Issue Date: January 9, 2012 | Web Date: January 12, 2012
Pharmaceuticals: Focus Shifts To Regulations, Shortages
This is the year the pharmaceutical sector faces down the so-called patent cliff. After the late-2011 expiry of patents on Pfizer’s statin drug Lipitor, the top-selling drug of all time, and Eli Lilly & Co.’s schizophrenia treatment Zyprexa, the value of products at risk to generic competition will rise 59% to $35.2 billion in 2012, according to health care data firm IMS Health. Among the drugs set to lose patent protection this year are AstraZeneca’s bipolar disorder treatment Seroquel and the blood thinner Plavix from Bristol-Myers Squibb and Sanofi.
Having spent years preparing for the patent expirations, the sector is expected to shift its focus this year to regulatory issues affecting reimbursement and to an alarming shortage that affects generic drugs in a range of therapeutic areas. Partnerships to support research will be a continued trend.
According to a report by advisory firm PricewaterhouseCoopers on top health care industry issues for 2012, a critical shortage of drugs, sparked by manufacturing delays, quality issues, and a sudden demand for certain therapies, has raised concerns about patient care and safety. The year ahead will be characterized by heightened scrutiny of supply chains by FDA.
IMS says more than half of the 168 short-supply drugs listed by FDA are provided by only one or two companies. Over the past year, 13 companies have stopped supplying listed drugs altogether.
IMS estimates that the global drug market will grow 3–5% to between $960 billion and $970 billion in 2012. With the megamergers of Pfizer and Wyeth and of Merck & Co. and Schering-Plough still being digested, major drug companies will shift investment to smaller acquisitions and to licensing compounds from biopharmaceutical and emerging drug companies.
After several years of cutting back on R&D, the industry is desperate for innovation and is willing to pay a premium for promising compounds, says Wenyong Wang, managing director of merchant banking at the investment firm Burrill & Co. He cites Amgen’s acquisition of BioVex for $425 million up front and total payments of as much as $1 billion and Abbott Laboratories’ $400 million license of preclinical compounds developed by Reata Pharmaceuticals as 2011 examples of the industry paying dearly for a chance to acquire innovative drugs.
Wang’s boss, G. Steven Burrill, anticipates a drop in new drug approvals in 2012 after a spike in 2011. “There will be fewer approvals as there will be no lessening in regulatory barriers to winning approval for new drugs,” he says. “Regulatory barriers will increase in the U.S. and lead companies to look to emerging markets for first approvals of new products.” Burrill cites biosimilars as an opportunity already being pursued by drug companies as FDA finalizes its protocol for approving the generic large-molecule therapies.
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