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Profits at center of biosimilars debate

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Profits are at stake on all sides of a fierce Indiana Statehouse fight over a bill that would regulate the dispensing of generic biotech drugs.

House Bill 1315, which is scheduled for a Senate floor hearing on Monday, would require pharmacists to check with a patient’s physician before automatically substituting a generic version of a biotech drug for a brand-name version.

This kind of substitution happens all the time now with chemical drugs, such as the brand-name cholesterol drug Lipitor and its generic version atorvastatin.

One reason it does is that the makers of generic drugs and the health insurers that pay most of the bill for prescription medicines make sure pharmacists benefit financially for doing so.

Generic drugmakers would rather pay higher profits to pharmacies than run their own sales and marketing efforts to convince pharmacists to dispense generics. And health insurers, such as Indianapolis-based WellPoint Inc., have strongly encouraged generic substitution as a way to reduce their own spending on medical claims. Current biotech drugs, such as the cancer drug Avastin, can cost tens or even hundreds of thousands of dollars for each patient per year.

The profit margins for retail pharmacists on atorvastatin, for example, are more than double what they are for branded Lipitor, according to an analysis by Philadelphia-based Pembroke Consulting.

Also, large distributors of drugs, such as Cardinal Health and McKesson Corp., make profit margins of 18 percent on generic drugs, compared with margins of just 2 percent on brand-name drugs, according to Pembroke.

The only problem for pharmacies is that the fat margins on generic drugs diminish over time. So with overall spending on prescription medicines declining in 2012 for the first time in history, drugstores are relying on a steady stream of patent expirations on brand-name drugs to keep their bottom lines healthy.

But the wave of blockbuster patent expirations will end in 2016, and after that, pharmacies need a new batch of drugs going generic. The obvious source for that new batch is the world of biotech, or specialty drugs, where several drugs' patents have already expired—but the drugs have faced no competition from generics.

The health reform law of 2010 included the first regulatory pathway to allow generic versions of biotech drugs, although the rules are still being hammered out by the U.S. Food and Drug Administration.

“Drugstores must either embrace the low-cost generic revolution or figure out how to penetrate the specialty market. Otherwise, they'll find it hard to climb out of the rabbit hole,” wrote Adam Fein, president of Pembroke Consulting, in a March 7 blog post.

But makers of brand-name drugs, such as Indianapolis-based Eli Lilly and Co., would benefit greatly if generic biotech medicines cannot immediately steal away sales once the patents on their brand-name drugs expire.

For example, U.S. sales of Lilly’s antipsychotic drug Zyprexa plummeted 88 percent in the 12 months after the drug’s U.S. patent expired in October 2011.

By contrast, Lilly’s biotech insulin Humulin has continued to rack up annual sales of more than $1.2 billion, even though its patent expired in 2000.

Currently, biotech drugs account for only one-quarter of all U.S. sales of brand-name drugs, according to data from IMS Health, a Connecticut-based market research firm. But nearly all large pharma companies, including Lilly, have staked their futures on using biotechnology to reverse a drought of new breakthroughs.

Last year, Lilly garnered more than $5 billion in sales from biotech drugs, or about one-quarter of all its drug sales. Of the 13 drugs Lilly has in Phase 3 clinical trials, eight of them are biotech drugs.

Lilly has thrown its support behind HB 1315, which was authored by Rep. Ed Clere, R-New Albany, at the request of biotech drug pioneer Genentech Inc., which is now a subsidiary of Switzerland-based Roche Group.

The stated concern of the drug companies is that, because biotech drugs are so much more complex than traditional chemical drugs, they will not be interchangeable like chemical drugs are. In industry parlance, biotech drugs are called biologics and their generic versions are called biosimilars, because they cannot be exactly the same as the original.

Clere told The New York Times in January that his bill “doesn’t do anything to prevent or discourage the use of biosimilars.”
 

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  • Zyprexa legacy
    Eli Lilly did make $69 billion on Zyprexa (Olanzapine) and they still expect to capture 20% of the US market as well as a billion year on ZyprexaXR. The patent only expires in the US and some Euro,Lilly announced they have an *authorized* distributor of generic Zyprexa. I am keenly interested in how they resolve remaining Zyprexa litigation. PTSD treatment for Veterans found ineffective. Zyprexa can cause diabetes. I took Zyprexa Olanzapine a powerful Lilly schizophrenic drug for 4 years it was prescribed to me off-label for post traumatic stress disorder was ineffective costly and gave me diabetes. -- Daniel Haszard

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  1. Great article and post scripts by Mike L (Great addition to IBJ BTW). Bobby's stubborn as a mule, and doubt if he ever comes back to IU. But the love he would receive would be enormous. Hope he shows some time, but not counting on it.

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  4. Jim, your "misleading" numbers comment is spot on. This is the spin these posers are putting on it. News flash, fans: these guys lie. They are not publicly traded so no one holds them accountable for anything they say. The TV numbers are so miniscule to begin with any "increase" produces double digit "growth" numbers. It's ridiculous to think that anything these guys have done has awakened the marketplace. What have they done? Consolidate the season so they run more races on consecutive weekends? And this creates "momentum." Is that the same momentum you enjoy when you don't race between August and March? Keep in mind that you are running teams who barely make ends meet ragged over the summer to accomplish this brilliant strategy of avoiding the NFL while you run your season finale at midnight on the East Coast. But I should not obfuscate my own point: any "ratings increase" is exactly what Jim points to - the increased availability of NBC Sports in households. Look fans, I love the sport to but these posers are running it off a cliff. Miles wants to declare victory and then run for Mayor. I could go on and on but bottom line for God's sake don't believe a word they say. Note to Anthony - try doing just a little research instead of reporting what these pretenders say and then offering an "opinion" no more informed than the average fan.

  5. If he's finally planning to do the right thing and resign, why not do it before the election? Waiting until after means what - s special election at tax payer expense? Appointment (by whom?) thus robbing the voters of their chance to choose? Does he accrue some additional financial advantage to waiting, like extra pension payments? What's in it for him? That's the question that needs to be asked.

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