The world is turning generic. That's the takeaway from the latest trends in the drug industry, according to IMS Health. In 2012, according to the healthcare industry analytics firm, dollar sales of drugs fell by 1% to $325.7 billion, but prescriptions grew by 1.2% as generic drugs' share of total drugs dispensed grew to nearly 83%.
For the 12-month period that ended in March 2013, dollar growth fell by 4% overall, including a 6.2% fall in dollar growth for branded drugs, while generic dollar growth increased by 5%. Prescription volume grew almost 3% overall, but branded prescriptions fell by 16%, and generic prescriptions grew by nearly 8%, according to IMS.
In addition to the growth of generics and the decline of branded drugs overall, specialty drugs — those used to treat complex, chronic health conditions — have seen significant growth as well, a trend that is likely to continue as the population ages and more treatments become available for difficult-to-treat diseases.
Generics and biosimilars
While the use of generic drugs is clearly on the rise, the number of branded drugs coming off patent and creating new opportunities for generic makers to profit is dwindling. Between 2008 and 2012, branded drugs with sales of $101 billion lost patent protection, but between 2013 and 2017, that figure is set to drop to $86 billion due to the drop in patent expiries as part of the patent cliff, according to IMS.
One big opportunity for generic companies lies in biosimilars, knock-off versions of biotech drugs. According to a report last month by pharmacy benefit manager Express Scripts, patients and payers in the United States stood to save $250 billion between 2014 and 2024 "if just a handful of biosimilars were to enter the market." Earlier this year, biosimilars hit a setback as many states considered laws that would make it harder for pharmacists to substitute biosimilars for branded biologics, but many states have rejected those laws.
Though the Food and Drug Administration is bound under the Patient Protection and Affordable Care Act to create an abbreviated approval pathway for biosimilars similar to the one for generic drugs, it has not yet done so. In the meantime, some drug makers are seeking approval for biosimilars using the standard approval process. In July, Sandoz, the generics subsidiary of Novartis and a major supplier of biosimilars in Europe, announced the start of a phase-3 trial of a biosimilar version of Amgen's Enbrel (etanercept), used to treat psoriasis and arthritis.
According to IMS, of the top 20 drug therapy classes as measured by spending in 2012, six of them were in specialty; but cancer drugs were the largest, accounting for $25.9 billion in spending. Specialty drugs are used to treat complex, chronic and serious health conditions, including cancers, chronic viral infections, autoimmune disorders and such rare illnesses as cystic fibrosis and lysosomal storage diseases. Many specialty drugs are biologics and very expensive, costing tens of thousands per year, and often available only through limited-distribution networks.
Specialty drugs still counted for a little more than a quarter of drug spending in 2012: Of the $325.8 billion spent on drugs, $89 billion, or 27.3%, went to specialty drugs. Non-specialty drugs still dwarf specialty in terms of overall spending, but the kicker is that specialty spending grew by 8.7%, while non-specialty spending fell by 4.2%.
The dramatic rise in the use of generic drugs is happening because many branded drugs are losing patent protection and facing generic competition. Most notable of these in recent years was Pfizer's cholesterol drug Lipitor (atorvastatin), which lost patent protection in November 2011 and faced competition from Ranbaxy Labs' generic after years of being the world's top-selling drug. Now, six drug makers have generic versions, according to the FDA.
But the rise in generics doesn't mean branded drugs will go away. In fact, approvals of new drugs have reached levels not seen in more than a decade. In 2012, according to IMS, the FDA approved 39 new drugs, including nine primary-care drugs and 30 specialist drugs, meaning those prescribed by specialist doctors. In 2011, 34 drugs received approval, including 22 specialist drugs and 12 primary-care drugs. Such a large number of new drugs hasn't been seen since 1998 and 1999, when the FDA approved 38 and 40 new drugs, respectively, notwithstanding a spike in 2004, when 36 were approved.