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Originally published July 24, 2011 at 5:28 PM | Page modified July 24, 2011 at 7:02 PM

Prescription-drug prices to plunge as patents expire

The cost of prescription medicines used by millions of people every day is about to plummet.

The Associated Press

quotes I thought the headline said "patients"... Read more
quotes This is great news for everyone. Mayber there is some hope for controlling health... Read more
quotes Hope all this is true. I'm on Lipitor and I see I now pay (thru BC/BS) $40 a month but... Read more

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The cost of prescription medicines used by millions of people every day is about to plummet.

The next 14 months will bring generic versions of seven of the world's 20 best-selling drugs, including the top two: cholesterol fighter Lipitor and blood thinner Plavix.

The magnitude of this wave of expiring drug patents is unprecedented. Between now and 2016, blockbusters with about $255 billion in global annual sales are set to go off patent, notes EvaluatePharma, a London research firm. Generic competition will decimate sales of the brand-name drugs and slash the cost to patients and companies that provide health benefits.

Top drugs getting generic competition by September 2012 are taken by millions every day: Lipitor alone is taken by about 4.3 million Americans and Plavix by 1.4 million. Generic versions of big-selling drugs for blood pressure, asthma, diabetes, depression, high triglycerides, HIV and bipolar disorder also are coming by then.

The flood of generics will continue for the next decade or so, as about 120 brand-name prescription drugs lose market exclusivity, according to prescription benefit manager Medco Health Solutions.

"My estimation is at least 15 percent of the population is currently using one of the drugs whose patents will expire in 2011 or 2012," says Joel Owerbach, chief pharmacy officer for Excellus Blue Cross Blue Shield, which serves most of upstate New York.

Those patients, along with businesses and taxpayers who help pay for prescription drugs through corporate and government prescription plans, collectively will save a small fortune. That's because generic drugs typically cost 20 percent to 80 percent less than the brand names.

Doctors hope the lower prices will significantly reduce the number of people jeopardizing their health because they can't afford medicines they need.

Even people with private insurance or Medicare aren't filling all their prescriptions, studies show, particularly for cancer drugs with copays of hundreds of dollars or more.

The new generics will slice co-payments of those with insurance. For the uninsured, who have been paying full price, the savings will be much bigger.

They work just as well

Generic medicines are chemically equivalent to the original brand-name drugs and work just as well for nearly all patients.

When a drug loses patent protection, often only one generic version is on sale for the first six months, so the price falls a little bit initially. Then, several other generic makers typically jump in, driving prices down dramatically.

Last year, the average generic prescription cost $72, versus $198 for the average brand-name drug, according to consulting firm Wolters Kluwer Pharma Solutions. Those figures average all prescriptions, from short-term to 90-day ones.

Average co-payments last year were $6 for generics, compared with $24 for brand-name drugs given preferred status by an insurer and $35 for nonpreferred brands, according to IMS Health.

Among the drugs that recently went off patent, Protonix, for severe heartburn, now costs just $16 a month for the generic, versus about $170 for the brand name. And of the top sellers that soon will have competition, Lipitor retails for about $150 a month, Plavix costs almost $200 a month and blood-pressure drug Diovan costs about $125 a month. For those with drug coverage, their out-of-pocket costs for each of those drugs could drop below $10 a month.

"A tremendous help"

Jo Kelly, a retired social worker in Conklin, Mich., and her husband Ray, a retired railroad mechanic, each take Lipitor and two other brand-name medicines, plus some generic drugs. Both are 67, and they land in the Medicare prescription "doughnut hole," which means they must pay their drugs' full cost by late summer or early fall each year. That pushes their monthly cost for Lipitor to about $95 each, and their combined monthly prescription cost to nearly $1,100.

Generic Lipitor should hit pharmacies Nov. 30 and cost them around $10 each a month.

"It would be a tremendous help for us financially," she says. "It would allow us to start going out to eat again."

For people with no prescription coverage, the coming savings on some drugs could be much bigger. Many discount retailers and grocery chains sell the most popular generics for $5 a month or less to draw in shoppers.

In the 1990s, big pharmaceutical companies were wildly successful at creating pills that millions of people take every day for common conditions, from heart disease and diabetes to osteoporosis and chronic pain. Double-digit quarterly profit increases became the norm.

But the patents on those blockbusters, which were filed years before the drugs went on sale, last for 20 years at most, and many expire soon.

Drugmakers scramble

In recent years, many drug companies have struggled to develop new blockbuster drugs, despite multibillion-dollar research budgets and more partnerships with scientists at universities and biotech companies. The dearth of successes, partly because the "easy" treatments already have been found, has turned the short-term prognosis for "big pharma" anemic.

"The profit dollars that companies used to reinvest in innovation are no longer going to be coming," warns Terry Hisey, life-sciences leader at consultant Deloitte's pharmaceutical consulting business. He says that raises "long-term concerns about the industry's ability to bring new medicines to market."

But pharmaceutical companies can save billions when they stop promoting drugs that have new generic rivals, and U.S. drug and biotech companies are still spending more than $65 billion a year on R&D.

The 20 new drug approvals in the U.S. this year, and other important ones expected in the next few years, eventually will help fill the revenue hole.

For now, brand-name drugmakers are scrambling to adjust for the billions in revenue that will soon be lost. Many raised prices 20 percent or more over the last couple of years, before generics hit, to maximize revenue. Some contract with generic drugmakers for "authorized generics," which give the brand-name company a portion of the generic sales.

Brand-name companies also are trimming research budgets, partnering with other companies to share drug-development costs and shifting more manufacturing and patient testing to low-cost countries.

Pharmaceutical companies have cut about 10 percent of their U.S. jobs in four years, from a peak of about 297,000 to about 268,000, according to Labor Department data.

Drug companies also are trying to stabilize future sales by putting more sales reps in emerging markets such as China and India, and diversifying into businesses that get little or no generic competition. Those include vaccines, diagnostic tests, veterinary medicines and consumer health products.

Key blockbuster drugs about to get generic rivals
These are blockbuster drugs, with more than $1 billion in annual global sales, set to go off patent and get generic competition in the U.S. in the next two years:
Patent ends Brand name Generic name Use/conditions treated Made/sold by
Oct. 2011 Zyprexa olanzapine schizophrenia/bipolar Eli/Lilly
Nov. 2011 Lipitor atorvastatin high cholesterol Pfizer
March 2012 Lexapro escitalopram depression Forest/Labs
March 2012 Seroquel quetiapine schizophrenia/bipolar AstraZeneca
March 2012 Avapro/Avalide irbesartan high blood pressure Bristol-Myers/Sanofi
April 2012 Provigil modafinil narcolepsy Cephalon
May 2012 Plavix clopidogrel clot prevention Bristol-Myers/Sanofi
July 2012 Tricor fenofibrate high triglycerides Abbott
Aug. 2012 Singulair montelukast asthma/allergies Merck
Aug. 2012 Actos pioglitazone diabetes Takeda
Sept. 2012 Diovan valsartan high blood pressure Novartis
Sept. 2012 Geodon ziprasidone bipolar disorder Pfizer
Nov. 2012 Lidoderm lidocaine pain patch Endo
Dec. 2012 Atacand candesartan heart failure AstraZeneca
March 2013 Lovaza omega-3 acid high triglycerides GlaxoSmithKline
Aug. 2013 Temodar temozolomide brain tumors Merck
Note: Patent expiration/generic arrival dates can change due to litigation or regulatory issues.

Sources: Medco Health Solutions, company websites.

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