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Slide Title Current Trends in the US Generic Market 15th Annual IGPA Conference
Shawn Brown Vice President, International Affairs • December 5, 2012
Presentation Outline
• Industry Overview – Growth in Generic Sector
• Watson/Actavis Introduction
• Consolidation
• Globalization + Trade
• Biologics
• GDUFA
I. Industry Overview
Industry Overview
20%
80% 74%
26%
Total Prescription Drug % of Prescriptions
Dollars Spent
Brand Generic
86.4% 86.1% 85.8% 85.3% 83.1% 81.8%
40.3%36.5%
32.1% 29.4% 26.0% 23.3%
13.6% 13.9% 14.2% 14.7% 16.9% 18.2%
59.7%63.5%
67.9% 70.6% 74.0% 76.7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2007 2008 2009 2010 MAT
Dec 2011
2006 2007 2008 2009 2010 MAT
Dec 2011
% M
AR
KE
T S
HA
RE
%Dollars %Total prescriptions dispensed
Brands Generics
Generics have reached all-time high share
Source: IMS Health, National Sales Perspectives, Dec 2011, National Prescription Audit, Dec 2011, Branded generics disaggregated Copyright IMS Health; All rights reserved
5
Growth in Generic Market
• 2011 US pharmaceutical market grew 3.7%; Generics account for 54% of growth
• Affordable Care Act will cover about 33 million additional lives
• An estimated $250 billion of brand product will lose patent protection between 2012 and 2015
• Generics are now dispensed 94% of the time where a generic form is available, up 1% from 2010
Generics Account for 54% of Dollar Growth in 2011
2007
Brands
79%
21%
MAT Dec 2011
Brands
46%Generics
54%
Source: IMS Health, National Sales Perspectives, Branded generics disaggregated, Dec 2011
Copyright IMS Health; All rights reserved
AC = +$11bn AC = +$10bn
% Contribution to growth US$
7
Average Price of Brand Versus Generic Prescription
$0.00
$50.00
$100.00
$150.00
$200.00
$138
$35
$1.50
$195
$21
$1.50
Brand1 Generic1 Generic Brand2 Generic2 Generic Manufacturer (Medicaid) (Medicaid) Manufacturer
1Source: Brand & Generic pricing is The National Association of Chain Drug Stores, 2008 2Source: Brand & Generic Medicaid pricing is Centers for Medicare and Medicaid Services (CMS), 2008
Expansion of Health Care
Drug Patent Expirations
Generics continue to post strong growth in the US
3.7%
2.0%
11.6%
0%
5%
10%
15%
YTD Dec 2011
% G
RO
WT
H 0.8%
4.5%
-9.8%
-15%
-10%
-5%
0%
5%
10%
YTD Dec 2011%
GR
OW
TH
Source: IMS Health, National Prescription Audit, Branded generics disaggregated, Dec 2011
Source: IMS Health, National Sales Perspectives, Branded generics disaggregated, Dec 2011
Jan 2011 to Dec 2011 Jan 2011 to Dec 2011 % Growth US$ % Growth TRx
Total market Brands Generics
Copyright IMS Health; All rights reserved
11
Generics and Specialty outperformed the US market in 2011
3.2%
4.4%3.7%3.7%
2.1%2.8%
13.8%
6.7%
0%
5%
10%
15%
MAT Dec 2011
% G
RO
WT
H
Total Market Brand Branded Generic
Generic Primary Care Driven Atcs Specialist Driven Atcs
Biologic Molecules Oncologics
Twelve months ending Dec 2011 % Growth US$
Source: IMS Health, National Sales Perspectives, Dec 2011 Copyright IMS Health; All rights reserved
12
II. Watson/Actavis
Watson + Actavis By the Numbers
• 3rd largest global generics company
• 10% combined market share in US
• 17,000 employees
• 17 global R&D centers
• 30 manufacturing facilities ~ 44B unit capacity
• Commercial and operational footprint in 60+ countries
III. Consolidation
15. Apotex 1.3
14. Fresenius 1.3
13. Cipla 1.3
12. Dr. Reddy’s 1.4
11. Sun Pharma 1.6
10. STADA Arzneimittel 1.6
9. Aspen Pharmacare 1.8
8. Ranbaxy Laboratories 1.9
7. Hospira 2.2
6. Actavis 2.3
5. Sanofi 2.4
4. Watson 3.4
3. Mylan 5.6
2. Sandoz 8.6
1. Teva 10.2
Watson/Actavis 5.7
2011 Worldwide generic sales, USD Billion
Combined Company will hold a top 3 positions in 11 markets and a top five position in 15 markets.
Combined Company will be 3rd Largest Global Generics Company
Gx M&A History: Living Proof that “Merge/Acquire scale” is Important
IV. Globalization + Trade Policy
Gx Prices Declining in Western Markets and will Continue to do so
1 Top 25 molecules in Q1/2005; average gross prices in local currency per SU from IMS (US: USD, UK: GBP, other: EUR); IMS data not adjusted for combination products SOURCE: IMS; McKinsey
EX-MNF (IMS) gross prices for top 25 molecules1
40
60
80
100
120
Italy
UK
Germany
2005 06 07 08
Percent, normalized to price level in Q1/2005
2010 09
Spain France
US
Pharmerging markets will show the most growth
-10%
-5%
0%
5%
10%
15%
20%
25%
0
200
400
600
800
1,000
1,200
2010 2011(f)
2012(f)
2013(f)
2014(f)
2015(f)
% G
RO
WTH
(CO
NST U
S$)
SALES U
S$BN
Global USAEU5 JapanTier 1 Pharmerging Tier 2 PharmergingTier 3 Pharmerging CanadaSouth Korea
Global Sales and Market Growth Developed Markets
CAGR 2011-2015
US 1 - 4%
Japan 2 - 5%
Germany 1 - 4%
France -1- 2%
Italy 0 - 3%
Canada -2 - 1%
Spain -2 - 1%
UK -1- 2%
S. Korea 1- 4%
Developed 1 - 4%
Source: IMS Health, Market Prognosis, October 2011 Copyright IMS Health: All rights reserved
Pharmerging Markets
CAGR 2011-15
Tier 1 (China) 16-19%
Tier 2 12-15%
Brazil 12-15%
Russia 11-14%
India 14-17%
Tier 3 10-13%
Pharmerging 13-16%
23
Free Trade Agreements
• Many agreements delay access to generics – Contradict U.S. and WTO commitments – Give extra layer of protection for brands via linkage – Make it difficult for generics to begin research – Impact: Back door to change U.S. laws
• New Trade Policy (NTP) – Affects FTAs with Colombia, Panama and Peru – Limits brand industry ability to overreach by gaining
more IP rights than they have under U.S. law – NTP promotes balance between pharmaceutical
innovation and access – Impact: Positive step; yet, more change is required
New Trade Policy (Overview)
• US generic industry supports the May 10 Bipartisan Agreement on Trade Policy (adopted in U.S.-Peru FTA) as a significant improvement to U.S. Trade Policy
– Establishes high standard of IP protection
– Elimination of the requirement to provide patent extensions for marketing approval delays for pharmaceuticals
– Elimination of the requirement to provide patent linkage
– Significant improvements on market exclusivity
– Provide possibility to grant effective rewards for the successful challenge of the validity or applicability of a patent (180-day market exclusivity is main driver for patent challenges in the US)
Patent Term Extensions
• U.S. FTAs historically require patent term extensions and allow patent
term restoration without limits.
• U.S. law: • Provides extensions only for certain types of patents (active ingredient,
formulation, method of use) • Provides only one patent extension per product • Limits extensions to 5 years for restoration period • Extension is capped at 14 years marketing
• Patent extensions should not be mandated in the TPP (as in the U.S.-Peru FTA)
Patent Term Extensions
• U.S. FTAs historically require patent term extensions and allow patent term restoration without limits.
• US-Korea: Party SHALL adjust the term of a patent to compensate for unreasonable delays that occur in granting of patent AND unreasonable curtailment of the effective patent term as a result of marketing approval process” – No limit on type of patent, number or duration of extensions
• New Trade Policy (US-Peru): Party SHALL – Make best efforts to process applications expeditiously
– Cooperate and assist to achieve this objective
• New Trade Policy (US-Peru): MAY . . . Provide means to compensate for unreasonable delays in issuance of a patent by restoring patent term AND MAY make available a restoration to compensate for unreasonable curtailment of the effective patent term resulting from the marketing approval process
7 years R&D
2 years regulatory review
5 year Patent Extension modified by 14 year cap
7 years R&D
2 years regulatory review 5 year Patent Extension
With 14 Year Cap:
Without 14 Year Cap:
20 YEARS
20 YEARS
Declaration on the TRIPS Agreement and Public Health
• US Trade Act requires US negotiators “to respect the Declaration on the TRIPs Agreement and Public Health” affirming support for “WTO members’ right to public health, to promote access to medicines for all”
• This requires a balanced agreement
Generic Position on US Trade Policy
• Pharmaceutical industry becoming increasingly globalized
• Generic competition is essential to the sustainability of public health, domestically and globally
• The New Trade Policy (US-Peru FTA) improved the balance of interests in cultivating competition and incentivizing innovation in the pharmaceutical market
• The TPP should reflect the balance between protecting IP rights and ensuring access to affordable medicine (patent extensions, data exclusivity, biologics, patentable subject matter, etc.)
– Patent linkage in the TPP IS NOT consistent with US law or TRIPs Agreement, DOES NOT create certainty, DOES NOT function in other markets
V. Biologics
Growth of interest in biosimilars
• Mainly “generics” companies • Emerging markets
• Niche dev. companies
• Generics companies • Emerging markets
• Niche dev. companies
• “Brand” companies (biotech / pharma) • CMOs / CROs
• No prior history of drug development
1st wave
Now
Biosimilars have yet to deliver on their promise This makes the next few years even more crucial to the long term viability of the
market
Past expectations vs. Current figures
Why it did not happen
2007*: What biosimilars were supposed to deliver by 2011
16 bil US$
2011: What biosimilars have delivered so far
~0.6* bil US$
1. Biosimilars uptake does not
follow the traditional generic
curve
• Growth only through new
patients
• Limited price reduction
• Overall scepticism due to
safety concerns
2. Absence of a US market
• Legislation recently approved
and still unproven
Source: Suzanne M. Sensabaugh. Biological generics: A business case (2007) Journal of Generic Medicines 4 , 186-199, * MAT 09/2011
Copyright IMS Health: All rights reserved
33
US will represent cornerstone of biosimilars market in the long run, with an upside potential up to 25 Bil US$ in 2020
Biosimilars not a short-term game
2015 1,9 – 2,6 Bil US$
2020 11 – 25 Bil US$
• Slow uptake in the US due to new legislation enabling innovators to delay the approval process of new biosimilars
• Uptake in Europe accelerates due to more mature framework
• Emerging countries (Asia specifically) ramping up
Source: IMS analysis on MIDAS data, Extrapolation of MIDAS data, Price cut set at 40-50%, uptake curves based on analogues and evidence from marketed biosimilars. Copyright IMS Health: All rights reserved
Biosimilars market evolution, 2010 - 2020
• Key upside drivers represented by the US market
11
20
25
Share of biologics market - 2020
4%
8%
10%
Aligned with recent publication from IMS IHI, 2 – 2,5 bil US$
34
Generics Pharma / biotech
Emerging markets
CMO / CRO / Other
Growth of Biologics
# Brand Name(s) Sales (USD)
1 Lipitor $14.3bn
2 Advair $6.1bn
3 Plavix $6.0bn
4 Nexium 5.1bn
5 Norvasc $4.9bn
6 Rituxan $4.7bn
7 Zyprexa $4.4bn
8 Enbrel $4.4bn
9 Diovan $4.2bn
10 Remicade $4.2bn
2006
# Brand Name(s) Sales (USD)
1 Lipitor $12.0bn
2 Plavix $9.1bn
3 Advair $8.1bn
4 Enbrel $7.3bn
5 Humira $6.7bn
6 Remicade $6.5bn
7 Avastin $6.2bn
8 Diovan $6.1bn
9 Rituxan $6.1bn
10 Crestor $6.1bn
2010
# Brand Name(s) Sales (USD)
1 Humira $9.7bn
2 Avastin $7.6bn
3 Rituxan $7.7bn
4 Crestor $7.5bn
5 Enbrel $7.2bn
6 Advair $7.0bn
7 Januvia $6.8bn
8 Herceptin $6.5bn
9 Remicade $6.1bn
10 Prevnar 13 $5.8bn
2016 (projected)
Lonza - Investor Relations presentation, 2011
Evaluate Pharma; other industry sources
Total biologics sales: projected growth WW pharmaceutical sales (top ten)
Patents
Adapted from: Bernstein - Biosimilars: Quo Vadis - A Snapshot of the Biosimilar Industry Halfway Through Its Formation, 2011
Avastin
Rituxan
Herceptin
Enbrel
Humira
Remicade
Erbitux
US EU
Potential launch dates
Biosimilar Opportunity
Teva (Rampy): Bernstein Research 4th Annual Long View Biosimilars Conference, 2011 Adapted from: IMS - Shaping the biosimilars opportunity: A global perspective on the evolving biosimilars landscape, 2011
Total opportunity Projected growth
Current Status (Sep 2012)
EU 19 Marketing Authorisation Applications reviewed
• 14 positive, 4 withdrawn, 1 negative
12 biosimilars currently hold a valid MA • 1 somatropin, 5 epoetin, 6 filgrastim
7 biosimilar MAAs are currently under review • 3 insulin, 1 follitropin alfa, 2 infliximab, 1 fligrastim
EMA Scientific advices (first and follow-up) • 2003 – 2007 < 10 advices per year • 2008 – 2010 around 15 advices per year • 2011 over 30 advices (mainly MAbs) • 2012 approx 15 advices
US 30 Pre-IND meetings 11 INDs
EMA (Tiitso) - Current status of EU Regulations and Guidance; DIA/FDA Biosimilars Conference, 2012 FDA - DIA/FDA Biosimilars Conference, 2012
FFDC Act
Octreotide ANDA
Desmopressin ANDA
Glucagon 505b2 NDA
Calcitonin Calcium ANDA
Somatotropin 505b2 NDA
Menotropins 505b2 NDA
Menotropins ANDA
Hyaluronidase 505b2 NDA
PHS Act
Albumins Limited clinical data
Immunoglobulins Limited clinical data
Allergenic products Limited clinical data
Science is here for low to
moderately complex
products- but still no defined pathway…
Biopharmaceuticals Already Approved By An Abbreviated Pathway
VII. GDUFA
42
Office of Generic Drugs
43
Office of Generic Drugs
44
Office of Generic Drugs
Generic Drug User Fees
• S.3187 – “Food and Drug Administration Safety and Innovation Act” (FDASIA)
• Last twelve months – Average receipts of originals 92/month (1103) – Average approvals 43 AP/month (479)
• Backlog at OGD is at 2933* ANDAs as of 9/30/2012 – To clear backlog at current rate – 2933/517 =
5.67years – If stream of ANDA continue at current pace (1000+/yr)
and with the phase in of staffing over 3 years there will be great pressure to meet the 3-5 year metrics
Generic Drug User Fees
• $299M per year is less than ½ of 1% of Generic Drug sales
• And is expected to reduce costs considering the reduced development/regulatory timelines
• GDUFA results in less than doubling in OGD over the life of the program
• Efficiency enhancement are a critical component of GDUFA
• GDUFA is modest size despite 10 X plus the application volume of brands
• Funding level = inflation adjusted $299M/year • Application Fees
• Applications in the backlog (year 1 only) • Drug master file fee (and availability for reference list) • ANDA and prior approval supplement (PAS) filing fee – Includes
PAS for labeling
• Facility Fees • Involved in manufacture of generic drugs, whether API or
Finished Dosage Form, domestic or foreign
• Individual fees calculated/published upon implementation
• Fees not linked to types of services; rather overall goals
Generic Drug User Fees
Goals and Benefits of the Program
• Certainty for industry
• Provide FDA with predictable budget
• Limit cost
• Ten month review cycle
• Eliminate the backlog
• Risk adjusted, biennial inspection with parity of foreign and domestic frequency
Fee Outline
Segment split - 80% from finished dosage form manufacturers, 20% from API manufacturers
• No FDA input to this; rather an industry segment negotiation
Type split - 70% from facility fees, 30% from application fees
• Need for stability
• 6% of overall revenue from DMF fees; 24% from ANDA/PAS fees; 56% from FDF facility fees; and 14% from API facility fees
Individual fees have published for ANDA, PAS and DMF
Fee Outline
• GDUFA Fees (estimate based on $299 million) – US Establishment $110-125,000
– X US Estab. $125-140,000
– US API Estab. $ 18 - 25,000
– X US API Estab. $ 30 - 40,000
– Orig. ANDA $ 51,520
– PAS $ 25,760
– Orig. DMF $ 21,340
– ANDA Backlog Fee $ 17,434
OGD HR Goals
• Hire and train 25% of incremental staff in FY 2013
• Hire and train 50% of incremental staff in FY 2014
• Aspire too complete 100% in FY 2015
52
• No Inspection required
• 60% of submissions within 6 months for FY 2015 receipts
• 75% of submissions within 6 months for FY 2016 receipts
• 90% of submissions within 6 months for FY 2017 receipts
• Inspection required
• 60% of submissions within 10 months for FY 2015 receipts
• 75% of submissions within 10 months for FY 2016 receipts
• 90% of submissions within 10 months for FY 2017 receipts
Metrics - PAS
53
54
• Inspection Metrics
• Risk Adjusted Surveillance Inspection • Achieving biennial inspection rate and parity of foreign and domestic
frequency in FY2017
• PAIs continue
• Backlog Metrics
• Review and act on 90% of backlog applications pending on October 1, 2012, by end of FY 2017
Metrics - Other
Thank You
