Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 73

The competitive landscape in the pharmaceutical industry faces ample changes
due to unprecedented numbers of patents coming to the end of their duration.
As more than 80 % of the brand prescription volume is replaced by generics within
6 months of patent expiration, the industry seems poised for a series of shocks trig-
gered by a slew of upcoming patent expirations. 25

Customized drugs . The development of targeted drugs for niche markets, individu-
ally designed drugs, or combination drugs (e.g., drugs targeting symptoms or condi-
tions that tend to appear in tandem), is another promising tendency addressing
patient needs on a microlevel. 26 Advancements in the life sciences and particularly,
the decoding of the human genome, along with the versatile tools of molecular
design and biotechnology, offer substantial promise that custom-built therapies will
be technically feasible in the not-too-distant future. Still, customized drugs may
face considerable regulatory and economic hurdles.

There is potential in the smaller markets . A persistent and salient tendency is that
large pharmaceutical markets continue to attract signifi cantly more innovation
(Acemoglu and Linn 2004 ). Economic as well as ethical reasons can explain why
R&D spending in drug innovation is prioritized for conditions and ailments affecting
large numbers of people (e.g., depression, high cholesterol, diabetes, hypertension,
ulcers). Because attractive markets are also likely to be populated with multiple
treatment alternatives, FDA scrutiny may tighten for new approvals. New drugs can
face steeper hurdles to prove they are market-worthy. In this regard, experts have
called for policy regulations that make small markets more appealing, e.g., by reduc-
ing the time and the cost of regulatory reviews, maximizing the access to fundamen-
tal science and its fi ndings, or encouraging cooperation and collaboration within the
industry as a way of supporting the efforts of fi rms venturing into small markets.

2.5 Conclusions and Directions for Future Research

Drug innovation is not only a multibillion dollar business but also a science- and
technology-driven process with exceptionally high stakes that often transcend pure
commercial interests. It is a topic that fi nds itself in the focus of increasing attention

25 As reported by the IMS Institute for Healthcare Informatics, in 2009-2010 the combined worth
of branded drugs set to face generic market competition due to patent loss was estimated as $32.1
billion (an all-time high). Major blockbusters such as Lipitor ® , Plavix ® , Zyprexa ® , and Levaquin ® —
which have accounted for more than 93 million prescriptions in 2010 and generated a total of $17
billion in sales—may soon lose market exclusivity in the USA. This trend appears to hold world-
wide as, over the next 5 years, branded drugs worth a total of $142 billion in sales are likely to see
their patents expire in major developed markets. Two-thirds of that loss, or $98 billion, will be
from forgone sales in the US market.
26 For example, the FDA has recently approved Merck's combination drug Juvisync, intended for
the joint therapy of type 2 diabetes and high cholesterol. Enhanced patient compliance and better
prevention are expected from the convenience of taking a single pill.