Makers of generic drugs face 'patent cliff'

  • Article by: KATIE THOMAS New York Times
  • New York Times
  • December 3, 2012 - 11:05 PM

They call it the patent cliff.

Brand-name drugmakers have feared it for years. And now the makers of generic drugs fear it, too.

This year, more than 40 brand-name drugs -- valued at $35 billion in annual sales -- lost their patent protection, meaning that generic companies were permitted to make their own lower-priced versions of well-known drugs like Plavix, Lexapro and Seroquel -- and share in the profits that had exclusively belonged to the brands.

Next year, the value of drugs scheduled to lose their patents and be sold as generics is expected to decline by more than half, to about $17 billion, according to an analysis by Credit Agricole Securities.

"The patent cliff is over," said Kim Vukhac, an analyst for Credit Agricole. "That's great for large pharma, but that also means the opportunities theoretically have dried up for generics."

In response, many makers of generic drugs are scrambling to redefine themselves, whether by specializing in hard-to-make drugs, selling branded products or making large acquisitions. The large generics company Watson acquired a European competitor, Actavis, in October, vaulting it from the fifth- to the third-largest generic drug maker worldwide.

"They are certainly saying either I need to get bigger, or I need to get 'specialer,'" said Michael Kleinrock, director of research development at the IMS Institute for Healthcare Informatics, a health industry research group. "They all want to be special."

The top generics companies have also sought to grow by going into the branded-drug business. Teva Pharmaceuticals is perhaps the best example, because it sells the blockbuster multiple sclerosis drug Copaxone.

Many drugmakers are also going after difficult-to-make products like extended-release tablets, patches and creams in the hope that, with less competition, prices will not erode as quickly.

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