1999: A pivotal year for generics pricing

Drug Store News, Feb 15, 1999 by Al Heller

Added John Hynes, group director of managed care, IMS Health: "Of 38 million people covered by Medicare, about 20 million have no prescription benefit at all. The rest have it by having carried over benefits from work or buying separate pharmacy insurance."

Despite that mega-market, "If prices will be tagged to the lowest price the government pays, that will negatively impact the generics industry because it either forces their prices down or it makes it difficult for them to raise prices," he said. "The pharmaceutical industry will give the U.S. government the lowest price. Period. If the legislation passes--and the industry is very much against it--at that low level, the potential impact is that generic pharmaceutical prices will either be frozen or go even lower.

"Typically, this population would buy generics anyhow," observed Hynes. "This a high-usage population with more chronic disease, particularly cardiovascular, than any other group, and less usage of acute medications such as antibiotics.

"There will be a profound effect of moving this massive population into the prescription market," he stated. "It's conceivable Medicare coverage could result in higher drug utilization and people taking their medicines appropriately. Currently they tend to take [drugs] less often than prescribed because they're trying to stretch costs."

Capps summed up the consumer compliance issue: "Can I afford my medicine at all? People who pay for their own drugs can comply better with generics. If covered, then brand or generic doesn't matter except perhaps for a difference in co-pay."

Besides the prospect of Medicare coverage, the general trend in managed care is to pass more of the cost burden for prescriptions onto consumers. It's possible, Capps said, that will make it easier for generics prices to rise by providing a higher price ceiling at retail pharmacies.

            Leading therapeutic categories, brands and generics

                        1997 $ sales Market share % gain
                        in millions
Top 5 Brands
Anti-ulcerants            $5,435         7.4%        3%
Antibiotics                5,214         7.1         5
Antidepressants            5,032         6.9        19
Cholesterol reducers       3,718         5.1        38
Calcium blockers           3,482         4.7         4
Top 5 Generics
Antibiotics               $652.5         8.3%      -14%
Bronchodilators-general    439.5         5.6         7
Analgesics-narcotic        425.9         5.4         2
Calcium blockers           382.1         4.9       -11
Systemics                  356.9         4.6        -9


Source: IMS Health

             Brands grab lion's share of pharmaceutical market

         1997 $ sales Market % gain
         in billions  share
Brands      $73.3     90.4%   13%
Generics      7.8      9.6     6
Total        81.2      100    13


Source: IMS Health

                       Total prescriptions dispensed

         1997 scripts Market % gain
         in billions  share
Brands       1.4      58.1%    5%
Generics     1.0      41.9     4
Total        2.4       100     5


Source: IMS Health

      Drugs available to generic competition with no ANDA yet approved

                                                       1997 U.S. $ sales
Product                             Company               in millions
[Premarin.sup.*]                 American Home              $990.5
                             Products/Wyeth-Ayerst
Procardia [XL.sup.*]      Pfizer/Pratt Pharmaceuticals       822.0
Cardizem [CD.sup.*]          Hoechst-Marion Roussel          691.7
Humulin                              Lilly                   649.2
[Taxol.sup.*]                 Bristol-Myers Squibb           518.7
Adalat [CC.sup.*]            Miles Pharmaceuticals           361.5
Prempro/Premphase                American Home               337.1
                             Products/Wyeth-Ayerst
[Sandimmune/Neoral.sup.*]            Sandoz                  325.2
Dilantin                          Parke-Davis                242.3
Triphasil 28                     American Home               172.3
                             Products/Wyeth-Ayerst
Depo-Provera                         Upjohn                  142.2
Sinernet CR                  DuPont Pharmaceuticals          126.4
Toprol-XL                            Astra                   122.6
[Verelan.sup.*]                     Lederle                  110.1
Catsflam                           Ciba-Geigy                93.9
[Intal.sup.**]                       Fisons                  92.7
Catapres TTS                       Boehringer                91.9
Desogen                           Akan/Organon               88.2
Ortho-Cyclen                       J&J/Ortho                 88.1
Ativan                           American Home               87.5
                             Products/Wyeth-Ayerst
Betapace                             Berlex                  82.7
Ortho-Cept                         J&J/Ortho                 80.2
Estraderm                          Ciba-Geigy                73.7
Lopressor Oros                     Ciba-Geigy                67.5
Rythmol                              Knoll                   50.9
Climara                              Berlex                  48.9
Vepesid                      Bristol-Myers Oncology          40.6
Ritalin SR                         Ciba-Geigy                37.5
Rocaltrol                         Roche/Syntex               33.0
Tambocor                       3M Pharmaceuticals            32.5
Tegretol-XR                         Novartis                 31.0
Vivelle                             Novartis                 31.0
Other                                                        281.5


(*.)ANDA filed.
(**.)Switched to OTC status.
Source: SBC Warburg Dillon Read Inc. and company reports