Latest Thinking

Drugs jumping on and off the patent cliff

May 1, 2012

Katherine Ho, B.Sc.Phm., M.Sc.Phm., R.Ph.
Source: Perspective 2012 – by TELUS Health

Cost savings of generic launch

When a generic version of a drug becomes available, there is an immediate and substantial cost savings for drug plans. Due to various provincial drug reforms, generic drugs are priced at a much lower percentage as compared to their brand name equivalents. The percentage varies by drug and by province. Hence, patent expiry dates of drugs are of interest to private and public payers alike. The Canadian Generic Pharmaceutical Association has indicated that generic share of retail prescriptions was 57.3% i.e., nearly 289 million generic prescriptions in 2010. Growth in generic prescriptions was 10% higher as compared to the previous year.

Table 1 shows ten high-impact drugs relevant to private payers with an anticipated patent expiry date between 2012-2014 taken from the Patent Register of Health Canada. Drug cost paid data were drawn from the entire TELUS Health Solutions’ book of business from January to December, 2011. Percentage of drug cost paid for each drug molecule is based on an aggregate of all strengths.

Patent regulations

In order to promote research and development for innovative medications to treat diseases, Canada’s Federal Patent Act currently allows brand name manufacturers 20-year patent protection, which is consistent with international standards. Commercially successful drugs usually have multiple patents filed at different times leading to different patent expiry dates. A company wishing to launch a generic drug in Canada must address all listed patents before Health Canada will issue marketing authorization. For any given patent, a generic company can either await patent expiry or allege that the patent is invalid or not infringed, through appropriate judicial process in Federal Court. For example, in December, 2011, generic clopidogrel was launched before the Plavix patent expired on August 22, 2012 and June 10, 2019 (the first and last patent listed on Health Canada’s Patent Register).

Patent expiration does not guarantee generic drug availability. Patent litigation, regulatory approval, potential market size for the generic drug, and complicated/technical medication delivery devices may influence the availability of generics. Orphan drugs for rare diseases are unlikely to ever see a generic version due to their small market and relatively high production and marketing costs.

Patent cliff

Patent cliff is a term used often by drug manufacturers, indicating a slump in sales as the patents on their popular drugs expire or are struck down by legal challenges, with few or no new potential blockbusters to take their place. On May 19, 2010, generic atorvastatin was launched on the best-selling drug in history – Lipitor, a cholesterol lowering drug — as its patents expired. In 2009, the top paid DIN of Lipitor (20mg) ranked an overall 2nd in drug cost paid on TELUS Health Solutions’ book of business. The top paid DIN of Crestor (10mg), another cholesterol lowering drug, ranked 5th. In 2011, the year after patents of Lipitor expired, the top paid DIN (20mg) of Lipitor’s ranking dropped to 68th while Crestor’s (10mg) increased to 2nd in drug cost paid out of TELUS Health Solutions’ entire book of business.

Table 1 High-impact drugs with anticipated patent expiry between 2012 to 2014 selected from Health Canada Patent Register

(January 2012)

Drugs jumping on and off the patent cliff tableau 1

Percentage of drug cost paid were taken from TELUS Health Solutions’ entire book of business from Jan-Dec 2011. Cost saving is based on all strengths of the drug molecule.

* Generic Crestor was launched on March 15, 2012 before its anticipated patent expiry in July, 2012.

** Estimated annual savings is based on an estimated generic price of 25% or 50% of the brand and a full year of interchangeability across Canada.

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