The IMS Institute for Healthcare Informatics recently published The Use of Medicines in the United States: Review of 2010. Within the report is a list of the top products by prescription. An observation from that list: 22 of the top 25 are generics. There is no balance between generic and non-branded products. (By the way, the three non-branded drugs listed will lose patent exclusivity in 2011 and making generics commercially available.)
I have worked in generic (ANDA) and innovative (NDA) research and development environments. Both environments are very competitive but with different goals. The primary goal of the generic environment is to be FDA approved and ready for commerce on the day the non-branded product’s patent exclusivity expires. The very big generic development houses knock out generics like machines; many products, minimal risk and inexpensive research but not much profit. It is not unheard of to see fourteen or more generics approved for sale on the day the non-branded medication loses patent exclusivity and price erosion of unit profits is in excess of 80%. Said another way, “little risk, little reward”.
The primary goal of the non-branded R&D environment is to incorporate an efficacious new drug molecule into a dosage form that a reasonably large patient population will utilize. Getting a product to this point is very expensive in both money and time; typically several billion dollars and over ten years but with an approval rate of about 1 in 12 (or 11 of 12 new products fail at some point in development). The reward (profit) can be substantial; Lipitor’s 2010 sales were 10.6 billion USD. Or, “big risk, big reward”.
What concerns me is that the dearth of non-branded medications on the list could indicate some disturbing trends.
- Perceived lack of innovation in big pharma’s product pipeline or
- Approval requirements are too strict or out of balance with the rewards of a new, innovative medication or
- The HealthCare system is prohibitively expensive forcing consumers to cheaper generic alternatives.
There are many, many intelligent researchers in Big Pharma, so I do not think there is a lack of ideas. It is common for the FDA to request increasingly more and more expensive pre-approval clinical studies. I believe the core problem is the over-priced health care/insurance system. People with high-deductible health insurance and limited prescription co-pays are forced to seek out generics because they cannot afford the cost of the non-branded medication. Many do not have prescription co-pay until the deductible is met. These people are forced to seek out the most inexpensive medication available even though a more expensive, more efficacious medication is available. When fair and equitable health insurance is available to all Americans, I believe balance between non-branded and generic medications will be restored.
© Grove Ridge Consulting, 2011