The collapse of patents: fly – it will become cheaper!
Falling up
Tatiana Bateneva, "Russian Business Newspaper", 17.01.2012
Prices in pharmacies are increasingly making us horrified – the newer (implied – and more effective) the drug, the more expensive it is. And this is understandable: a company that has spent millions or even billions of dollars on its development and production strives to return costs as quickly as possible and get maximum profit. For everything about everything, she has about 20 years, protected by a patent. Of these, about 10 are spent on the development and introduction of drugs to the market, the remaining 10 are actually for sales. Then the patent advantage evaporates, and a new drug can be produced by anyone who wants and can. Reproduced drugs, or generics, immediately drop sharply in price – by an average of 60-70%.
For consumers, this event is pleasant and useful. And for pharmaceutical companies, this is a dramatic moment. They dramatically lose income, and sometimes their usual position in the market. Therefore, they go to all lengths to delay the release of generics – they try to extend the patent term by expanding the scope of use of the drug or the contingent of patients, sue those who want to register a copy of the drug, pay compensation to the company that is first ready to launch the release of the generic, etc. And that has its own interest, especially in the US drug market. There, the legislation provides the first generic manufacturer with a six-month head start of exclusivity, and in such a huge market, even in six months and on one drug, a generic company can simply get rich.
Last year, the process began, which has already been dubbed the "patent collapse". Innovative blockbuster medicines of the world's leading companies, created in the 90s of the twentieth century, began to lose patent protection one after another.
But if in 2011 only five popular brands came out of patent protection, then in the coming year the same thing will happen with a dozen highly effective drugs, each of which brought billions of dollars a year to its manufacturers. In total, 35 brands will lose the patent shield by 2016, with total annual sales of $ 209 billion.
The patent collapse can so significantly change the balance of power in the global pharmaceutical market that many companies have begun to change their strategies – some are buying smaller companies with interesting product portfolios, others are expanding the range of promising new products, investing heavily in research and development.
"Our company is no exception in this process," Nenad Pavletic, President of AstraZeneca Russia, told RBG. – Last year, one of our drugs left the patent protection, in the next 3-4 more will go. And this is a positive process, as patients will receive the same or similar quality products for a lower price. And we will compensate for our losses by bringing completely new medicines to the market – one has already been registered, and in the coming year we will bring at least four more.
Will these turbulent events affect the pharmaceutical market of Russia, which consists of imported medicines by more than 70% (in monetary terms)?
"Some Russian companies are planning to master the production of expensive drugs that are out of the scope of patents in 2012," Viktor Dmitriev, General Director of the Association of Russian Pharmaceutical Manufacturers, told RBG. – Their production in Russia, including through localization, will allow companies to expand their product portfolio, and patients to get innovative medicines at an affordable price.
Since Russian citizens are much less solvent than Americans, and the state provides only certain categories with preferential medicines and prefers to save on this, many companies have not even patented their super–expensive novelties in Russia - they are not interested in a small market. This was used by large foreign generic companies, which quickly registered copies of expensive drugs with us at much lower prices. This is facilitated by our demand structure (the cheaper the medicine, the more sales), and our legislation. So while there is a struggle over who will be the first to start producing a generic of the most popular cholesterol-normalizing drug in the Western world for the US market, we have copies of it registered a long time ago and sold 10 times cheaper.
The same story happened with other blockbuster drugs, generics of most of them we already have and are successfully used. Although many men will undoubtedly be pleased that a very popular medicine for erectile dysfunction will also lose patent protection in 2012 – its generics will become cheaper, which means even more popular, although doctors will hardly be pleased with their independent use.
But the end of the patent for a very expensive innovative drug for the treatment of lymphoma can be a salvation for many patients – today in Russia its course for a month costs an average of 23,000 rubles. Several Russian enterprises have set the task ahead of time to develop a technology for producing a copy of it.
– Our company has already registered the relevant substance and is now completing clinical trials of the finished form, – Larisa Sapezhinskaya, head of the registration department of the Moscow pharmaceutical company, told RBG. – Several other Russian manufacturers are at different stages of this process. Of course, the prices of our drugs will be much lower.
– There is no great doubt that many Russian companies can master the production of generics – they have the necessary specialists and the necessary equipment for this, – says Ivan Glushkov, head of the Corporate Development Department of STADA CIS. – But it will be much more difficult to make money on their production, since most Russian companies do not have a modern and effective sales system and, most importantly, their products do not have a sufficient positive reputation in the medical community. Without such a sales system and reputation, their drugs are unlikely to be successful in the commercial market. Hopes that Russian–made generics will be bought by the Russian state are hardly justified - there are no preferences in the country and no government procurement for domestic-made drugs is expected yet. And price competition with drugs from India and Southeast Asia will quickly lead to a reduction in the production of new generics - production costs in the pharmaceutical industry in Russia are still significantly higher.
However, Russian companies can be quite competitive in this market as contract manufacturers (that is, to produce medicines under the order of another pharmaceutical company), Ivan Glushkov believes, because Russian enterprises – despite all their criticism – have a good technological level and the quality of the drugs produced on them is high.
In principle, the competition of generic manufacturers – both domestic and foreign – is always in the hands of the consumer. If it were not for the problem of the quality of these drugs, which often differ significantly (up to 30%) from the original drug in terms of the content of the active substance and therapeutic efficacy. This problem can be solved only with the introduction of GMP (good manufacturing practice, that is, good manufacturing practice), harmonized with the world. Such a task has been set for our pharmaceutical manufacturers – they should start working according to GMP rules by 2014. However, this will require serious costs for re-equipment of production, training of personnel, etc. Localization of their production facilities in Russia by the world's leading pharmaceutical companies and the creation of pharmaceutical clusters, of which educational centers will also be an integral part, can help this process.
The patent collapse will continue until 2016 – about 20 more drugs will come to the generic market – copies of the most profitable and popular brands. In the dispute about what is still better - the original drug or its copy, there is no unambiguous solution today. Most Western countries have adopted various models of drug insurance, so their healthcare systems, which until recently relied exclusively on brands, due to the rapid growth of costs, are switching to the purchase of generics - of course, produced according to the strictest quality standards. Domestic producers and regulators will have to solve these problems in parallel and simultaneously. And the patent collapse here is more of an assistant than a hindrance.
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18.01.2012