At the end of last year, Eli Lilly’s mega-blockbuster antidepressant Cymbalta went off patent. Cymbalta’s generic version, known as duloxetine, rushed in to the market and drove down the price, making it more affordable.
Great news for everyone, right? Well, not quite.
Indeed, generic competition is a great boon to the payer and the patient. On the other hand, the makers of the brand medicine can lose about 70% of the revenue. Without sustained investment in drug discovery and development, there will be fewer and fewer lifesaving drugs, not really a scenario the patient wants. Cymbalta had sales of $6.3 billion last year. Combined with Zyprexa, which lost patent protection in 2011, Lilly lost $10 billion in annual sales from these two drugs alone. The company responded by freezing salaries and slashing 30% of its sales force.
Lilly is not alone in this quandary. In 2011, Pfizer lost its $13 billion drug Lipitor, the best-selling drug ever, which made “merely” $2.3 billion in 2013. Of course Pfizer became the number one drug company by swallowing Warner-Lambert, Pharmacia, and Wyeth, shutting down many research sites that were synonyms to the American pharmaceutical industry, and shedding tens of thousands of jobs. Meanwhile, Merck lost its US marketing exclusivity of its asthma drug Singulair (montekulast) in 2012 and saw a 97% decline in US sales in 4Q12 compared with 4Q11. Merck announced in October last year that it would cut 8,500 jobs on top of the 7,500 layoffs planned earlier. Bristol-Myers Squibb’s Plavix (clopidogrel)’s peak sales were $7 billion, ranking the second best-selling drug ever. After Plavix lost its patent protection in May 2012, the sales were $258 million last year. Meanwhile BMS has shrunk from 43,000 to 28,000 employees in the last decade.
Generics competition is not the only woe that big Pharma are facing. Outsourcing Pharma jobs to China and India, M&A, and economic downturn rendered thousands of highly paid and highly educated scientists to scramble for alternative employments, many outside the drug industry. With numerous site closures, outsourcing cost reductions, and downsizing, some 150,000 in Pharma lost their jobs from 2009 through 2012, according to consulting firm Challenger, Gray & Christmas. Such a brain drain makes us the lost generation of American drug discovery scientists, including this author. In contrast, Japanese drug companies refused to improve the bottom line through mass layoffs of R&D staff, a decision will likely benefit productivity in the long run.
What can we do to ensure the health of the drug industry and sustain the output of lifesaving medicines? Realizing that there is no single prescription for this issue, one could certainly begin talking about patent reform.
Current patent system is antiquated as far as innovative drugs are concerned. Decades ago, 17 years of patent life was somewhat adequate for the drug companies to recoup their investment in R&D because the life cycle from discovery to marketing at the time was relatively short and the cost was lower. Today’s drug discovery and development is a completely new ballgame. First of all, the low-hanging fruits have been harvested, and it is becoming increasingly challenging to create novel drugs, especially the ones that are “first-in-class” medicines. Second of all, the clinical trials are longer and use more patients, increasing the cost and eating into patent life. The latest statistics say that it takes $1.3 billion to take a drug from idea to market after taking the failed drugs’ costs into account. This is the major reason why prescription drugs are so expensive because pharmaceutical companies need to recoup their investment so that they will have money to invest in discovering future new life-saving medicines. Therefore, today’s patent life of 20 years (the patent life was extended from 17 years to 20 since 1995) is insufficient for medicines, especially the ones that are “first-in-class.”
Therefore, patent life for innovative medicines should be extended because the risk is the highest, as is the failure rate. Since the life cycle from idea to regulatory approval is getting longer and longer, it would make more sense if the patent clock started ticking after the drug is approved while exclusivity is still provided after the filing
The current compensation system for the discovery of lifesaving drugs is in a dire need of reform as well. Top executives are receiving millions in compensation even as the company is laying off thousands of employees to reduce cost. Recently, Glaxo Smith Kline announced that the company will pay significant bonuses to scientists who discover drugs. This is a good start.
The phenomenon of blockbuster drugs was a harbinger of the golden age of the pharmaceutical industry. Patients were happy because taking medicines was vastly cheaper than staying in the hospital. Shareholders were happy because huge profit was made and stocks for big Pharma used to be considered a sure bet.
Perhaps most importantly, the drug industry expanded and employed more and more scientists to its workforce. That employment in turn encouraged academia to train more students in science. America’s Science, Technology, Engineering, and Mathematics education was and still is the envy of the rest of the world. Maintaining that important reputation depends on a thriving pharmaceutical industry to provide jobs for our leading scientists and researchers. In turn they will reward us by discovering the next life-saving drugs.
Chemistry Giveaway! In time for the 2014 American Chemical Society fall meeting and in honor of the publication of The Oxford Handbook of Food Fermentations, edited by Charles W. Bamforth and Robert E. Ward, Oxford University Press is running a paired giveaway with this new handbook and Charles Bamforth’s other must-read book, the third edition of Beer. The sweepstakes ends on Thursday, 14 August 2014 at 5:30 p.m. EST.