In splintered drug market, industry seeks solutions

If you’re a pharmaceutical manufacturer, wholesaler or retailer, that distinct chill you’ve been feeling at your place of business over the past couple of years isn’t just some abstract news from the nation’s financial press; it’s the downdraft created by falling U.S. demand for brand-name prescription medicines.

Stymied by weak demand in a recessionary economy, intensifying generic competition, a relative dearth of research-and-development breakthroughs and an ongoing loss of patent protection for some of their biggest-selling pioneering medicines, branded pharmaceutical manufacturers have scrambled over the last three years to restore their once-enviable track record for product innovation and sales growth. And 2009 was no exception.

Reporting on industry trends for the 12-month period ended June 2009, IMS Health tracked a dismal performance record for the branded drug industry. While total retail prescription drug sales rose 4.2% to roughly $300 billion, the real action was almost all in the generic and specialty/biotech segment of the market. Sales of brand-name pharmaceuticals were up 2.7% for the period, thanks largely to drug-price inflation and biotech or specialized medications, while sales of generics jumped nearly 12%.

When measured in unit sales, the picture for the branded side was even worse. The number of prescriptions dispensed by U.S. pharmacies edged up roughly 1% during the 12-month period ended last June, but the growth was driven by booming demand for low-cost, me-too medications.

According to IMS, generics grew 5.6% in number of prescriptions dispensed, while branded pharmaceuticals, by contrast, actually declined a sobering 9.2% in units. Me-too medications now account for 70% of all U.S. prescriptions dispensed, according to the research company, and their sales have more than tripled since 2000 to more than $51 billion last year, or 17% of the U.S. total.

By contrast, specialty pharmaceuticals, whose distribution is driven by specialized pharmacies and primary care physicians, saw solid sales growth of more than 4% in the June 2008 to June 2009 12-month period.

“The new and expanding field of specialty pharmacy could bring more biologic products into the pharmacy space, meaning some biologics that are now limited to clinics and hospitals will join insulin and the few others now in pharmacy,” said Doug Long, VP trade relations for IMS.

It’s no secret that much of the industry’s research and development focus—and most of the innovation and sales growth—has shifted to the expensive and highly targeted arena of specialty and biotech pharmaceuticals. Murray Aitken, SVP healthcare insight for IMS, predicted that many of the new chemical and biological entities emerging over the next few years “will be specialist-driven,” and aimed at “niche indications and narrow patient populations.”

Top 10 drug classesSource: IMS Health, National Sales Perspectives, June 2009*In millions
 MAT JUNE 2009
LEADING CLASSESUS$*% MARKET SHARE% GROWTH
U.S. INDUSTRY$291,804100.0%3.2%
1. Lipid regulators16,8115.8-3.2
2. Antipsychotics, other14,2224.93.3
3. Proton-pump inhibitors13,8914.8-0.9
4. Antidepressants11,4203.9-1.9
5. Angiotensin II antagonists7,9462.712.9
6. Seizure disorders7,7732.7-18.1
7. Antineoplastic monoclonal antibodies7,6702.69.3
8. Erythropoietins6,4502.2-12.9
9. Antiarthritis, biologic response modifiers5,9382.013.6
10. Analogs of human insulin5,6992.028.8
TOP 10$97,81933.5%0.4%

Market share and growth of top 10 prescription drugs

U.S. INDUSTRYTOP 10Source: IMS Health, National Sales Perspectives, June 2009*In millions
  MAT JUNE 2009
PRODUCTS(COMPANY)US$*% MARKET SHARE% GROWTH
$291,804100.0%3.2%
1. Lipitor(Pfizer)7,6682.6-2.9
2. Nexium(AstraZeneca)6,1112.17.2
3. Plavix(BMS)5,2121.815.8
4. Advair Diskus(GlaxoSmithKline)4,5401.66.1
5. Seroquel(AstraZeneca)3,9651.49.2
6. Singulair(Merck & Co.)3,5481.22.5
7. Abilify(Otsuka America Pharmaceuticals)3,5251.235.7
8. Actos(Takeda)3,2451.15.8
9. Enbrel(Amgen)3,1641.10.1
10. Remicade(Johnson & Johnson)3,0991.17.9
$44,07615.1%7.1%

That could spell some trouble for traditional retail pharmacies, most of which aren’t set up to handle the complex dosage regimens, insurance expertise or close coordination with patients and their doctors that the specialty pharmacy business requires—let alone the staggering costs of some specialty and biotech drugs. But it also could spell huge opportunity for chains and independents that can summon those capabilities as the $70 billion U.S. market for specialty products continues to ramp up.

One thing seems certain: the commoditization of the lower end of the generic drug marketplace likely will continue as $4 generic drug promotions and pricing pressures remain a staple of the U.S. pharmacy market. Those pressures will continue to weigh on profit margins at the pharmacy counter as more drugs lose patent protection and such pharmacy giants as Walmart keep up the pressure on pricing.

Top 10 leading cos. in salesSource: IMS Health, National Sales Perspectives, June 2009*In millions
 MAT JUNE 2009
LEADING CORPORATIONSUS$*% MARKET SHARE% GROWTH
U.S. INDUSTRY$291,804100.0%3.2%
1. Pfizer (including Greenstone)20,1036.9-6.3
2. AstraZeneca17,1285.910.2
3. GlaxoSmithKline16,2595.6-12.3
4. Merck & Co.14,6785.0-13.3
5. Johnson & Johnson14,1624.9-11.9
6. Roche (including Genentech)13,2214.56.8
7. Novartis (including Sandoz)12,6044.30.7
8. Lilly12,5644.310.3
9. Amgen Corp.12,4044.3-5.8
10. Teva12,1714.223.6
TOP 10$145,29349.8%-1.7%

Top 10 leading cos. in Rx volume

Source: IMS Health, National Prescription Audit, June 2009*In millions
 MAT JUNE 2009
LEADING CORPORATIONSTRx*% MARKET SHARE% GROWTH
U.S. INDUSTRY3,867100.0%0.9%
1. Teva62516.25.2
2. Mylan Labs3208.35.0
3. Novartis (including Sandoz)2376.1-10.3
4. Watson Pharmaceuticals2255.8-2.5
5. Pfizer (including Greenstone)2125.5-10.5
6. Apotex1042.732.9
7. Mallinckrodt942.43.3
8. Qualitest Products932.44.3
9. AstraZeneca912.41.6
10. Merck & Co.882.3-23.0
TOP 102,09154.1%-0.2%

Here again, however, the market may hold a huge opportunity for pharmacy providers willing to make a real break from the traditional business paradigm to forge new ties with health plan payers and patients, and new personalized services designed to keep those patients healthier at a lower cost.

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