Thursday, March 15, 2012

Pfizer's Lipitor Strategy and the 2012 Generic Monster

After more than three months, Lipitor share is now tracking above historical generic substitution patterns, i.e., the brand-name version is losing share more slowly than a typical generic drug. The pretty picture below tells the tale.

As expected, 2012 will be the monster year for generic launches. Twenty-five drugs, with total revenues of $35.6 billion, face a loss of exclusivity in 2012. (See the list below.) Trust me—many manufacturers are studying Lipitor’s strategy.

The generic boom-and-bust will reshape the entire drug channel system—and how manufacturers must interact with pharmacies, wholesalers, and PBMs. Happy Ides of March!

THE EVOLVING LIPITOR STORY

Since November 30, the atorvastatin market has been split between Pfizer’s heavily-discounted brand-name Lipitor product, an authorized generic from Watson, and the first-to-file generic Ranbaxy.

In Is Pfizer's Lipitor Strategy Working?, I found that brand-name Lipitor was losing share faster than a typical generic drug.

This pattern has now changed. Based on IMS data, Larry Marsh at Barclays Capital reported on Monday that atorvastatin, the generic form of Lipitor, controlled 67.0% of the Lipitor market for the week ending March 2, 2012. This is the thirteenth full reported week by IMS with atorvastatin on the market. Lipitor’s share is about the same as early January's share.

The chart below compares Lipitor to a broad sample of generic drugs from the past 5 years. To create it, I combined the following two sources:
Pfizer’s discounting strategy for the first 180-days works because pharmacies and wholesalers typically make more money from a generic drug during the first 180 days after a generic launch. See Ranbaxy Makes Three: The Battle for Generic Lipitor Profits. That's why Pfizer's strategy altered the usual profit picture for pharmacies.

Beyond the pharmacies, I still contend that Pfizer’s strategy was a win-win. Total healthcare spending declined faster than if Pfizer had done nothing, while Pfizer managed to hold onto market share, albeit at deeply discounted prices.

THE 2012 MONSTER

Here at Drug Channels’ worldwide headquarters, we’ve been tracking the generic wave and its potential impact since the site was launched in 2006. Back in 2010, Medco’s CEO David Snow referred to 2012 as “the monster.”

Check out this scary look at expected 2012 generic launches, based in part on Medco Health Solutions’ January 2012 Estimated Dates of Possible First Time Generic/ Rx-to-OTC Market Entry. (I summarized the July 2011 update in Medco’s Latest Update on the Generic Wave.)

As you can see, Lipitor was just the appetizer. Plavix, 2011’s second-largest U.S. product by revenues (behind Lipitor), is this year’s big kahuna. Plavix has no 180-day exclusivity period, so substitution will be especially rapid after the generics launch in May.

The superior profitability of generic drugs should benefit the pharmacy industry, although pressure on these profits is rising. For more, see "Risk and Reward from the Generic Wave" in Chapter 8 of the 2011-12 Economic Report on Retail and Specialty Pharmacies.

3 comments:

  1. biotechtranslatedMarch 18, 2012

    Adam,

    Great post and it will be interesting to see what the owners of the other big products that lose patent protection will do.

    What's your opinion on Pfizer's strategy post-ANDA exclusivity?  Typically drug prices fall only 80-90% during the 180-day ANDA exclusivity period, then plummet to commodity pricing after that.

    Will Pfizer stay in the game?  Is it worth it?

    Since Pfizer is pushing hard into emerging markets where brand counts for something even after you've lost exclusivity, I'm wondering if they'll keep branded Lipitor around in the developed markets as well?

    Mike

    ReplyDelete
  2. Post 180-days, there's limited value in maintaining the strategy. Don't forget that brand-name drugs usually retain 1-4% of RX even after commodity pricing sets in, so the brand never really goes away completely.

    ReplyDelete
  3. Silver Scripts (Part D) is mandating the use of brand Lipitor but reimbursing at below net-net cost of acqusition for brand. Are are setting up pharmacies to dispense authorized generic instead of Brand and commit fraud just to avoid the loss?

    ReplyDelete

Related Posts Plugin for WordPress, Blogger...