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Drug Giants Face $65 Billion in Lost Sales as Insurers Attack Patents

By Bruce Japsen - Dec 21, 2014 at 9:01AM

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Expiring patents on major brand name drugs, particularly bipolar treatments and other prescriptions for central nervous system disorders, may cost $65 billion in lost sales by 2019, a new study shows.

By 2019, pharmaceutical companies face a major loss of $65 billion in sales due to patent expirations largely from brand name central nervous system drugs that are opening up to competition from cheaper generic copies.

A new report from London-based research and consulting firm GlobalData says a "patent cliff" will hit several drug companies including AstraZeneca (AZN 3.08%) and Eli Lilly (LLY 2.63%)Otsuka is poised to be the hardest hit, with its treatment for bipolar disorder and depression, Abilify, losing patent protection next year.

"Abilify's upcoming U.S. patent expiration in 2015 means the drug will lose a massive $6.2 billion by 2019 as the result of generic competition, making it the biggest victim of the pharmaceutical industry's current patent cliff," said Adam Dion, GlobalData's health care industry analyst in a statement accompanying the report.

The quick evaporation of sales, particularly in the U.S., comes as pharmacy benefit managers and insurance companies more quickly than ever shift the higher costs of brand names to consumers in the form of higher copayments so they will switch to cheaper alternatives.

The health benefit industry's clout was seen clearly when AstraZeneca's biopolar treatment, Seroquel, lost its patent protection and was clobbered by the introduction of generics. The company's central nervous system franchise "has been bleeding sales" ever since, as market share dropped to 3 percent of the market last year from 9 percent in 2010, according to GlobalData.

Meanwhile, Eli Lilly's market share fell to 11.2 percent in 2013, down from 14.3 percent in 2010, due to decreasing sales of their biopolar disoarder treatment Zyprexa.

It's no coincidence. Health insurers and pharmacy benefit managers are ratcheting up strategies to get consumers to switch to generics as more specialized drugs enter the prescription market.

Pharmacy benefit manager Express Scripts (ESRX) showed in their prescription price index that the average price of brand name drugs has doubled since 2008, while the price of generics has been slashed in half.

"When a therapy class becomes competitive with clinically equivalent alternatives, Express Scripts has the proven ability to move market share toward the manufacturers who are able to provide our clients and patients the most affordable prices," said David Whitrap, Express Scripts director of corporate communications.

"When a therapy class becomes competitive with clinically equivalent alternatives, Express Scripts has the proven ability to move market share toward the manufacturers who are able to provide our clients and patients the most affordable prices," Whitrap said. "In this environment, more than ever, we anticipate that payers will rely on Express Scripts' formulary and step management programs to maximize the savings potential of new generics."

Bruce Japsen has no position in any stocks mentioned. The Motley Fool recommends Express Scripts. The Motley Fool owns shares of Express Scripts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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