The cancer market is set for a boom in low cost drugs, as a significant number of high value cancer drugs are set to lose patent protection over the next decade, triggering a dramatic influx of cheaper generic equivalents. But as patients and generics manufacturers bask in the glow, pharmaceutical companies will be forced to gamble on innovation for fear of being left out in the cold?
Extensive savings are expected in the cost of cancer treatment as the value of the cancer generics market dramatically expands. This is forecast to occur due to the sharp increase in the number of cancer product approvals toward the end of the 20th century, many of which now face patent expiry.
In addition, the regulatory environment of the pharmaceutical market is facing proposed changes that could favor the earlier introduction of generic drugs.
A $15 billion saving
For research-based pharmaceutical companies, this poses a considerable threat to their revenue stream from the oncology market, while for generics manufacturers this is a dramatic new opportunity. Overall, cancer patients are expected to benefit most: from cheaper treatments and increased innovation.
Datamonitor calculates the total value of the generic drugs market across the seven major pharmaceutical markets to be approximately $20 billion. Of this, oncology products currently account for less than 10% of generic sales.
However, in line with the increasing number of cancer drug approvals toward the end of the 20th century, a significant number of cancer drugs will lose patent protection over the next decade.
The total value of these cancer drugs by the time of patent expiry is forecast to be in excess of $15 billion, triggering a dramatic expansion in the cancer generics market. This represents a significant opportunity for generics manufacturers, many of whom view the current cancer market as unattractive compared to other therapy areas in terms of generating revenue.
This translates into enormous cost savings for consumers, as generic drugs are typically priced at around 30% to 60% of the price of the original. This will allow effective treatment of more patients for the same cost in developed markets, and greater availability of cancer therapies in developing markets, which face restrictive healthcare budgets.
The cost of cancer treatment is expected to rise in line with the increasing incidence of the major tumor types - as the number of patients diagnosed with cancer grows, so too will the cost of treating this increased patient population. This will result in more cancer products achieving high sales in a traditionally low sales market compared to other therapy areas.
The launch of a generic equivalent to the widely used cancer drug paclitaxel in the US by Ivax Pharmaceuticals in 2000 illustrates the potential value of high sales cancer products to the generics industry. Bristol-Myers Squibb's original branded paclitaxel product, Taxol, achieved global sales of almost $1.6 billion in 2000, of which $988 million was from the US market.
BMS saw US sales of Taxol drop by 45% to $545 million in 2001 following the launch of generic equivivalents like Ivax's Onxol. 2002 sales of Taxol are not expected to exceed $200 million following a price drop and further generic competition.
The end of patent protection
Revenue from this single generic product accounted for 17% of Ivax's total generic sales revenue in 2001. Although Bristol-Myers Squibb's Taxol sales in 2000 are the highest recorded sales for any cancer drug in a single year so far, several current drugs have the potential to exceed this figure prior to patent loss.
Several high revenue cancer products are faced with imminent patent expiry within the US and European markets, including AstraZeneca's tamoxifen (marketed under the brand name Nolvadex) loses market exclusivity in the US in February 2003.
Tamoxifen is considered to be the gold-standard hormonal treatment for breast cancer, used as both a first-line treatment for post-menopausal early-stage patients and as a preventative treatment. Global sales of tamoxifen in 2001 were $1,024 million.
Bristol-Myers Squibb's platinum-based cancer drug Paraplatin (carboplatin) faces US patent loss in 2004. Carboplatin is indicated for the treatment of ovarian cancer, but also used in the treatment of several other cancer types including lung cancer, leading to global sales in excess of $700 million in 2001.
Low cost generic equivalents to these, and other cancer products expected to achieve sales of over $1 billion by patent expiry, will both expand the cancer generics market, currently valued at around $2 billion, and create significant healthcare savings.
The generic solution for healthcare budgets
Governments are under increasing pressure to reduce healthcare spending, leading to the advancement of regulatory changes that will favor the generics industry. For example, the McCain-Schumer Act, recently approved by the US Senate, could see the earlier introduction of generic drugs and the sealing of loopholes that allow pharmaceutical manufacturers to delay generic drug launches.
Despite the opposition of the pharmaceutical industry, these regulations are backed by a collaboration of generics companies, consumer groups and large corporations keen to reduce health insurance costs, in addition to bipartisan political support.
If the President signs this bill into law, it could render many of the traditional strategies utilized by pharmaceutical companies to extend product lifetime and delay the launch of generics obsolete.
The Big Pharma response
Furthermore, regulatory reform over the next decade will allow the production of generic equivalents to biological therapies, such as therapeutic proteins, which are high price, innovative therapies.
In addition to the advantages of low cost generics the market change is also expected to have a positive impact on the major pharmaceutical organizations, as they will no longer be able to depend on strategies such as extensive patent litigation to maintain revenues.
"Ultimately, research-based pharmaceutical companies will be driven toward the development of novel, more efficacious therapies, as they can no longer depend on prolonged revenue from older products facing patent expiry," says Paul Tunnah, cancer analyst at Datamonitor.
"The cost savings triggered by extensive genericization of the cancer market will allow the treatment of more cancer patients, more effectively, with the same amount of healthcare spending."
If you found this week's Expert View useful, you may be interested in Datamonitor's reports:
- Global Generics Guide: Capitalizing On an $82 Billion Opportunity priced $10,800
- Strategic Perspectives: Impact of the Cancer Generics Market Active priced $6,100
- The Generics Industry in 2005: A New Threat to Pharma priced $5,800
All available from www.datamonitor.com
Datamonitor's Pharmaceutical Dashboard service also provides access to high-quality, in-depth information identifying new business leads, areas of business growth and new product development, all for just $1,500 - making it the perfect, cost-effective resource.
For more information on the Dashboard service and a free trial, please visit www.internet-e-business-news-service.com/dashboard_home.htm.