The term “patent cliff” as it relates to the pharmaceutical industry in Canada most likely truly entered the public conscience in 2010. This was the year, after all, when many international brand name pharmaceutical companies began losing their twenty-year patents to a number of major Brand drugs. Perhaps most notably, 2010 also happened to be the year that Pfizer lost the patent to Lipitor, the #1 selling drug in history.
As far as brand name pharmaceuticals are concerned, the effect of the patent cliff has been widely felt, to say the least. To give a better idea of the impact the loss of key drug patents has had on pharmaceutical companies, in 2012 at least 19 drugs, including the anti-stroke drug Plavix, were scheduled to lose patent protection. It was a patent loss that represented a potential $38.5 billion in decreased sales, according to Barclays. In Pfizer’s case, in 2012, it was reported that the company’s profits declined 19%, two years after the loss of their Lipitor patent.
It’s clear that the patent cliff, a cliff that, mind you, is still in progress, has had more than a significant impact on brand name pharma. In the past four years, losing exclusive patents to key selling drugs has forced companies like Pfizer and AstraZeneca to undertake new business strategies aimed at replacing lost business and sales – indeed, everything from aggressively trying to extend its patent privileges in court to introducing and marketing generic versions of their own once protected drugs, to placing higher priority on their R&D efforts.
For brand name drug makers, the patent cliff has had the effect of forcing these companies to re-envision their business models and what it takes to remain profitable.
In Canada, the rise in generic drugs that patent losses have allowed has yielded increasingly positive results for the country and its health care system. Generic pharmaceutical companies, like Apotex Canada’s largest privately-owned pharmaceutical company, are making significant efforts to take advantage of patent losses and bring more generic drugs to market. Companies like Apotex are achieving this goal not only through investing in larger and more expansive R&D efforts, but also through legally challenging existing drug patents and/or finding viable non-infringement pathways to market. In Apotex’s case, the company plans to spend $2.1 billion in the next ten years in its research and development efforts and has spent over $800 million in litigation in the past decade to drive more generic drugs to consumers.
The patent cliff provides a tremendous savings opportunity for Canadian health care in several ways. Although Canada has a universal health insurance system, what it does not have is universal prescription drug coverage. In Canada the use of lower-cost generic medicines saved governments, employers and consumers nearly 13-billion dollars in 2013. Generic drugs are dispensed to fill 66.0% of all prescriptions in Canada yet account for only 23.5% of the $22.2-billion Canadians spend annually on prescription medicines. Indeed, Canadians spend more on prescription drugs than any comparable country. Moreover, for those Canadians fortunate to have employer-provided prescription plans, historically high pharmaceutical drug costs have yielded an upward trend in their drug costs.
Indeed, if in 2013, the use of generic drugs in Canada had matched the use in the United States (Canada’s generic drug utilization runs at 66% compared to United States’ 88%), the Canadian health care system would have enjoyed $6 billion in savings that year.
Many Canadian provinces fully understand how significant the cost savings from generic drugs can be and are increasingly requiring insurance plans to make generic substitution mandatory.
The patent losses to commonly used (and commonly needed) drugs, although certainly not a boon for brand name drug companies, represents a breaking-free point in the Canadian pharmaceutical industry – a moment when expanding generic drug manufacturers like Apotex can finally accelerate their goal of bringing lower cost pharmaceuticals to Canadians across the country. A goal that will undoubtedly save the Canadian health care system billions in the years to come.