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Generics to cut U.S. drugs bill by $70 billion
November 8, 2010 / 6:19 PM / 7 years ago

Generics to cut U.S. drugs bill by $70 billion

NEW YORK (Reuters) - The U.S. healthcare system will reap at least $70 billion in savings over the next four years as brand-name medicines become available as lower-cost generics, a top drug industry expert said on Monday.

<p>Murray Aitken, senior vice president for Healthcare Insight at IMS Health, speaks at the Reuters Health Summit in New York, November 8, 2010. REUTERS/Brendan McDermid</p>

Many of the world’s biggest-selling drugs are set to lose U.S. patent protection from 2011-2014, leading to massive savings, Murray Aitken, senior vice president for pharmaceutical market information company IMS Health Inc, told the Reuters Health Summit.

“That’s a significant cost savings that accruing to payors directly, to patients a little bit directly, somewhat indirectly,” Aitken said. “It’s a number we haven’t seen before in terms of the number of potential savings.”

Generics are also expected to increase their market dominance, rising from 77 percent of prescriptions in the first half of this year to as much as 85 percent by 2014, according to the new forecast.

"We can see generics reaching and exceeding 85 percent," Aitken said. (For a graphic on drugmakers facing a "patent cliff," click here: r.reuters.com/dec24q)

Two years ago, half of patients who received treatment for the first time for a major chronic condition received a generic.

Now, Aitken said, two thirds of such patients receive a generic drug, and in certain therapeutic areas such as hypertension, depression and migraine, more than 70 percent of patients are prescribed a generic first.

Doctors’ greater interest in reaching for a generic option first hurts the chances of a new brand-name drug gaining traction, Aitken said.

Unless a new medicine really addresses an unmet need, Aitken said drug companies have “got to be pretty realistic about whether their products are going to be used as first line or not.”

The healthcare system has become ever more efficient at driving patients to generics. When a generic alternative is available, doctors prescribe it 93 percent of the time, up from 83 percent in 2003, according to IMS.

Drug companies increasingly have to wait until a generic proves ineffective for a particular patient before that patient is prescribed their new brand medicines, Aitken said.

Among the high-profile drugs losing U.S. patent protection during the 2011-2014 period are the world’s two top-selling medicines: Pfizer Inc’s (PFE.N) Lipitor cholesterol treatment and the blood-clot preventer Plavix, sold by Bristol-Myers Squibb (BMY.N) and Sanofi-Aventis (SASY.PA).

Other widely sold medicines set to see generic competition include Eli Lilly’s (LLY.N) Zyprexa schizophrenia drug and Merck’s (MRK.N) Singulair asthma treatment.

The pharmaceutical industry is about 40 percent of the way through the so-called patent cliff, from 2005-2014, measured in dollar terms, according to Aitken, which they have managed through massive layoffs and other cost cutting.

“As they move through the remaining 60 percent this year and through 2014, this will likely trigger additional rounds of restructuring,” Aitken said. “It doesn’t seem as if all of the restructuring has been done.”

Generic penetration could fall back from the height of 85 percent after 2014, depending on the new medicines that come to market, Aitken said.

“At the end of the day, this entire industry comes back primarily to innovation and the value of the medicines that are being developed,” Aitken said.

Reporting by Lewis Krauskopf and Bill Berkrot. Editing by Lisa Von Ahn and Robert MacMillan

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