By 2015, if all
The drug’s name: Lipitor, which went off patent and began facing generic competition December 1, 2011.
That’s right, Lipitor, once the world’s biggest selling drug – peaking at annual sales of more than $9 billion and with lifetime sales of more than $131 billion – is expected to generate about $3 billion in sales in 2015, according to a report by AARP’s Public policy Institute.
That performance, if it comes true – and there’s little reason to believe it won’t – defies expectations about generic drug competition and shows the remarkable marketing muscle and ingenuity of pharmaceutical companies, especially those faced with huge revenue losses as patents expire.
PFE Revenue TTM data by YCharts
The report by the arm of AARP, which regularly reports on drug pricing, details a series of moves by Pfizer to protect and extend the life of Lipitor, a statin designed to lower bad cholesterol. Certainly good for Pfizer shareholders, the moves nonetheless are among those helping to keep health care costs higher than they otherwise might be. And the moves show – as in most regulated industries – how companies often sidestep the intent of regulation and how regulators and legislators are too slow-footed to keep up.
Six of the 10 biggest-selling prescription drugs on the U.S. market were expected to lose patent protection during 2011-2012, a huge opportunity for generic drug makers; for consumers, insurers and others to save money; and, as the Pfizer case illustrates, a chance for Big Pharma to surprise us all by hanging onto more branded drug sales than is expected.
As trade publication FiercePharma noted, “The AARP report itself is a pretty good playbook for drug makers facing a patent loss.” According to the study, Pfizer’s moves to hang onto Lipitor sales included:
--Raising the price of the drug while it was still under patent, from a typical $1,290 per patient per year in 2006 to $1,939 in 2011, the last year of patent protection.
--Advertising directly to consumers during patent years to boost usage, spending $1.43 billion from 2000 to 2010.
--Entering into a so-called pay-to-delay deal with Ranbaxy, a generics maker, delaying the initial generic introduction from June 2011 to December 1 of that year.
--Launching a so-called authorized generic via Watson Pharmaceuticals, which shared about 70% of its Lipitor-related profits with Pfizer and diminished other generic sales.
--Giving consumers coupons to greatly reduce their co-pays to encourage them to stay on branded Lipitor and not switch to generic equivalents. And paying rebates to insurers and/or pharmacy benefit managers to keep using Lipitor.
The result: four months after generic Lipitor was launched, Pfizer's branded version hung onto about one third of the market, roughly three times as much as expected when a drug loses patent protection.
Pharmaceutical stocks have generally outperformed the S&P 500 so far this year.
Pfizer trades at a P/E ratio below the broader market and its dividend yield is about 3.3%.
PFE PE Ratio TTM data by YCharts
Jeff Bailey, the editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at editor@ycharts.com. You can also request a demonstration of YCharts Platinum.
