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  Medicine patents: Drugmakers find it hard to do business
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Date: 25 February 2011
Source: Financial Times
Link: 00144feabdc0,s01=1.html#axzz1ExRQQK1m


Among pharmaceutical industry insiders, it is known as the patent cliff.

Over the next two years, patents for many blockbuster brand-name drugs sold in Japan are set to expire.  Astellas Pharma`s patent on Lipitor, a cholesterol-lowering drug licensed from Pfizer, runs out in 2011, while that of AstraZeneca`s Arimidex, for breast cancer, is up the following year.

With patent protections gone, it is likely to throw the field wide open for companies that make generic, or copycat, drugs. Those companies could significantly build on their limited share of Japan`s $80bn pharmaceutical market, the world`s second-largest, analysts say. We expect the market to accelerate, says Alan Thomas, of IMS Japan, a pharmaceutical market research company.

The biggest of Japan`s generics makers could prosper. Morgan Stanley MUFG predicts that net profits for Nichi-Iko Pharmaceutical, the largest generics producer, will nearly double between 2011 and 2015, while Osaka-based Towa Pharmaceutical`s net profits will jump 47 per cent. Credit Suisse sees net profits for Osaka-based Sawai Pharmaceutical, the second-biggest generics maker, gaining 25 per cent in the next two years.

It is not just the domestic groups that are well positioned. Swiss company Novartis` generics unit Sandoz was among the early wave of entrants. So was Indian drug maker Lupin, which acquired a majority stake in Japanese generic drug maker Kyowa Pharmaceutical Industry in 2007.

Last year, Teva, the world`s top generic drug maker, formally stepped in through a tie-up with Japan`s Kowa, and aims for 10 per cent of the market by 2015. France`s Sanofi-Aventis opted to partner Nichi-Iko last year.

Japan`s Daiichi Sankyo, Mitsubishi Tanabe Pharma and Fujifilm have also said they will enter the fray. Credit Suisse predicts groups such as these will have between 100 and 150 generic products by early 2013, allowing them to compete with homegrown generic drug makers.

Japan has not been an easy place for drugmakers to do business. Every other year, the government dictates price cuts to keep its medical costs in check.

These cuts have made it harder for some drugmakers to recoup investments on innovative products. They have also worked against the spread of generics: brands win out over generics when there is little difference in price.

In June 2010, generic drugs were 22.4 per cent of the market by volume, according to the Japan Generic Medicines Association. The figure is low compared with the US, where generics account for more than 70 per cent by volume.

The health ministry has set a target of 30 per cent market share by volume in March 2013. Wider generics use could help lower overall spending on drugs, something the government is keen to do as the population ages, says Ludwig Kanzler, a partner at consultancy McKinsey in Tokyo.

The National Institute of Population and Social Security Research has forecast the number of people under 65 will nearly halve by 2055, leaving fewer workers to pay taxes.

Few think the ministry will reach its target. We aren`t optimistic, says Shuhei Hosokawa, of the Japan Society of Generic Medicines, an industry group.

Persuading doctors and patients could also take time. I have never asked for a generic drug and no doctor or pharmacist has ever recommended generics to me, says Haruo Hatakeyama, a 55-year-old Tokyo resident. There`s a lack of awareness about generics here.

New rules were designed to bring change. Last April, the government opted to leave prices unchanged for some drugs still protected by patent, while cutting prices for generics.

At the same time, more hospitals are shifting towards a flat-fee system, known as Diagnosis Procedure Combination, or DPC. The transition attempts to do away with the system in which doctors and hospitals are reimbursed for every procedure they perform and drug they dispense.

To educate patients, the health ministry has printed posters and pamphlets, hosted public seminars, and posted videos online that explain the benefits of generics.

Japan`s national health insurance agency has issued cards with generic drugs, please on them so patients can ask for generics without having to challenge the authority of doctors. You will see higher penetration of generics as the government becomes more assertive, says McKinsley`s Mr Kanzler.


Keywords: Drugmakers / Patents / Medicines