Nearly half a billion pounds will be cut from the NHS drugs budget as part of the QIPP savings agenda, according to a new DH report.

Forecasts included in The Quarter, a report which reviews NHS QIPP targets, predict that up to £477m will be saved from the prescribing budget by April 2013.

Savings will be generated by a number of treatments losing patent protection in 2011/12 allowing the NHS to purchase cheaper generic alternatives.

AstraZeneca’s Seroquel (quetiapine) and Pfizer/Eisai’s Aricept (donepezil) are two products used throughout the NHS which recently lost patent protection. Pfizer’s Lipitor (atorvastatin), one of the biggest components of NHS drugs expenditure, came off-patent in May and will also contribute to the savings.

The report shows that the NHS saved £1.2bn in the first quarter of the financial year and is on track to meet its £5bn savings target this year. Cutbacks on drugs spend are predicted to be the second biggest saving behind efficiencies coming from acute services.

The expected £477m savings is down on the £700m saved on the medicines bill the year before – when the NHS made £5.8bn of savings through the QIPP agenda.

As the era of blockbuster drugs draws to an end, the pharmaceutical industry is looking to fresh markets and new models of drug development while facing legislative changes as well as economic threats. Sarah Hanson looks at what lies ahead for the industry in 2012.

2012 looks set to be the year when pharmaceutical companies face their scariest outlook: peering over the brink of a patent cliff. Major pharmaceutical companies are realising that they can no longer rely on a broken business model that is dependent on blockbuster drugs, and are looking for alternative ways to maintain profits and cover the loss of revenues due to patent expiry. This throws up a host of commercial, legal and regulatory challenges.

Entering new markets
Major structural shifts are taking place in R&D and how intellectual property is financed, meaning that the life sciences sector is providing a rare bright spot in the pervading economic gloom. Over the last decade, there has been almost US$700bn worth of deals in the pharmaceutical sector, which remains one of the prime industries in terms of M&A activity. Now we are likely to be at the start of a fresh cycle of M&A activity in the industry, with a particular focus on emerging markets (BRIC, South-East Europe and Turkey) where the portfolios of many pharma companies remain weak.

Japan has enjoyed a particularly busy year in terms of pharmaceutical M&A: across all sectors, cross-border acquisitions by Japanese companies nearly tripled relative to 2010. Liquidity among Japanese pharma companies remains strong, as does demand for prescription medicines from an ageing population, enabling Japanese companies to enter into deals at a time of intense competition for intellectual property in the industry. In 2011 Takeda, the largest Japanese pharmaceutical company, completed its €9.6bn (debt-free, cash-free) acquisition of Swiss drug company Nycomed. On the back of this transformative deal, we expect the industry to undertake more M&A activity in Japan in 2012. Factors such as the economic climate, demography and the state of R&D pipelines should see more Asian acquisitions of European patented drugs.

Emerging markets also continue to receive significant life science private equity (PE) investment, with China and India gaining the most. Historically, the risk involved in R&D has led PE firms to avoid large pharma companies and the biopharma industry in general. However, recently some small deals have linked PE and venture capital with biotechnology, and we are seeing investment in a number of diverse projects in different life science areas. This growing trend is already playing out in Europe – according to the European Private Equity and Venture Capital Association, the total investment in life sciences in Europe increased from €3.4bn in 2009 to €5.7bn in 2010, while the total venture investment in life sciences accounted for 30% of the total investment in Europe in 2010. Such funding is likely to increase as the cash-rich life sciences sector is seen to be ’recession proof’.

A helping hand for R&D
Pharmaceutical companies looking to weather the storm of patent expiry on key products are also looking to diversify their pipelines and develop replacement products. With most companies struggling to make a return on high R&D costs pumped into prospective pipelines, additional support is vital.

In the UK, the Government hopes its new Patent Box legislation will give a welcome boost to research and development. When it comes into force in April 2013, the Patent Box will reduce UK corporation tax on patent profits to 10%, encouraging R&D activity and providing incentives for companies to retain intellectual property in the UK. This will make the UK competitive with other European countries such as Ireland, Switzerland and Hungary, which have had similar systems in place for years. While the existing system of R&D tax credits has given some relief for R&D expenditure, there has until now been no similar incentive for businesses to retain their IP in the UK once it has been created.

Legislation such as Supplementary Protection Certificates (SPCs) will also play a significant role in assisting companies facing the expiry of major patent portfolios and provide more protection for companies investing heavily in R&D. EU patent offices have long been able to grant SPCs where there has been a large gap for a company between filing a patent application and getting authorisation to market a drug. However, legal issues surround how SPCs apply to medicines that contain more than one active ingredient. In a landmark case in November 2011, the Court of Justice of the EU said that there is no reason why an SPC may not be granted for a single active ingredient that is specified in a patent where the marketing authorisation also contains other active ingredients. This (and other recent cases regarding SPCs) is likely to have further ramifications in battles between generic and pharmaceutical companies into 2012.

New legislation: help or hindrance?
New legislation coming into force will also have an impact on the pharma industry in the year ahead. Whether the expected IP and regulatory legislation will help or hinder pharmaceutical companies in this challenging climate remains to be seen.

A number of significant regulatory issues are being debated in Europe. A Directive is being developed to improve the EU pharmacovigilance system, simplify regulatory decision-making, provide a legal basis for more proactive pharmacovigilance by both regulatory authorities and the industry, and involve patients more closely in reporting adverse drug reactions. Though it was adopted in 2010, compliance is not compulsory until 2012. The legislation will bring about the most profound change to the legal framework since 1995, when the EMA was set up. The European Commission, EMA and Member States have been carrying out work to implement the legislation, but companies still lack clarity on many of the new obligations. It is likely that the new requirements will be introduced in phases beyond the original July 2012 implementation deadline.

At a time when social networking continues to grow and become part of the daily routine of many working lives, pharmacovigilance is particularly important. The pharma industry must recognise that social networking and reporting are taking on a rapidly-increasing significance in the marketing, discussion and exchange of information concerning drugs. There are pharmacovigilance obligations at all stages of the life cycle of a medicine and the process of drug monitoring; the pharmacovigilance system will need to take account of this, not least because the increasing use of social media also poses interesting questions around geographical legal jurisdiction.

Discussions continue about the introduction of a Directive that would require substantial changes to the regulation of clinical trials. In March 2010, the Chancellor of the Exchequer announced that the Government would review the UK’s implementation of the Clinical Trials Directive in order to reduce perceived gold-plating and to increase the proportionality of the system. The MHRA has stated that it intends to wait for the outcome of the European negotiations before reviewing and amending the UK legislation.
2012 may also herald significant changes in the way drugs are marketed. EFPIA in particular will be under the spotlight this year as the implications of amendments to the advertising of medicines become apparent. Currently, the advertisement for a medicine must be in line with the product’s Summary of Product Characteristics (SmPC). Hence off-label promotion is not allowed. EFPIA has approved an amended Code of Practice on the promotion of prescription-only medicines to, and interactions with, healthcare professionals.

The changes to the Code make allowance, for example, for the provision of a limited number of samples to healthcare professionals for a limited time (Art. 16).  Previously, following EU Directive 2001/83/CE, the provision of samples was not allowed (due to concern over inducement); but in accordance with national and/or EU laws and regulations, a limited number of medical samples may now be supplied on an exceptional basis and for a limited period. A reasonable interpretation of this provision is that each health professional should receive, per year, not more than four medical samples of a particular medicine that he/she is qualified to prescribe for two years after he/she first requests samples of that particular medicine.

A landmark year
Last year saw significant developments for the pharma industry – and for lawyers – which look set to continue through 2012. With deals such as Takeda’s acquisition of Nycomed in 2011, we expect the trend of commercial and economic power shifting eastward to continue. Increased diversification, coupled with regulatory hurdles, will set a challenge for the pharma industry. Whether companies will survive and thrive on this challenge remains to be seen as the year unfolds, but the structural upheaval felt as a result of life beyond the patent cliff is already being witnessed.

Sarah Hanson is a partner at CMS Cameron McKenna: the UK branch of CMS, a leading European provider of legal and tax advice.

The European biosimilars market is expected to reach nearly $4 billion by 2017 after the expiration of patents and other intellectual rights opens new opportunities, a new report predicts.

Frost & Sullivan’s Analysis of European Biosimilars Market predicts the industry will record annual growth of more than 50% in the next five years as physicians and patients search for cheaper medication.

Srinivas Sashidhar, a Frost & Sullivan Research Analyst, says the next decade “opens up opportunities for biosimilars to enter the market and increase industry competition”.

The report notes that the biosimilars manufacturing industry is at a nascent stage. The market earned revenue of around $172 million in 2010, research found.

However, while there are plenty of opportunities for growth, the market will require sizeable investment – especially smaller firms. Complex production processes, expensive materials and rigorous clinical trials require significant investment, the report adds.

“The need for considerable financial outlays will hinder the entry of small biotech firms in particular,” warns Mr Sashidhar. “On the other hand, specialty pharmaceutical companies with biotech expertise and financial capabilities are well positioned to venture into the biosimilars market.”

Another obstacle the market faces is high manufacturing costs. But, the report says, viable prospects for licensing agreement between companies should overcome this. “Access to sales and marketing capabilities can be achieved through collaborations between pharmaceutical companies and specialty biotech firms with technical expertise,” said Sashidhar. “Companies can build sales and marketing capabilities in-house and ensure effective marketing support for the commercialisation of biosimilars.”

If the market is to realise its potential in the next decade, the report advises effective sales communication to the scientific community, coupled with continuous promotional activities as well as close and constant interaction with doctors and pharmacists.

Pharma companies can only obtain one Supplementary Protection Certificate (SPC) per patent, the EU Court of Justice (CJEU) has ruled.

The new ruling clarifies existing regulations, whose disputed application had led to uncertainty about the patent status of combination drugs and multivalent vaccines.

Pharma companies in the EU will now be less able to use SPCs to extend patent life by gaining additional exclusivity for altered products.

As a result, companies may see an increase in biosimilars and generics being released by competitors at the point of patent expiry.

According to the CJEU verdict, an SPC:

• can only be granted for active ingredients that are specified in the claims of the underlying patent

• is permitted for multi-ingredient products only if each ingredient is patent-protected

• can be granted only once for each basic patent.

Jonathan Radcliffe of global law firm Mayer Brown commented that the ruling “cuts directly across current patent office and industry practice across Europe, where multiple SPCs are being granted out of the same basic patent despite the prohibition against doing so”.

However, Will James of UK law firm Marks & Clerk pointed to the value of the ruling for pharma companies: “The CJEU rulings have confirmed a relatively broad scope of SPC protection covering all combinations of a particular active ingredient with others, providing that the active ingredient is supported by the underlying patent.”

The decision arose partly from the recent case brought by UK pharma company Medeva, which was refused SPCs for combination vaccines that brought together patented and non-patented active ingredients.

The Medeva case was referred to the CJEU – whose new ruling means that an SPC can be granted for a product with additional active ingredients only if these were specified in the original patent.

Global revenues from small-molecule targeted cancer therapies are expected to reach $27.3bn in 2015, a new report predicts.

visiongain’s Small-Molecule Targeted Cancer Therapies: World Market 2011-2021 found that the overall market generated $20.3bn last year but is set to grow as more patients are diagnosed with cancer.

Dr Syed Ahmed, a senior healthcare industry analyst, visiongain, says there is still “an under-met need for therapeutic agents” and the therapies “remain a crucial part of the pharmaceutical market from 2011 to 2021.”

The report found that there were more than 13 million patients worldwide diagnosed with cancer in 2009. But there may be as many as 20 million new cases by 2025, it says.

Targeted cancer therapies block the growth and spread of tumours by interfering with with molecules involved in tumour growth and progression. Most of these are either small-molecule drugs or monoclonal antibodies.

The market is currently dominated by Novartis’ Glivec/Gleevec (pictured), the report says, but ‘blockbuster’ brands are set to lose their patent protection in the next ten years paving the way for generic competition.

“A strong R&D pipeline for small-molecule cancer therapies makes this industry segment dynamic and promising for pharmaceutical companies," said a report analyst.

Sanofi is expected to overthrow Pfizer’s nine-year reign as the world’s biggest drug maker, according to new research.

The French pharmaceutical company is expected to retain the top spot until at least 2016, with Pfizer falling to third place behind Novartis due to the loss of Lipitor’s US patent protection, according to EvaluatePharma (see figure one).

The report says that Sanofi’s numerous acquisitions over the last decade have contributed largely to the company’s success, gaining $20 billion after it bought out Genzyme.

Sanofi’s mergers over the last decade have contributed a great deal to its current position, starting with its $30 billion deal with Synthélabo in 1999.

It is expected that the company will retain its top position until at least 2016, mainly thanks to sales of enzyme replacement therapies through its acquisition of Genzyme.

Also, the company’s addition of Cerezyme and Myozyme blockbuster drugs will help fill the gap left by Lovenox, Taxotere, and Plavix, which loses US patent protection in 2012.

Pfizer’s $68 billion buyout of Wyeth in 2009 helped fill the gap left by Lipitor, but it will be difficult to replace the drug’s global sales figure of $13.4 billion seen in 2008, which set the record as the biggest selling medicine.

Following its loss of US patent protection in November 2011, Lipitor sales are estimated to shrink to $2 billion by 2016.

However, pipeline products such as rheumatoid arthritis (RA) pills tofacitinib and Eliquis are expected to boost Pfizer’s drug sales after 2016, which will help retain the company’s position in the top-five pharmaceutical companies.

Merck’s four-year outlook is seen as bleak despite its takeover of Schering-Plough for $41 billion in 2009, with only 1% annual sales growth predicted, conceding to European companies GlaxoSmithKline and Roche to overtake the company.

EvaluatePharma predicts that Johnson & Johnson’s recent pipeline successes will benefit the company in the coming years, despite its drugs arm being substantially smaller than the five biggest pharma companies.

It is thought that Novartis will be Sanofi’s closest competition over the next few years, with strong sales growth from Gilenya and Tasigna due to Diovan’s loss of patent protection next year.

Figure 1:

Takeda Pharmaceutical has called a halt on big deals following its recent $13.7 billion buyout of Nycomed.

Takeda’s President, Yasuchika Hasegawa, has said that the company will hold back on big mergers and acquisitions to “focus on integration for the next year or two”, adding that Japanese companies have been typically poor at integrating foreign acquisitions in the past.

Hasegawa said that domestic deals are even harder to get right, and told the Wall Street Journal that “it’s not worth it”.

He commented that acquisitions outside Japan tend to work better when companies are looking to fill in gaps, such as Takeda’s plans to develop products and pipeline projects to make up for loss of patent protection on its leading drug, Actos.

Global generic drug revenues will reach $137.6bn in 2015, a new report predicts.

Visiongain’s Generic Drugs: World Market Outlook 2011-2021 estimates an increase from the $96.4bn reached last year after the number of generic sales tripled since 2000 in the US.

A senior pharma analyst at Visiongain says the patent loss on major products “means a significant opportunity for generic producers” over the next decade.

The global prescription generics market was worth less than $50bn in 2004. But the market share has increased after ‘blockbuster’ branded drugs have lost patent protection and patients search for cheaper medicines.

Generic prescriptions now account for approximately 70% dispensed in America. Other significant growth drivers for the industry include new strategies for pharmaceutical companies establishing a presence in generic manufacturers.

Pfizer and Novartis have recently built a partnership and acquired generic operations. Generic manufacturers have also entered into mergers and acquisitions as they aim to increase scale, revenue, market reach and competitive advantage.

The market could see further significant growth if a general definition of generic products is used with the report predicting revenues could reach $150bn a year.

The report also estimates the market will grow steadily to 2021 due to an increased life expectancy across the globe, budgetary constraints and developing countries searching for affordable medicines.

“Expansion of the generics market will continue steadily as legislative demands to control healthcare costs increase, especially in US and European markets,” the analyst added.

Sanofi is set to launch a generic version of Pfizer’s anti-cholesterol drug Lipitor (atorvastatin calcium), according to reports in France.

Newspaper Les Echos cites two other sources that Sanofi is planning a generic alternative of Lipitor before its full European patent protection is lost in May next year.

The agreement would be part of the France’s Strategic Council of Health Industries (CSIS) programme which offers tax rebates to the company who holds the rights to the original drug if production is based in the country.

Lipitor, one of the world’s best selling drugs, was set to lose patent in November 2011, but received an extra six months of protection in Europe after a launch of a new version for children.

Generic versions are already available in several countries, including Spain, Brazil and Mexico, which has seen sales of the drug drop from $2.81bn in 2010 to $2.59bn in 2011.

Dr Reddy’s Laboratories recently settled a lawsuit with Pfizer regarding its plan to launch a generic version of the drug, following a similar case against Teva Pharmaceutical restricted their manufacture of the drug.

Other generic companies such as Mylan, Ranbaxy Laboratories and Watson Pharmaceuticals are also planning alternative versions in the future.

Generic versions of some of the world’s most popular medicines are set to enter the market and heavily reduce the cost of drugs when several ‘blockbuster’ brands come off patent, a new report says.

EvaluatePharma’s World Preview 2016 “Beyond the Patent Cliff” notes that seven of the world’s 20 best-selling drugs will lose patent protection within the next 14 months, including the top-two: Lipitor and Plavix.

Anthony Raeside, Head of Research, EvaluatePharma, says $54bn of sales will be lost to cheaper generics, with 2011 and 2012 “forecast to be the worst years” for pharma companies.

Between now and 2016, manufacturers of blockbuster brands will lose around $225bn in global sales, the report reveals.

Generic alternatives will result in sales dropping for more expensive branded drugs and slash the cost of medicines to patients and payers.

Copycat products typically cost anywhere between 20% and 80% less than brand names. Although only one generic version is permitted to be sold for the first six months after a drug has lost its patent protection, several other generic options often enter the market after this period.

As a result, blockbuster drugs will lose 90% of their revenue within two years, although Ben Weintraub, a Research Director at Wolters Kluwer Pharma Solutions, says it’s not uncommon for this to happen within as little as 12 months.

But pharma is aiming to combat the lost billions in revenue by increasing prices towards the end of a drug’s patent. Companies have also organised contracts with generic manufacturers for ‘authorised generics’ which entitle them to a share of future sales. Other tactics include reducing the number of jobs, merging with other companies and stabilising future sales by adding more sales representatives in emerging markets.

According to the Generic Pharmaceutical Association, generics saved the US healthcare system more than $824 billion between 2000 and 2009, and now save about $1 billion every three days.