Tuesday, April 26, 2011

US Pharmaceutical Industry – Innovation lagging genericisation - Recent IMS numbers reflects declining drug productivity

US Pharmaceutical Industry – Innovation lagging genericisation
IMS has recently released 2010 annual sales number for the US prescription drug industry. The numbers reflect the growing pressure of genericisation and faltering innovation. Generic efficiency is now at 93%, while share of newly approved drugs (launched in the last 2 years) in the total patent protected market is at its historic low.  

The average price of patent protected brands was hiked by 17% in 2010, but despite, the value sales of this segment declined by 0.7%. The spending on generics and branded generics grew respectively by 21.7% and 4.5%, taking the total prescription drug spending for 2010 to $307b, up 2.7% year over year on a nominal basis.  On a real per capita basis, prescription drug spending increased by 0.6% compared to a 3.1% increase in 2009.  When adjusted by the GDP price deflator, real total spending increased from $261Bn in 2006 to $277Bn in 2010.

The real evidence of the growing impact of genericisation and faltering innovation is reflected by the fact that total drug spending on products that have been available to patients for less than 24 months has dropped to $4.0Bn in 2010, down from $6.7Bn the prior year and $11.0Bn in 2006.   Spending on new medicines is now 2.8% of total brand spending, down from 5.0% in 2006. The number of products in this group
totaled 69 in 2010, down from 96 in 2006, reflecting the decline in products emerging from research and development laboratories and receiving regulatory approval.   Average spending per new branded product was $62Mn in 2010, down from $114Mn in 2006, reflecting a shift in the mix of new products toward orphan drugs and products with the same mechanism of action as existing products.

Genericisation getting more painful
In 2010, $12.6Bn in branded products faced generic competition compared to $19.5Bn of products in 2009. This combined 2-year time period ($32.1Bn) represents the highest amount ever. Another $32b of sales will lose patent in 2011 and 2012, while the new product flow continues to be dismal.

The patent expiry pressures is becoming all the more painful as now just within six months of patent loss, over 80% of a brand’s prescription volume is replaced by generics. This is driven by an increasingly efficient set of mechanisms for encouraging use of generics versus original. The branded generic market share has risen each of the past five years to now account for 78% of all prescriptions dispensed

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