Despite the fact that prescription drug sales continue to grow in the high single digits, the pharmaceutical industry appears to be under siege on at least three fronts: pricing, safety and generic competition.
According to IMS Health data for the 12-month period ended in March, prescription drug sales were up 8 percent.
By contrast, employer drug costs have increased 83.4 percent over the past five years and are projected to continue to rise at an 11 percent annual rate for the foreseeable future, according to research from Mercer Human Resource Consulting. Employers have responded by passing costs along to their employees in the form of higher copays and more restrictive drug formularies.
The pricing debate has the potential to become an even more contentious debate as the U.S. government prepares to add prescription drug coverage to its Medicare rolls. Already, 10-year cost estimates for the Medicare prescription drug plan have reached as high as $1.2 trillion.
Jon Resnick, a senior analyst for IMS Health, speculates that the debate in Congress will turn quickly to controlling costs. "Faced with market failure or cost overrides, legislators will have four options: modify eligibility, reduce benefits, seek extra financing--or take money from other programs--or control prices," he noted. "The first three are difficult political decisions with direct implications for voters. The fourth, taking pricing action, is the least painful way to deliver a sustainable benefit."
The question of drug safety also has challenged the pharmaceutical issue of late--particularly the potential link between suicidal ideation and the predominantly off-label use of antidepressants in the teenage population, as well as the link between prolonged use of cox-2 inhibitors and increased risk for cardiovascular disease. Currently, selective serotonin reuptake inhibitors are being investigated for a possible link to suicidal thoughts in adult users, as well.
That some have charged the Food and Drug Administration as being slow to take action in both situations has done little to take the pressure off the pharmaceutical industry. Sales of SS-RIs have dropped 20 percent, representing $702.9 million in lost dollars, over the first five months of 2005, according to IMS Health. And since Merck voluntarily withdrew Vioxx in September last year and the FDA asked Pfizer to stop selling Bextra in April, the cox-2 inhibitor market has dropped 65 percent in that time--a loss of $1.5 billion.
And the safety issue could resurface again at any moment. Last month, the FDA issued new labeling for erectile dysfunction drugs, warning users of the "small number of post-marketing reports of sudden vision loss, attributed to [non-arteritic ischemic optic neuropathy], a condition where blood flow is blocked to the optic nerve."
While the FDA may be acting faster than it has in the past, which is a positive, there is not yet any conclusive proof that ED drugs, which generated $1.4 billion in 2004, are the root cause of the episodes of NAION. The reality is that safety concerns, whether legitimate or unfounded, have the potential to crush drug sales. The act-fast strategy of the FDA may work to restore faith in the safety of approved drugs, but it may make the market a little more volatile as a consequence.
Industry growth also will continue to be challenged by generic competition as nearly $30 billion worth of branded pharmaceuticals are expected to come off patent over the next two years, according to some estimates. That includes the statins Zocor and Pravachol, the prescription allergy remedies Flonase and Allegra and the sleep aid Ambien. Those five drugs alone represented more than $10 billion in sales in 2004.
Newer products and treatment regimens are expected to allay some of those losses, but that's still a huge chunk of lost business.
Branded statins could find some relief from the introduction of new drugs designed to raise levels of high-density lipoproteins, the good cholesterol, in addition to lowering low-density lipoproteins, the bad cholesterol--a major break in cholesterol management.
Likewise, insomnia treatments are evolving from a regimen designed to treat acute episodes over a very limited time to treatment of insomnia as a chronic condition, with the approval late last year of Sepracor's Lunesta. Meanwhile, Sanofi-Aventis will look to revive its Ambien franchise with a controlled-release version expected to emerge soon.
As for allergy remedies, the brands facing generic competition may be switched to the over-the-counter market, where sheer volume and higher margins will at least satisfy chain drug operators, even if it does little to recoup the losses GlaxoSmithKline and Sanofi-Aventis face when patents on Flonase and Allegra expire.
GlaxoSmithKline has talked in the past about potentially filing a switch application for Flonase, even though it is a nasal steroid. And Allegra, like Claritin, was one of the non-sedating antihistamines recommended for switch by a pair of FDA advisory panels in 2001. Meanwhile, Sanofi-Aventis last month gained approval for its Allegra-D (fexofenadine and pseudoephedrine), which essentially will line-extend its $1.5 billion prescription Allegra franchise.
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