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Drugs with no patents and no competition – here’s our list of new ‘price-gouging’ targets

Drug price increases have emerged as a core strategy for generic pharmaceutical companies in the recent past. In September last year, Martin Shkreli’s decision to increase the price of Daraprim (Pyrimethamine) from US $ 13.50 per tablet to US $ 750 overnight, received an angry tweet from Hillary Clinton. “Price gouging like this in the specialty drug market is outrageous,” she had tweeted. Shkreli of Turing Pharmaceuticals wasn’t the only one hiking prices of drugs. ‘Price gouging’ has become a hot topic, and synonymous with the activities of many major pharmaceutical companies. Price increase due to ownership, not improved scienceValeant Pharmaceuticals, a stock market darling until recently, developed a strategy of buying up companies and dramatically increasing the price of the acquired drugs. In February 2015, Valeant purchased two life-saving heart drugs – Isuprel and Nitropress. And the same day, Valeant increased the prices of these drugs by 525 percent and 212 percent respectively. The increase was not an outcome of improved science but simply a change of ownership. Similarly, on January 1, 2016, Pfizer raised prices of more than 100 of its drugs. According to global information services company Wolters Kluwer the price increase was as much as 20 percent in the case of some medicines. Another recent study on US drug prices uncovered that “prices for four of the nation's top 10 drugs increased more than 100 percent since 2011, Reuters found. Six others went up more than 50 percent.” “It’s not funny, Mr. Shkreli. People are dying”Scrutiny on drug price increases and its accounting practices has made Valeant Pharmaceuticals, which not so long ago was the biggest company on the Toronto Stock Exchange (TSX), lose 90 per cent of its market value in less than a year. “Pharma Bro” Shkreli was arrested in December for allegedly bilking tens of millions of dollars from his former biotech venture, Retrophin. And while he smirked his way through the Senate hearing on drug price increases, he was rebuked by Representative Elijah Cummings. “It’s not funny, Mr. Shkreli. People are dying, and they are getting sicker and sicker,” he told Shkreli, as the latter grinned during the Congressman’s opening statement. The appearance by Shkreli was the highlight of this congressional hearing, which explored the complicated reality of drug pricing in the US. Bernie Sanders, a US presidential candidate, has long been protesting “skyrocketing drug prices” and has also proposed a new bill last year – The Prescription Drug Affordability Act of 2015. FDA’s accelerated review planIn this backdrop, the US Food and Drug Administration (FDA) announced a small regulatory change – it will prioritize review of new applications for generic drugs “that would compete with treatments made by only one company.”The policy mentions that “potential first generic products for which there are no blocking patents or exclusivities on the reference listed drug may receive expedited review”. In an email to Bloomberg, the FDA estimates the change in prioritization could expedite review of as many as 125 generic drug applications. The next ‘price-gouging’ targetsPharmaCompass has found over 300 different dosage forms of drugs which currently have no patents and no competition. Click here to access the compilation (Excel version available) for FREE!Our compilation covers a broad range of products from Pfizer's Premarin, isolated from pregnant mares’ urine, which brings in over US $ 1 billion in sales to Emcure’s BICNU (carmustine or BICNU is an anti-cancer, chemotherapy drug).While Emcure was banned from exporting products to the United States, due to compliance problems found in their manufacturing operations, BICNU was exempted since there was no other alternative available in the market. While an estimated 13 million people in the United States have latent tuberculosis infection (LTBI), Sanofi’s Priftin (rifapentine), launched last year in a new packaging, still has no generic competition. Click here to access the compilation (Excel version available) for FREE! Our viewWhile our list provides tremendous opportunities for generic companies in the short-term, the FDA’s accelerated review program will require companies to rely on strategies less opportunistic than price-gouging to drive their future business growth.

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07 Apr 2016

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Making a fortune out of decades-old prescription drugs

The importance of taking the right decision in product selection, by the senior management at pharmaceutical companies, can never be emphasized enough. A correct call can lead to windfall gains and if companies are fortunate enough, a monopolistic market position. This week, to assist the senior executives, we compiled a list of products that have existed for decades without any competition. A billion dollar opportunityCanadian company, Concordia’s acquisition of Covis Pharmaceuticals, for US $ 1.2 billion in March this year, was yet another affirmation of the opportunity that lies in 18 high-margin, branded generic pharmaceutical products. Covis Pharma’s 2014 revenues were around US $ 140-US $ 145 million. However, their gross margin was a whopping 90 percent! Wouldn’t it be wonderful if there were more such opportunities?This week we used the PharmaCompass database to generate a list of products (email us for your copy) which were approved in the United States before 1982 and are currently enjoying monopolistic positions and don’t have any patent protection. Our focus (for this list) is on approved, prescription drugs. We removed biologics, over-the-counter medicines, devices and unapproved drugs from the list. For generic firms ‘old is gold’ While old products stop serving the strategic growth objectives of larger pharmaceutical companies, smaller generic companies with ambitious growth plans frequently buy these branded products. Sales of ‘pharmaceutical assets’ is quite common and boutique financial advisory companies, like Torreya Partners, have developed a special focus on providing these services. Since 2010, Torreya has been “involved in the acquisition or sale of 23 separate pharmaceutical products”. For both large pharmaceutical companies and generic firms, old products can generate substantial cash. The deal between GlaxoSmithKline (GSK) and Aspen Pharmacare Holdings is a case in point. Six years ago, GSK off-loaded a portfolio of products to South African, Aspen Pharmacare in exchange for a 16 percent shareholding in Aspen. The strategic agreement also combined commercial activities in Sub-Saharan Africa of the two organizations. In May 2015, GSK sold half its stake in Aspen for US $841 million as the share prices of Aspen had surged eight folds since the original agreement was struck.On the one hand, the old products generate cash for the large pharmaceutical firms and generics players, on the other hand their niche market positions sometimes let them earn exemptions in the event of US Food and Drug administration (USFDA) regulatory action. Take the case of India’s Emcure Pharmaceuticals, which purchased the rights of BiCNU (Carmustine for injection) from Bristol-Myers Squibb in 2012. Last month, when Emcure was banned from exporting products to the United States, due to compliance problems found in their manufacturing operations, BiCNU was exempted since there was no other alternative in the market. The price hike potentialThe drugs that make our list have not been subject to competition for years because usually their sales are relatively small, in comparison to the blockbuster drugs. Moreover, these drugs serve niche market segments. Since they don’t qualify as ‘budget-breakers’, companies can take risks by increasing prices without fearing a drop in sales volumes. This invariably results in outrageous profits, leading to a raging debate across the US and Europe.Earlier this year, Valeant Pharmaceuticals purchased the rights to Isuprel (isoproterenol hydrochloride), another drug on our list. The very day they acquired the rights from Hospira, Valeant raised the price of Isuprel by more than six-fold. The curious case of Premarin Another old product which has a unique story is Premarin. It was introduced in the United States in the 1940s. However, when Premarin’s patents expired in 1971, the sales had declined to a point where generic companies were not motivated enough to develop an equivalent drug. But things changed dramatically when new data appeared in 1986 demonstrating its efficacy in minimizing bone loss associated with osteoporosis. The sales of Premarin sky-rocketed and now the drug generates over US $ 1 billion annually for Pfizer. The drug’s protection from generics has been an outcome of the fact that Premarin is isolated from pregnant mares’ urine. The complex mixture, now known to contain more than 50 estrogens, has made it difficult for a generic to replicate the composition and Premarin’s slow release bio-availability mechanism. Generics which were in the market in the late 1980s were removed in 1991. “We had certified that the generics were interchangeable with Premarin, but when we looked at it from the point of view of the science, that was not the case,” said Janet Woodcock, director of the FDA’s Center for Drug Evaluation and Research (CDER). Our viewProduct selection continues to be one of the most challenging decisions taken by the senior management at pharmaceutical companies. In our previous reviews, we have seen many companies targeting the same business opportunity, which in turn leads to unprofitable operations due to poor development decisions.Could our list of these golden old drug monopolies provide ideas to companies on their strategy going forward? Watch this space for more.

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20 Aug 2015

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Drugs with no patents and no competition – here’s our list of new ‘price-gouging’ targets

Making a fortune out of decades-old prescription drugs

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