Lapsing patents help generic drug-makers


LONDON - Teva Pharmaceutical Industries Ltd. and other generic-drug companies might outperform larger rivals such as GlaxoSmithKline Plc as $82 billion in medicines lose patent protection in the next several years, a report says.

Generic versions could appear by 2007 for 42 of the 52 treatments with more than $1 billion in U.S. sales last year, said Neal Hansen, senior pharmaceuticals analyst at Datamonitor Plc, a U.K. consultancy.

Glaxo, Bristol-Myers Squibb Co. and other large drug makers have trouble getting new medicines on the market, but makers of generics such as Teva, Ranbaxy Laboratories Ltd. and Andrx Group are aggressively marketing their copycat versions of top-selling drugs such as Bristol-Myers's Glucophage diabetes treatment.

"The generic companies have gotten much more effective at challenging patents and much more effective at distributing drugs," Hansen said in an interview. "There's also a large push, especially in the U.S., to switch people to generic drugs as soon as they're available."

Generics are chemically identical to brand-name medicines and usually can be sold after patent protection for the brands expire. Because their makers spend less on research and marketing, generics generally sell for less than half the price of brand-name equivalents.

Teva, an Israeli company that is the largest maker of generic treatments, U.S. rival Andrx and Ranbaxy, India's biggest drug-maker, will do well as more medicines lose protection, Hansen said. The world market for copycat drugs grew 11 percent last year, when it was worth $27 billion, Datamonitor said. Total global drug sales grew 8 percent in that period, it said.

Most companies in the industry will have high growth rates, and some surpass those of large pharmaceutical companies, Hansen said. The 16 largest drug-makers had an average operating profit margin of 22.7 percent, while a group of 20 leading generic companies averaged 18.1 percent, he said.

"The profit margins aren't that far off, and some of the generics have profit margins that surpass" those of the big companies, he said.

Merck & Co.'s Zocor cholesterol medicine and Pfizer Inc.'s anti-depressant Zoloft are among the products with high sales that might lose protection soon. AstraZeneca Plc's Prilosec, once the world's best-selling drug, could face generic competition this year.

When copycat versions hit the market, brand-name drugs usually lose sales quickly, Hansen said. Bristol-Myers's Glucophage had sales of $1.3 billion in the first six months of last year. Sales dropped to $14 million in the first half of this year after generic versions were introduced.

In the United States, companies that successfully challenge drug patents in court have the generic market to themselves for several months before competitors introduce their versions, he said.

Barr Laboratories Inc. made $365 million from sales of a generic version of Eli Lilly & Co.'s Prozac antidepressant in the first eight months it was on the market, when Barr had exclusive rights. In the following three months, when other generic makers introduced copies, Barr's Prozac sales fell to $2.5 million, he said.

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