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One of my favorite Rolling Stones' albums, not necessarily their best mind you, growing up was "Aftermath", an appropriate label for this period following all the intensity and excitement of BIO 2006- Chicago.
As BIO 2006 - Chicago is still fresh in our minds, I was going to give my take on the outcome, but so many others have already done so that I will wait a bit until the dust settles and some more of the facts emerge (like the final attendance number). Suffice it to say that it was a big success in many ways, but the challenge now for us Midwesterners is how to leverage this momentum from the event into creating a major Midwest life science cluster, or perhaps a series of interlocking or inter-related clusters.
One way of doing this is to hopefully draw in more international life science companies into the Midwest. Many countries still retain stereotyped visions of Chicago as the land of Al Capone, the Mafia, violence, heavy crime, and an industrial black hole (the "rust belt" image); most were surprised by the city's beauty and majesty and fortunately the weather got better as BIO progressed. Hopefully, the "real" Chicago image was sufficiently embellished into their minds that they will want to come back and do some prolonged business here. I am certainly doing my part to try and make that happen.
I will hold my comments on BIO 2006 for a while, but BIG kudos are due to not only David Miller at IBIO and a very supportive IBIO board and large group of volunteers working months and months on this event, but all our other Midwest life science associations that gathered the troops and brought them down to Chicago. Wisconsin had a large contingent as did other Midwest states.
As this event was about biotech including biotech drugs, it is an appropriate time to deal with the large elephant sitting in the living room: bio-generics (drugs).
On several occasions over the last few years I have addressed the worldwide generic pharmaceutical market. The reality is that the generic market differs widely around the world due to the role of patents, physician compensation, patient insurance reimbursement, and other factors in each country.
In places like India where patents are just beginning to take effect, prices are among the lowest in the world but will gradually rise. On the other end of the spectrum, a drug protected by a patent in the U.S. for 8-10 effective years of its patent life enjoys hefty prices and margins during this period and then quickly begins a rapid decline after the patent expires with the price dropping by as much as 70-80% or more within 12 months after patent expiry.
In Japan, a new drug starts out with, most likely, the highest price in the world but will never again see a price increase; on the contrary, prices will be lopped off 8-12% every 2 years by the government. However, for physicians, who actually dispense all of the prescription drugs in Japan (pharmacies in Japan only sell over-the-counter drugs) in addition to prescribing them, these physicians make more money off higher-priced drugs than generics. So generics have yet to make much of dent in the Japanese market to date. However even this may change as the Japanese government deals with the accelerating costs of healthcare due to a rapidly aging population.
The reality is that except for the U.S., Japan and selected European countries, the prices of drugs around the world is generally much more in line with income levels in each country (excluding newly launched products).
The coming battle in generics however is not over the traditional small molecule drug, which is easily retro-engineered by savvy Indian scientists, but bio-generics
, or generics of large molecule biotech drugs. These drugs are often protein-based, and difficult as well as expensive to manufacture.
A number of biotech drugs are set to have their patents expire (or have already expired some time ago), and a number of companies have lined up to both produce and launch these products in Europe and the United States, but the regulatory authorities in both regions have put the brakes on any approval process.
Traditionally, generics have been able to get FDA approval through a relatively simple Abbreviated New Drug Approval (ANDA) process in which manufacturers prove:
1. bioequivalence to the original or innovator drug (equivalence in the bloodstream)
2. no infringement of any inventor patents
For bio-generics, regulatory authorities have added on yet other hurdles which focused on the manufacturing process to demonstrate manufacturing equivalence such as structural similarity and comparability, and immunogenicity testing requirements to demonstrate that no unexpected and undesirable immune response is created by the generic
So why all the fuss?
Well, remember that the worldwide pharmaceutical market, according to IMS Health, the giant pharmaceutical research firm, represented worldwide pharmaceutical sales of about $300 billion in 1999 of which biotech drugs represented less than 2-3% of sales.
Three years later in 2002, this total market had grown to about $400 billion, and biotech drugs had increased to a 5-6% of total sales. Last year, total Pharma sales topped $500 billion with biotech drug sales approaching 10%.
By 2009, the market should be approaching $650 billion with biotech drug sales representing 15-20% of total sales. Furthermore it is expected that 50% of all new drug approvals in 2010 will be for biotech drugs versus conventional small molecule drugs.
Again, so what - this is still a ways from us now!
Well let's look at the biotech drug patent expirations and their related sales:Biotech Drug Patent Expirations
|Product/ Brand||Innovator Company||Active Drug||Patent Expiration Date||Global Sales(2002)|
|Humulin||Eli Lilly||Human insulin||2001||$1.0 billion|
|Intron A||Schering-Plough||Alpha-interferon||2002||$2.5 billion|
Source: IMS Health May 18, 2004
These 5 biotech drugs represent almost $12 billion in sales with most of them already off-patent and yet with no generic product in the market.
The logical question is why?
Before we answer that question, let's take a look at the inroads generics have made into the U.S. market.U.S. Generic Drug Market
|Year||U.S. Generic Drug Market Share (Dispensed Prescriptions)|
Source: IMS Health and William Blair & Co.
In terms of actual dollars spent on drugs, generics today in the U.S. represent still only about 17% of all sales. This means that generic drug sales in the U.S. today represent over $40 billion in annual sales and growing yearly. But the actual prescription trend tells that more than one out of every two prescriptions is filled with a generic drug.
Knowing that this large number of both small molecule traditional pharmaceutical drugs and the bio-generics represent vast sales dollars, there has been incredible jockeying for worldwide position in the generic market by several major players:
1. Teva Pharmaceuticals
- Headquartered outside of Tel Aviz, Israel, ratcheted up its worldwide presence by the acquisition of fellow generic company IVAX last year and Sicor the year before.
2. Sandoz Pharmaceuticals
(a division of pharmaceutical mega-player Novartis)
, the Canadian generic company
4. Dr. Reddy,
the very astute
and agile Indian company which has ramped up its U.S. presence in recent years
5. Barr Labs
, a traditionally strong U.S. generic company that has partnered with the Croatian Pharma company Pliva.
6. Other Indian companies:
Cipla, Sun Pharma, Ranbaxy, Wockhardt, Aurobindo, are waiting in the wings.
7. Other Players
: Dragon Pharmaceuticals (Canada), Genemedix (U.K.), BioGenerix (Germany), BioPartners (Switzerland) are bosed to jump into the bio-generic fray.
To add to this, even more Indian pharmaceutical companies are getting prepped to enter the fray, by seeking and getting U.S. FDA approval of their manufacturing facilities in India:FDA-inspected Fine Chemical Pharma Companies in India
|Indian Pharma Company||API*Manufacturing||Finished Pharmaceutical Drug||Direct U.S. Marketing Presence|
Source: Scrip Magazine, April, 2006 (Arthur D. Little)
= major activity
()= some activity
*= Approved Product Ingredient or pharmaceutical bulk drug
It gets even worse, if the above shocks you, there are now about 65 Indian companies with an approved Drug Master File, which means that they have filed with the FDA key manufacturing data on a drug that has been acceptable to the FDA. Granted that most of the above companies are focused on small molecule traditional pharmaceuticals, but there is also an emerging group focused on large molecule "biologicals" and are positioning themselves to enter the U.S. market when the FDA decides on its parameters for bio-generics approval, which is not likely this year.
Just so you know that this is heating up, Sandoz filed a lawsuit against the FDA in September, 2005 regarding non-approval of its human growth hormone product.
The issue the FDA is grappling with is a need to show greater safety with these products requiring companies to do more clinical trials for bio-generics. It appears that a physician prescription will also be coupled with dispensing of these drugs (today a pharmacist can switch to a generic drug in many cases without consulting a physician).Bio-generics
have already begun in Australia with Sandoz's launch of human growth hormone there, and there are at least 3 bio-generics under review in Europe by the European FDA (EMEA) with another 15 filed. It is very possible that a generic human growth hormone could be approved in Europe during 2006; what is not clear is under what conditions.
The reality is that bio-generics will
be in the market in the foreseeable future, spurring the development of new generic companies, but also stimulating the need for new patented drugs as well. Remember that most biotech drugs are substantially more expensive to the consumer/patient, so bio-generics will be a welcome relief. To counter the price decline, Pharma companies have turned to new delivery mechanisms such as Pfizer's launch of inhaled insulin (Exubera), developed by Nektar Therapeutics. Virtually all of the bio-generics are today injectable drugs.
By the way, India had a very large presence at BIO 2006, so expect that we will see more of the Indian Pharma companies; so did China, probably the next wave of Pharma companies, a few years behind the Indians.
Michael S. Rosen is senior vice president of new business development for Science & Technology Group, which builds bio-parks across the U.S. and currently has bio-parks completed or under development in Cambridge, Baltimore, Chicago, Cleveland, and Denver. Rosen is also a founder and board member of the Illinois Biotechnology Industry Organization
. He can be reached at firstname.lastname@example.org
The opinions expressed herein or statements made in the above column are solely those of the author and do not necessarily reflect the views of The Wisconsin Technology Network, LLC. (WTN). WTN, LLC, accepts no legal liability or responsibility for any claims made or opinions expressed herein.