer market will be worth at least $40 billion by 2008, driven by an aging population, better diagnostics, and the introduction of new products.

One of the highest profile cancer therapies in development is Pfizer's Sutent, which has shown strong clinical results in treating renal cell carcinoma and malignant GISTs. In GISTs, it may help patients who have developed resistance to Gleevec. There has also been positive data for Abgenix and Amgen's panitumumab, a monoclonal antibody for metastatic colorectal cancer that is due to be submitted for FDA approval by the end of 2005.

Another therapy area garnering attention is age-related macular degeneration, where the vascular endothelial growth factor (VEGF) monoclonal antibody Macugen from Eyetech and Pfizer may soon be challenged by Genentech and Novartis' similar product Lucentis. VEGF is also the target for the cancer therapy Avastin.

With personalized medicines perhaps 10 to 20 years away, the blockbuster model appears to still have some life left in it. The biotech industry is making an increasing contribution: In 2004, seven of the top 30 pharmaceuticals were derived from biotechnology. Owing to regulatory delays and unresolved issues, no biogenerics look set to reach the U.S. market in any hurry, further protecting biotech sales. Novartis has sued FDA over delaying approval of the human growth hormone product Omnitrope. With partner Momenta Pharmaceuticals, the company has also asked FDA to approve a technology-enabled copy of Sanofi-Aventis' anticoagulant Lovenox.

Another major trend that IMS has observed over the past few years is the rise of the specialist-driven product, or those where the majority of prescribing decisions are made by specialists either in office or hospital practice. As of mid-2005, 12 such products were among the top 30. Specialist-driven markets have been growing much faster than those driven by general practitioners for some years and now account for almost 40% of the total market.

Pipeline health. Companies are needing to adapt to the new realities of the global health care market. One approach is through diversification-with operations covering ethical pharmaceuticals, available only by prescription; over-the-counter products; biotechnology; and generics-as already in play at the European manufacturers GSK, Novartis, and Roche. Along with this strategy comes the need for innovation, either in-house or through external sources, to generate new products.

The two most successful launches from 2004, on the basis of sales, were the cancer drugs Erbitux and Avastin. Other potentially significant approvals in 2004 included Macugen; Merck and Schering-Plough's combination cholesterol-lowering product Vytorin; OSI Pharmaceuticals, Genentech, and Roche's lung cancer drug Tarceva; Boehringer Ingelheim and Pfizer's chronic obstructive pulmonary disease (COPD) therapy Spiriva; and Sepracor's novel hypnotic Lunesta. More recent approvals include Takeda's hypnotic Rozerem, Amylin Pharmaceuticals and Lilly's antidiabetic Byetta, Wyeth's injectable antibiotic Tygacil, GSK's leukemia/lymphoma therapy Arranon, and Roche and GSK's once-monthly osteoporosis drug formulation Boniva.

In 2003, the number of new active substances (NAS) launched by the global pharmaceutical industry fell to a 25-year low of 30. In 2004, this number rose by just one, to 31, and biotechnology accounted for 26% of the new products; numbers available so far for 2005 do not suggest any dramatic improvement. There are, however, some indications that the earlier stage pipeline is beginning to look healthier.

The majority of NAS launched in 2004 took between nine and 15 years to move from initial research to the market; biotech products generally tend to have shorter lead times. The U.S. far exceeded all other individual countries in NAS launched, accounting for just under 35% of the total in 2004. It was also the most productive country for R&D-32% of all new products came from U.S. firms.

Licensing has become crucial as a means to fill development pipelines. Out of the 31 NAS launched in 2004, 22 were the subject of at least one licensing deal. Among all the deals over the year, most were for products that were in later stages of development, and the majority occurred at the Phase II stage.

With a paucity of compounds emerging in-house at big pharmaceutical companies, smaller firms now have the upper hand and are negotiating higher deal prices at earlier stages in development and demanding a bigger slice of the action, particularly in the form of copromotion and comarketing arrangements. Still, given the poor recent market for initial public offerings, smaller firms must rely to a large extent on big pharma's cash for their survival.

Novartis has been particularly free with its money in recent months, signing a $375 million deal with Arakis and Vectura for COPD products; forming a major alliance with Anadys Pharmaceuticals for hepatitis B and C therapies; partnering with Bruin on the development of D-4F, a drug that could clear arteries using HDL (good) cholesterol; and beginning an agreement that could be worth up to $700 million with Alnylam Pharmaceuticals, the RNA interference (RNAi) specialist.

Other big deals were signed between Pfizer and Isis Pharmaceuticals (antisense therapies for ophthalmic diseases), AstraZeneca and Avanir Pharmaceuticals (cholesterol), Roche and Pharmasset (hepatitis C), Wyeth and Plexxikon (type 2 diabetes), GSK and Vitae Pharmaceuticals (renin inhibitors for hypertension), and Merck and Nastech Pharmaceutical (obesity).

Biotech projects especially are usually licensed in by big companies. Biotech products account for 27% of the total drug pipeline (and 10% of total sales in 2004), but big pharma is responsible for generating only 19% of the biotech products. Roche leads in these endeavors and licenses in the fewest compounds, thanks to its majority ownership of U.S. biotech powerhouse Genentech.

Licensing is expected to remain an important source of novel products as big pharmaceutical companies leave the small companies to absorb the earlier stage development risks and then help with the commercialization of any promising drugs. For instance, oncology is an active area for deals: Half of the cancer products launched since 2000 are not being marketed by their originators.

Japan has also been a source of new products. Firms there originated the current blockbusters Pravachol and Prevacid; growing products like Aricept for Alzheimer's disease, developed by Eisai and comarketed with Pfizer; and Otsuka's antipsychotic Abilify, sold with BMS. Western firms continue to sign development and marketing deals with Japanese manufacturers: Merck is in one for Dainippon Sumitomo Pharma's schizophrenia therapy lurasidone and Ono's stroke products; Lilly for Taisho Pharmaceutical's antidiabetic TS-021; GSK with Toyama for antibiotics; and Gilead for Japan Tobacco's HIV integrase inhibitor.

The hunt for new products has also shaped the merger-and-acquisition environment. Megamergers are still to be expected in the future as companies seek to reduce costs. Recent smaller deals have mainly focused on acquiring a particular product or technology or on increasing scale in a certain area, most notably generics.

Some examples of big pharma snapping up small specialists include Pfizer's deals for Angiosyn (ophthalmic diseases), Esperion (lipid disorders and atherosclerosis), Idun (apoptosis), and Vicuron (anti-infectives); GSK's for ID Biomedical (influenza vaccine) and Corixa (vaccine adjuvants); and J&J's for Peninsula (antibiotics).

Biotech and specialty firms are also merging as they shift from development to commercialization-for example, OSI and Eyetech, QLT and Atrix, MGI Pharma and Guilford, Protein Design Labs and ESP Pharma, Esprit and Metagen, and EpiCept and Maxim.

R&D Trends. IMS believes that biotech and specialty products will become key drivers of growth within the pharmaceutical industry, cancer being a major focus. Some manufacturers, such as Bayer and Schering AG, are already repositioning themselves and moving away from the primary care markets, while Roche has thrived on a portfolio led by cancer, HIV, and hepatitis C products.

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As of mid-2005, almost 400 oncology projects were at the Phase II trial stage or higher; the major players include Roche, AstraZeneca, Sanofi-Aventis, Novartis, BMS, Pfizer, and Lilly. Merck has also signaled its intention to move into oncology.

In an era of concern over an influenza pandemic, vaccines are becoming increasingly important. Major manufacturers are beginning to reinvest in this area, which some abandoned a few years ago owing to its manufacturing complexity and low profitability. In November, Pfizer said it might be restarting vaccine R&D. New cell-culture-based production techniques are expected to improve efficiency and decrease lead times.

Another new technology that is experiencing increased recognition is RNAi, as demonstrated by Novartis' major alliance with Alnylam. Merck also has ongoing collaborations with the RNAi company. In ophthalmology RNAi therapeutics, Allergan is working with Sirna Therapeutics, as is Alcon Laboratories with Dharmacon. RNAi can silence disease-causing genes and thus has potential in a wide variety of diseases, some linked to what were previously viewed as nondruggable targets; the first products are now in Phase I studies.

Hopes for personalized medicines appear to have dimmed after a string of disappointments in the development of genomic drugs. But many observers still believe that personalized drugs hold promise, especially for the long-term future of the pharmaceutical industry. By their very nature, personalized medicines would reduce the need for large armies of sales representatives and intensive direct-to-consumer advertising-two facets of the business that have attracted criticism of drug manufacturers. R&D costs would also likely decrease.

In the short term, there is still not much incentive for the major players to adopt the personalized approach wholeheartedly, but given the recent safety scandals and high-profile drug withdrawals, some governments may start encouraging more research in this area. Improved theranostics, which identify appropriate patients for a particular therapy, should also steer more drug development toward this area, as will the success of products like Herceptin-suitable only for 2530% of women with breast cancer, but extremely effective in those patients.

In November, Merck announced a second collaboration with AVEO Pharmaceuticals, which will use its Human Response Prediction platform to identify patient populations likely to be responsive to a number of investigational cancer drugs currently being developed by Merck; a Merck executive said the company was committed to bringing targeted cancer therapeutics to market.

To encourage research into riskier diseases, NIH itself began funding and carrying out early-stage clinical trials in 2005. The scheme is designed to address the translational gap between basic research carried out at NIH or academic institutions and the development of novel drugs needed for a number of diseases.

The program began with schizophrenia. In an attempt to address variables in current antipsychotic R&D, a panel of experts selected a battery of tests that could assess potential patients in approximately one hour. NIH then invited drugmakers to participate in a clinical trial network and was offered 24 products. Lilly was one of the largest firms to join the scheme. NIH eventually chose two compounds, from Akzo Nobel and Targacept, for testing.

NIH did, however, meet with some resistance from companies concerned about sharing proprietary data with potential rivals. We can do the work ourselves, so we are not seeking outside help, commented a Pfizer executive. We have reservations about the intellectual property and competitive issues. Eventually, it was agreed that if one of the drugs works, the originator company will take it forward and retain commercial rights, although the trial results will be made public.

Regulatory flux. An area of some uncertainty is the behavior of FDA, which has come under unprecedented attack in 2005. Politically, there has been furor surrounding the over-the-counter sale of Barr's emergency contraceptive Plan B and the sudden resignation of newly confirmed FDA Commissioner Lester M. Crawford.

Scientifically, the agency has faced accusations of being lax, being too close to the industry, and pressuring its reviewers to dampen concerns. This situation resulted in the belated withdrawal of Vioxx and delayed warnings of the dangers of suicidal thoughts in adolescents using SSRI antidepressants. In reaction, the first quarter of 2005 saw a peak in the number of required black-box label warnings, the most severe FDA can inflict.

Moreover, a new Drug Safety & Oversight Board will be responsible for giving consumers emerging safety information through a Drug Watch website on pharmaceuticals that are already on the market. Drug labels will be made easier to read and updated quickly on the Internet. FDA has also engaged the Institute of Medicine to make recommendations to revamp the U.S.'s entire drug safety monitoring system; a report is expected in July 2006.

The agency may also clamp down on Phase IV postmarketing studies, a number of which are never completed despite being required by an accelerated drug approval process. A September study from the Tufts Center for the Study of Drug Development suggested that the quicker approval of new drugs encouraged by the Prescription Drug User Fee Act (PDUFA) in 2003 had not increased the number of prescription drugs withdrawn for safety reasons; 3.2% of drugs were withdrawn in the 1980s, compared with 1.6% since 2000.

Some observers, however, believe that fast-track approvals have become a double-edged sword: They were originally begun in 1988 to clear the desperately needed antiretrovirals, not widely used products. Moreover, until the late 1990s, many drugs were launched in the U.S. after being made available in Europe or elsewhere first, but now the U.S. is the initial market for many drugs; any safety problems will appear here first. Some also believe that the company-paid PDUFA fees have led FDA to focus on faster drug approvals at the expense of other areas, such as drug safety, manufacturing inspections, and monitoring promotional materials.

Some of FDA's approval decisions in 2005 suggest that it is becoming more risk-averse, demanding more safety data and longer trials, but its rationales are not always transparent. That being the case, the development and approval process may well lengthen as companies are forced to produce more, and more robust, data that require detailed scrutiny by FDA reviewers.

AstraZeneca Chief Executive Officer Sir Tom McKillop has publicly supported the idea of a provisional approval period during which new drugs' effects could be monitored, but some other executives fear that this approach will stifle innovation and make companies more conservative in their R&D efforts. Nevertheless, third or fourth entrants into a therapeutic category may face a tougher time winning approval if they cannot offer any clinical benefit, and novel products are likely to need a strong folder of safety data. The associated added expenses could be a factor in another round of industry consolidation.

Some big pharmaceutical companies might maintain an in-house focus on developing mass-market therapies for chronic diseases that offer sustainable revenues, many being me-too products, but the wisdom of this strategy is questionable. The pharmaceutical industry must carefully consider how to adapt its business model to sustain growth worldwide, IMS's Aitken says. Market conditions are changing, governments' span of control is growing, and future success will only be achieved by those manufacturers with innovative products, demonstrable cost-effectiveness, and productive, evidence-based sales and marketing approaches.

Changing Times. As new products become harder to find or get onto the market, prolonging the life of existing drugs takes on more urgency. Not only can this entail new indications for use, meaning increased revenues and possibly extended exclusivity periods, but any data backing safety and/or efficacy may help products maintain their positions. Thus companies may benefit from investing in health outcomes and pharmacoeconomic studies to prove the value of their products.

One preferred path to longer product life is the development of fixed-dose combinations, as demonstrated by Pfizer's $800 million development of torcetrapib, a cholesterol ester transfer protein inhibitor that raises levels of HDL cholesterol; it would be combined in a single pill with Lipitor. Merck has already launched Vytorin, the combination of its Zocor and Schering-Plough's cholesterol absorption inhibitor Zetia, while Abbott is developing a combination of TriCor, licensed from Solvay, and an undisclosed statin.

Some classes of drugs lend themselves to new indications, such as the TNF inhibitors (various autoimmune disorders), angiotensin antagonists (heart failure), and aromatase inhibitors (the adjuvant treatment of early breast cancer in postmenopausal women). Rituxan, already a blockbuster for non-Hodgkin's lymphoma, is now awaiting approval for rheumatoid arthritis. Pfizer's erectile dysfunction product Viagra has been approved, under the name Revatio, for treating pulmonary arterial hypertension.

Other signs that the pharmaceutical industry is beginning to adapt to a new operating environment, one in which it is under greater scrutiny than ever before, have been emerging. Led by GSK, a number of companies began publishing their clinical trial data on public websites in late 2004. Then in September 2005, the International Federation of Pharmaceutical Manufacturers & Associations unveiled a new Internet portal that will carry detailed information about most new trials. A year earlier, members of the International Committee of Medical Journal Editors had said they would not publish any studies that were not registered in a public database as the studies are launched.

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Also responding to criticism, Pharmaceutical Research & Manufacturers of America (PhRMA) unveiled its preliminary guiding principles on direct-to-consumer (DTC) advertising in July. The voluntary code will see new medicines discussed with doctors before DTC promotion begins, and a more balanced presentation of the benefits and risks of treatments. In June, Senate Majority Leader Bill Frist (R-Tenn.) had proposed a two-year moratorium on DTC ads for newly approved drugs.

Whereas PhRMA's guidelines did not go as far as Frist wanted, BMS has said it will delay DTC advertising for a year, while Pfizer committed to a six-month wait. In November, AstraZeneca proposed a mandatory requirement for pharmaceutical companies to submit all DTC advertising to FDA's Division of Drug Marketing & Communication for review prior to use. The PhRMA guidelines will take effect in January 2006.

A number of companies, recognizing that physicians are becoming overwhelmed-and irritated-by numerous visits from sales representatives, are scaling down their sales efforts. Niche products will also benefit from smaller sales forces that target fewer doctors, but ones who can spend more time considering each product. In February, GSK CEO Jean-Pierre Garnier said the global pharmaceutical industry was locked in a marketing arms race that was eroding margins for all companies. The spending could be diverted into more productive areas, such as R&D.

Outlook. IMS expects global pharmaceutical market growth to remain flat in 2005 at 7–8%, with the overall market approaching $600 billion. In 2006, the market is forecast to grow by 6–7% and possibly exceed $640 billion, as patent expirations and cost-containment initiatives make an impact. With time, the U.S. market is expected to outperform the global market slightly, increasing just 6–7% in 2005, but then 8–9% in 2006, partly thanks to a probably short-term boost from the Medicare prescription drug benefit.

The five major European markets are forecast to see lower growth of 45% in 2006 as price controls and generic usage expand, but Central and Eastern European markets should see double-digit growth. Pricing pressures will continue in Japan, with growth declining from 56% in 2005 to 1% or less in 2006, but China will continue to emerge as a significant market, seeing 1718% growth in 2006 to reach nearly $14 billion. Latin America will be another major emerging territory.

Among the main therapy areas, oncology is expected to see the highest increase in sales, at 1718% from 2005 to 2006; drugs for baby-boomer and developed-world disorders, such as hypertension and diabetes, are also likely to enjoy steady growth. Generics will continue to increase in popularity, representing 1213% of global sales by value in 2005 and 1819% in 2006. Even though biotech sales will outstrip the overall market, IMS expects their growth to moderate, from 16% in 2005 to 1415% in 2006, when biotech products will account for 8% of the global market. Other specialty products and fixed-dose combinations are also seen as growth drivers; other specialty products will increase sales by 1011% in 2006.

Selena Class is deputy executive editor of IMS Company Profiles, an IMS Health publication providing insight into companies at a strategic and local level. IMS provides market intelligence to the pharmaceutical and health care industries, offering business intelligence products and services that are integral to clients' day-to-day operations. All data in the article are sourced from IMS, unless stated otherwise. For further information about IMS, visit www.imshealth.com.

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