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Cliff

Tuesday’s decision by a federal judge to deny AstraZeneca’s attempt to extend patent protection on its multi-billion dollar Crestor franchise sent a reminder to the global pharmaceutical industry, which has quietly attempted to ignore an impending reality:

The patent cliff is here and it’s ain’t going away. Legal wrangling may buy some time, but low-priced generics are poised to wrest away market share and obliterate earnings.

In case you missed this week’s news, AstraZeneca had argued that a new orphan drug approval should protect Crestor, a $5 billion statin drug, till 2026. The company first petitioned the FDA in June, stating that FDA policies should bar generic drug labels that did not include data on the new pediatric indication. Because of orphan drug exclusivity, that data was AstraZeneca’s exclusive province. The FDA ignored the petition, AstraZeneca sued, and the federal court said the drug maker didn’t have a case.

The court’s rapid-response decision made heads spin and probably caused a few to explode. The FDA’s generic approvals are now official and half-dozen generic makers are ready to launch versions of Crestor. This will be quite painful for AZ’s profits.

AstraZeneca is not the only pharmaceutical company about to be spanked by expiring patents. Of the top 25 drugs in the world in 2014, all but one has lost or will lose itsprincipal U.S. patent protection by 2018. This includes such well-known brands as Humira ($12.54 billion), Remicade ($9.24 billion) and Enbrel ($8.54 billion). Of the top 25, only Solvaldi ($10.28 billion) will retain U.S. patent protection. Although some may still have limited European Union patent coverage, they are definitely heading toward the cliff.

Top Selling Drugs Edited

It’s worth noting that of the eight top-selling drugs, seven are biological/large molecule and are also injectable.

The implications are significant for these major drug brand holders and the overall industry. Big pharma will see profits obliterated as generics (small molecules) and especially newly emerging biosimilars drastically erode market share and create ever lower price points. Revenue holes will be too big and too painful too ignore. The coming months should see a whole lot of scrambling!

All of this raises the obvious question: how can big pharma rebuild their revenue streams quickly in an age of increasing price pressure? To PaizaBio’s way of thinking, for a multitude of reasons all eyes should turn to China and its 1.4 billion potential consumers. China is ready and we have the insight, experience and in-China manufacturing footprint in place to create a softer landing and future profits.

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