Pharmaceutical Companies Losing Patent Exclusivities

Since the US Food and Drug Administration approved Lipitor (atorvastatin) in the late 1990s, Pfizer, Inc, could rely on the cholesterol-lowering drug to generate billions in revenue. The product became the best-selling drug in history, providing a significant advantage for the company as it endured the industry’s cyclical nature. No longer. On November 30, 2011, Pfizer lost patent protection to atorvastatin. Watson Pharmaceuticals, Inc, now sells an authorized copy of atorvastatin, in which the company and Pfizer have a profit-sharing agreement for 5 years. Ranbaxy Laboratories, Ltd, also has a generic competitor. In May, there will be several more generic versions of atorvastatin available, including from Teva Pharmaceuticals. Pfizer has attempted to hold on to as much market share as possible by implementing creative yet controversial deals, but the loss of atorvastatin is difficult to overcome in the near term. In 2011, atorvastatin generated $9.5 billion in worldwide sales and $5.0 billion in US sales. Other pharmaceutical companies will soon be in similar situations. The patent for the blood thinner Plavix (clopidogrel), the second-highest selling drug in 2011, expires on May 17, contributing to billions in lost revenue for Sanofi and Bristol-Myers Squibb, its manufacturers. This year, 10 drugs with at least $1 billion in US retail sales in 2010 will lose their patents, according to Medco Health Solutions data. Five more drugs in that category will lose their patents by the end of 2014. The products include Nexium (esomeprazole), Seroquel (quetiapine), Singulair (montelukast), and Actos (pioglitazone). EvaluatePharma, a London research firm, published a report in June that noted drugs with $255 billion in annual sales will go off patent between 2011 and 2016. By 2015, generic drugs will have an 86% share of the pharmaceutical marketplace, up from 75.5% in 2010, according to Douglas Long, MBA, vice president of industry relations at IMS Health, a health information company. The shift will help consumers save on prescription costs. IMS Health estimated the average copayment for generics was $6.06 per prescription in 2010 compared with $22.73 for branded generics, $23.65 for preferred brands, and $34.77 for nonpreferred brands. However, major pharmaceutical companies will suffer with competition from generics. Some are taking innovative approaches to help preserve some of the revenue for as long as possible. Pfizer has implemented several strategies. The company created a program called Lipitor For You, in which individuals covered by private insurance can pay as little as a $4 per month copay if their out-of-pocket expenses are <$54 for a monthly supply. If expenses are >$54, they can get up to $50 in monthly savings. People who are on Medicare, Medicaid, or other federal or state government programs do not qualify for the discount. In early November, the New York Times obtained a letter from Catalyst Rx that revealed Pfizer had asked pharmacy benefit managers (PBMs) to block generic versions of atorvastatin for the first 6 months after the patent expired. If they complied, PBMs would receive large discounts from Pfizer. The newspaper reported the typical copayment for 30 days of atorvastatin was ≥$25 before the patent expired, but it would likely fall to $10. A few weeks later, an advocacy group called Pharmacists United for Truth and Transparency released a memorandum from CVS Caremark to pharmacists that noted claims for generic atorvastatin would be rejected in favor of branded atorvastatin for Medicare Part D plans. The brand would cost the same as the generic copay, according to the New York Times. Express Scripts, Inc, and Medco Health Solutions recommended that clients switch to generic atorvastatin, but both companies use branded atorvastatin as the generic in their mail order business because Pfizer matched the generic price, the New York Times reported. Pfizer’s tactics caught the attention of Senators Max Baucus (D-MT), Chuck Grassley (R-IA), and Herb Kohl (D-WI). Sen. Baucus is chairman of the Senate Finance Committee, while Sen. Kohl is chairman of the Special Committee on Aging. Sen. Grassley is a senior member of the Finance Committee. The senators sent letters to Pfizer, Medco Health Solutions, Express Scripts, Catalyst Rx, Coventry Health Care, and UnitedHealth. In a news release, they mentioned they were dismayed that Pfizer would give discounts to PBMs and insurance companies that blocked the generic atorvastatin. “In what’s been reported, just about everyone wins except consumers and taxpayers,” Sen. Grassley said. “That’s cause for scrutiny, and these letters reflect a commitment to looking at how to prevent the system from being manipulated so that access to generic drugs is restricted and taxpayers are forced to unnecessarily pay brand-name drug prices.” In February, Bloomberg reported an Alabama-based health plan sued Pfizer and Ranbaxy, claiming the companies delayed the generic version of atorvastatin for 20 months, which led to higher purchase costs. A Pfizer spokesman told Bloomberg that the Federal Trade Commission agreed to the terms of the 2008 settlement between Pfizer and Ranbaxy, and said “Pfizer believes the suit has no merit.” Earlier, 11 California pharmacies sued the companies for similar reasons. Dave Simmons, Pfizer’s president and general manager of emerging markets and established products, said in a conference call with analysts and investors in late January that the company’s market research had found “a significant percentage of patients who want to remain on the brand.” Mr. Simmons added that Pfizer aimed to serve those customers “without increasing costs to the healthcare system.” In the 6 months after losing its patent, Pfizer had expected to have a 40% market share and generate $500 million in atorvastatin revenue. As of late December, IMS Health reported the brand had a 37% market share compared with 35% for Ranbaxy’s generic and 27% for Watson’s generic, according to the Associated Press. Adam J. Fein, PhD, founder of Pembroke Consulting, Inc, wrote on his Web site (www.drugchannels.net) on January 18 that branded atorvastatin’s share had decreased at a faster rate than other brands that lost patent protection dating to 2006. Dr. Fein used data through the week of January 6. Beginning in February, Express Scripts moved branded atorvastatin to the third tier of its national formulary, according to the Wall Street Journal. Before the change, the drug was on Express Scripts’ second tier. The generics remain on the first tier. The newspaper said the new pricing would affect companies hiring Express Scripts to manage their drug benefits, but it would not likely apply to health plan clients or the company’s mail order pharmacy. WellPoint, Inc. will not cover branded atorvastatin starting on April 1 and will only cover the generic version for many commercial members in 12 of the 14 states where the insurer operates, according to Dow Jones Newswires. In the other states (New York and California), members will be required to use generic atorvastatin first. The move will not affect commercial clients using outside firms to handle drug benefits. With atorvastatin losing its patent, Pfizer announced that it expected revenue this year would be between $60.5 billion and $62.5 billion, lower than the $62.2 billion to $64.7 billion it had previously stated. The company generated $67.4 billion in revenue in 2011. In a statement coinciding with the release of Pfizer’s 2011 financial results, chief executive officer Ian Read said the company had $5 billion in product exclusivity losses in 2011. He mentioned a few products the company hopes will help in the coming years, including Prevnar (pneumococcal 13-valent conjugate vaccine); Xalkori (crizotinib; approved in August 2011 for late-stage, non–small-cell lung cancer); Inlyta (axitinib; approved in January 2012 for advanced kidney cancer); tofacitinib (expected to be approved in 2012 for rheumatoid arthritis); and Eliquis (apixaban; expected to be approved in 2012 for atrial fibrillation). Pfizer is also making cuts and considering divestitures. In February 2011, the company announced it would cut research spending by as much as 30%. The company may also sell its Animal Health and Nutrition divisions. Mr. Read said in a statement that “any separation of these businesses from Pfizer will occur between July 2012 and July 2013.” “We’re not going to be a one-product company,” Geno Germano, Pfizer’s president of specialty care and oncology, told Bloomberg. “We’re poised to deliver significant new pipeline assets in the coming year, and in coming years.”