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In splintered drug market, industry seeks solutions

Sales growth of prescription drugs Source: IMS Health, MIDAS, National...
Market share of retail and institutional channels Source: IMS Health,...
U.S. sales growth Source: IMS Health, National Sales Perspectives, June...
U.S. prescription growth Source: IMS Health, National Prescription Audit, June...

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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 classes


Source: IMS Health, National Sales Perspectives, June 2009 *In millions
  MAT JUNE 2009
LEADING CLASSES US$* % MARKET SHARE % GROWTH
U.S. INDUSTRY $291,804 100.0% 3.2%
1. Lipid regulators 16,811 5.8 -3.2
2. Antipsychotics, other 14,222 4.9 3.3
3. Proton-pump inhibitors 13,891 4.8 -0.9
4. Antidepressants 11,420 3.9 -1.9
5. Angiotensin II antagonists 7,946 2.7 12.9
6. Seizure disorders 7,773 2.7 -18.1
7. Antineoplastic monoclonal antibodies 7,670 2.6 9.3
8. Erythropoietins 6,450 2.2 -12.9
9. Antiarthritis, biologic response modifiers 5,938 2.0 13.6
10. Analogs of human insulin 5,699 2.0 28.8
TOP 10 $97,819 33.5% 0.4%

Market share and growth of top 10 prescription drugs


U.S. INDUSTRY TOP 10 Source: IMS Health, National Sales Perspectives, June 2009 *In millions
    MAT JUNE 2009
PRODUCTS (COMPANY) US$* % MARKET SHARE % GROWTH
$291,804 100.0% 3.2%
1. Lipitor (Pfizer) 7,668 2.6 -2.9
2. Nexium (AstraZeneca) 6,111 2.1 7.2
3. Plavix (BMS) 5,212 1.8 15.8
4. Advair Diskus (GlaxoSmithKline) 4,540 1.6 6.1
5. Seroquel (AstraZeneca) 3,965 1.4 9.2
6. Singulair (Merck & Co.) 3,548 1.2 2.5
7. Abilify (Otsuka America Pharmaceuticals) 3,525 1.2 35.7
8. Actos (Takeda) 3,245 1.1 5.8
9. Enbrel (Amgen) 3,164 1.1 0.1
10. Remicade (Johnson & Johnson) 3,099 1.1 7.9
$44,076 15.1% 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 sales


Source: IMS Health, National Sales Perspectives, June 2009 *In millions
  MAT JUNE 2009
LEADING CORPORATIONS US$* % MARKET SHARE % GROWTH
U.S. INDUSTRY $291,804 100.0% 3.2%
1. Pfizer (including Greenstone) 20,103 6.9 -6.3
2. AstraZeneca 17,128 5.9 10.2
3. GlaxoSmithKline 16,259 5.6 -12.3
4. Merck & Co. 14,678 5.0 -13.3
5. Johnson & Johnson 14,162 4.9 -11.9
6. Roche (including Genentech) 13,221 4.5 6.8
7. Novartis (including Sandoz) 12,604 4.3 0.7
8. Lilly 12,564 4.3 10.3
9. Amgen Corp. 12,404 4.3 -5.8
10. Teva 12,171 4.2 23.6
TOP 10 $145,293 49.8% -1.7%

Top 10 leading cos. in Rx volume


Source: IMS Health, National Prescription Audit, June 2009 *In millions
  MAT JUNE 2009
LEADING CORPORATIONS TRx* % MARKET SHARE % GROWTH
U.S. INDUSTRY 3,867 100.0% 0.9%
1. Teva 625 16.2 5.2
2. Mylan Labs 320 8.3 5.0
3. Novartis (including Sandoz) 237 6.1 -10.3
4. Watson Pharmaceuticals 225 5.8 -2.5
5. Pfizer (including Greenstone) 212 5.5 -10.5
6. Apotex 104 2.7 32.9
7. Mallinckrodt 94 2.4 3.3
8. Qualitest Products 93 2.4 4.3
9. AstraZeneca 91 2.4 1.6
10. Merck & Co. 88 2.3 -23.0
TOP 10 2,091 54.1% -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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