MMS Project Guidelines revised (2)

8/7/2019 MMS Project Guidelines revised (2)

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A

PROJECT REPORT

ON

IMPACT OF PATENT EXPIRY ONPHARMACEUTICAL INDUSTRY

FOR

MASTER OF MANAGEMENT STUDIES (MMS)UNIVERSITY OF MUMBAI

SUBMITTED TO

MARATHA MANDIRS

BABASAHEB GAWDE INSTITUTE OFMANAGEMENT STUDIES

MUMBAI CENTRAL

UNDER THE GUIDANCE OF

Prof.Dr.C.M.SANKARAN KUTTY

SUBMITTED BY

SWAPNIL.S.WARGAONKARBATCH 2009-2011 & ROLL NO.120

MARKETING

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CERTIFICATE

This is to certify that ________________________________________has

successfully completed the project work as a part of academic fulfillment of Masters

of /Management Studies (M.M.S.) semester IV examination.

Name & Signature of Project Guide

Date : _________________

DIRECTORBGIMS

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DECLARATION

I, Swapnil Satish Wargaonkar of Master of Management Studies (Semester IV) of

Babasaheb Gawde Institute of Management Studies (BGIMS), hereby declare that I have

successfully completed this Project on Impact of Patent Expiry on Pharmaceutical

Industry in the academic year 2010-11 The information incorporated in this project is true

and original to the best of my knowledge.

_____________________________

Signature

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ACKNOWLEDGEMENT

This project would not have been possible without the guidance, help & cooperation of a

number of people. I extend my gratitude to all these people who helped me some or the

other way to complete my project.

My sincere thanks to Prof.Dr.C.M.Sankaran Kutty who considered my candidature for

final project & thus provided me with an opportunity get an insight of current

pharmaceutical industry.

I owe my sincere thanks to Dr. Sunil Karve, Director of Maratha Mandirs Babasaheb

Gawde Institute of Management Studies, Mumbai Central who helped me greatly in

winding up my project and has been inspiring me throughout.

I also want to thank all my other teachers who introduced me to various concepts ofmanagement & provided me with the confidence of entering the corporate world.

I also extend my gratitude to all my friends & my family for their love & support.

Swapnil.S.Wargaonkar

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TABLE OF CONTENTS

Chapter Contents PageNo

1 Executive Summary 8

2 Introduction 9

2.1 Statement of the problem 9

2.2 Significant of the study 9

2.3 Purpose 10

2.4 Objectives 10

2.5 Hypothesis

11

3 Research design and methodology 12

4 A Conceptual framework 14

5 Trends in Pharmaceutical Industry 16

6 Generic Drug Industry 22

7 Review of Literature 27

8 Case study & Market Research 32

8.1 Case study 1 MERCK ZOCOR 32

8.2 Case study 2 PFIZER LIPITOR 46

8.3 Anticholesterol drug market of India and Market survey 53

9 Presentation and Analysis of data 56

10 Findings 66

11 Results 68

12 Recommendations/suggestions 70

13 Limitations 72

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14 REFERENCE SECTION

14.1 Appendix

14.2 Bibliography

14.3 Webliography

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76

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LIST OF TABLES

Number NAME PAGE NOS1 Blockbuster drugs 162 Original drugs that did not get launched in India 173 Acquisitions by MNCs 204 Indian company review of patent fights 255 Strike rate of Indian company in patent fight 266 Price of Zocor v/s Leschol 367 Price of branded Lipitor v/s generic lipitor 52

LIST OF CHARTS

Number NAME PAGE NOS1 Sales of Merck including Zocor 33

2 Sales of Merck including Zocor 343 PBMC Medco & Merck review 374 Medco, Zocor and other Merck products sale 385 Zocor sales through its life cycle 386 Net income of Merck 427 Pfizer v/s Wyeth sales and other assets comparison 48

LIST OF FIGURES

Number NAME PAGE NOS

1 Caudet 502 Caudet 53

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1. EXECUTIVE SUMMARY

While studying marketing as a major subject the most important and interesting thing that I

came across was the rapid growth rate of pharma industry in India as well as worldwide and

different factors affecting it. Being a B.pharmacy graduate, the recent up and downs in

pharma industry alongwith the highly volatile market due to major Mergers&Acquisitions

attracted me to do research on the same.

The purpose of my project is to identify the reasons behind the major M&As done by many

MNCs as well as their buyouts in India and other emerging markets. In this reference we

propose and examine a retail audit market survey alongwith case studies of MNCs like

Pfizer & Merck which identify the factors that led to decrease in revenue and market share

of organization that holds patented drug as well as factors contributing to M&As.

A wide range of measurement techniques are used in the study. The research design selected

for this study is exploratory. The sampling method adopted for research work was

convenient sampling method. The respondents have been located at various towns across

Mumbai city. The research work gave an insight into the impact that a patent expiry of block

buster drug has on pharma industry worldwide and different strategies adopted by the same

to overcome it as well as current scenarios in India w.r.t patenting laws, patent expiry &

generic drug market.

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2. INTRODUCTION

Companies holding patents for the products of pharmaceutical products face serious

threats, once the patent expires its validity.

Many firms are facing problems on account of these issues. Not much study has

been done in this area w.r.t Indian market. Hence this study is carried out.

2.1 STATEMENT OF PROBLEM

TO STUDY THE IMPACT OF PATENT EXPIRY OF BLOCK BUSTER DRUG

ON PATENT HOLDING PHARMACEUTICAL INDUSTRY IN ANTICHOLESTEROL

DRUG MARKET

2.2 SIGNIFICANCE OF THE STUDY:

The significance of this study arises out of the need for identifying the issues that weaken

the growth of pharma industry. Issues such as:

1. Patent expiry of blockbuster drug in pharmaceutical industry in anticholesterol drug

market citing comparative example of ZOCOR (simvastatin) of MERCK and

LIPITOR (atorvastatin) of PFIZER.

2. To understand the rise of Generic drug market in world as well as India due to less

entry barriers

3. To understand the Patenting policy in India and world

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2.3 PURPOSE:

1. To analyze the impact of generic drug manufacturing industry on pharmaceutical

industry

2. To understand the financial impact on pharmaceutical company during post patent

expiry period

3. To understand the strategies adopted by pharmaceutical companies to

Retain the market share

Increase revenue

Attract investors to invest in the organization

As well steps taken to promote brand/sales

2.4 OBJECTIVES OF THE PROJECT

1. A project is an essential part of MMS curriculum

2. The project was conducted To study Impact of patent expiry on a pharmaceutical

company w.r.t Anticholesterol drug(statin) market

3. To study the strategies adopted by pharmaceutical companies during post patent

expiry period

4. To study the outcome of the strategies implemented by the organization

5. To study the impact of patent expiry on beneficiaries i.e generic drug

industry/market

6. To study opportunities available to generic companies in India

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7. To study and analyze local Indian market(metro city) via market research for:

Generic version of patent expired product in Anticholesterol drug market

&

Competition in market prior to launch of generic version of patent expired product in

Anticholesterol (statin) drug market

8. To study the current trend in International market w.r.t to patenting and other

regulatory as well as free trade agreement for medicines

2.5 HYPOTHESIS:

The study is based on the hypothesis that :

Generic drug manufacturing companies are at an advantageous position for

launching the generic version of patent expired product or where a patent(s) is/are

not in force.

Patent expiry of blockbuster drug leads to loss of market share of a company

Patent expiry of blockbuster drug leads to decrease in revenue of a company

3. RESEARCH DESIGN

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I. Research Objective:

To Monitor Trends

Sales(Market)

Brand Competition

To Understand Distribution

Width & Depth

Shelf Competition

I. Research type:

Syndicated/Continuous: Retail audit

I. Sampling :

Sampling Universe Medical shops.

Sampling/Coverage Area Mumbai/Thane

Sample Size 50

Sampling method: Random

I. Research Methodology: The study is a cross sectional study and data wascollected at single point of time.

Data Collection Method:

As the study was about analyzing local Indian market (metro city) via market

research for generic version of patent expired product/launch of generic

version of patent expired product in Anticholesterol (statin) drug market

primary data was directly collected from the Medical shops and was a

mandatory requirement.

As well as to corroborate with the data collected regarding Merck and Pfizer

case studies Interviews were scheduled with respondents working for pharma

MNC.

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Also information regarding anticholesterol drugs market in India, the

manufacturers of anticholesterol drugs, the expected growth in this market

etc was also required. So secondary data is also included in this project.

I. Research Measuring Instrument :

The Measuring Instrument adopted in this research report is the

Questionnaires which are filled in by the Medical shop owners/operators

themselves.

So that first hand information is available directly from the POP.

I. Data Interpretation :

The interpretation of the data was purely done on logical grounds. Based on

the findings from the questionnaire filled in by shop owners the data was

feed into an excel sheet

I. Data Analysis :

The data collected was from 50 respondents and analysis was done critically

taking into consideration every aspect viewed.

The analysis is shown in the form of graphs, pie-charts & tables

I. PERIOD OF STUDY: 3 months

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Chapter 4. A Conceptual framework

What is Drug?

Substance used in the diagnosis, treatment, or prevention of a disease or as acomponent of a medication. Such a substance as recognized or defined by the U.S.

Food, Drug, and Cosmetic Act

Definition:

All medicines for internal or external use of human beings or animals an all

substances intended to be used for or in diagnosis,treatment,mitigation or prevention

of any disease or disorder in human being or animals including preparation applied

on the human body for the purpose of repelling insects like mosquitoes

Substance other than food intended to affect the structure or any function of the

human body or intended to be used for the destruction of or insects, which causes

disease in human beings or animals

All substances intended to be used as components of a drug including empty gelatin

capsules

Such devices intended for internal or external use in diagnosis, treatment, mitigation,

or prevention of disease or disorder in human beings or animals

What are Branded Drugs?

A Branded Drug has a trade name and is drug manufactured by a well established

pharmaceutical company, protected by a patent. It cannot be produced or sold by any

other company

What areGeneric Drugs?

Drug which is produced and distributed without patent protection

Generic drugs are chemical equivalents of name-brand drugs that contain the same

active ingredients as the original formulation

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According to the U.S. Food and Drug Administration (FDA), generic drugs are

identical or within an acceptable bioequivalent range to the brand name counterpart

with respect to pharmacokinetics and pharmacodynamics properties

The generic drug may still have a patent on the formulation but not on the active

ingredient

Generally less expensive than their name brand counterparts, are manufactured and

marketed by other companies and, in the 1990s, accounted for about a third of all

prescriptions written in the United States

For approval of a generic drug, the U.S. Food and Drug Administration (FDA)

requires scientific evidence that the generic drug is interchangeable with or

therapeutically equivalent to the originally approved drug. This is called an "ANDA"

(Abbreviated New Drug Application)

What are Patents?

A patent is an official right, to be the only person or company allowed to make or

sell a new product for a certain period of time

As per the FDA Regulation the patent of any medicine can last for 17 years. After

which the generic version of the drugs is released

Indian scenario

In India patent implementation took place 2004-2005

So pre 2004-05 drugs dont qualify for protection under patents right

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Chapter 5. Trends in Pharmaceutical Industry

For purpose of this study Blockbuster drug is defined as:

A blockbuster drug is a drug generating more than $1 billion of revenue for its

owner each year

"A blockbuster drug is one that achieves acceptance by prescribing physicians as a

therapeutic standard for, most commonly, a highly prevalent chronic (rather than

acute) condition. Patients often take the medicines for long periods."

A report from URCH Publishing estimated that about one third of the pharma market

by value is accounted for by blockbusters. About 125 products are blockbusters.

Top seller was Lipitor marketed by Pfizer with sales of $12.5 billion

In 2009 there were a total of seven new blockbuster drugs, with combined sales of

$9.8 billion

DRUG NAME COMPANY TREAT 2009

Lipitor Pfizer Cholesterol $12.5 billion

Nexium AstraZeneca Heartburn/gastric reflux

$6.3 billion

Plavix Bristol-MyersSquibb

Blood thinner $5.4 billion

Advair diskus GlaxoSmithKline Asthma/COPD $5.6 billion

Seroquel AstraZeneca Atypical anti-psychotic $4.5 billion

Zyprexa Eli-lilly Neurodisease $5 billion

Cymbalta Eli-lilly Neurodisease $3 billion

Table 1

Why MNCS not bring blockbuster drug to India

Lack of Patent Recognition

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India lagging in research output

Country Ranks 9th In Patents Filed, 12th In Granted

Copy Market

Approvals are not happening fast enough, In three years now, only about nine drugshave got product patents. The process needs to be fast and clear.

Some Original Drugs that did not get launched in the Indian market

Company Use Brand/Drug

AstraZeneca Cholesterol lowering Crestor (Rosuvastatin)

Johnson&Johnson Antibiotic Levaquin

Pfizer Cholesterol lowering Lipitor (Atorvasatin)

Table 2

IMS Forecast on Global Pharma Market

Growth in 2010 4 - 6%

Expansion Through 2014 5 - 8%

Growth single digit : New product introductions decreased

Patent losses increased

Increase in generic demand and approvals

New products not expected to generate same magnitude of sales as compare

to products losing patent protection. (no blockbuster)

Current Indian Scenario:

The domestic pharma sector continued its strong show in 2010 and recorded a 16.5%

growth during January-December 2010

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Cipla topped the list with the highest market share 5.21%, cough medication Corex

(Pfizer) was the largest-selling brand in the organized retail market

During 2010, Corex, the largest selling drug, recorded annual sales of Rs 205 crore

The Rs 46,787-crore pharma market has been on an upswing over the last four years

with a growth of 13-17%

Mumbai patent office rejects Abbotts and Bristol-Myers Squibb drug application for

HIV drugs in December 2010.

Abbotts application for Lopinavir & Ritonavir (LPV/r) as it lacked inventive step

BMSs application for Atazanavir bisulphate (ATV) as it lacked inventive

ingenuity

All the 3 drugs are recommended by the WHO for second-line AIDs therapy while

LPV/r is also sometimes used as first line therapy for infants born with HIV

Market growth for 2011 forecast in the range of 15-17%

Trends in Pharmaceutical Industry:

The pharmaceutical industry is most profitable industries of all businesses in U.S. &

in annual Fortune 500 survey return of 17% on revenue.

USA accounts almost half of the global pharmaceutical market$289 billion in

annual sale followed by the EU and Japan.

Emerging markets such as China, Russia, South Korea and Mexico outpaced that

market, growing a huge 81 percent.

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Number of methods for foreign companies to explore opportunities inIndia.

Outsourcing : Recently there has been a move from outsourcing lower value and

manufacturing activities to more research-based capabilities

Licensing is being used to establish a common platform in order to gain rapid in-market acceptance and create a complete therapy range

Franchising : US-based Medicine Shoppe International. For instance, has entered the

market as Medicine Shoppe India and plans to expand to 1,000 stores

Joint ventures with domestic partners bring local expertise and a local network and

require government approval. Pharmaceuticals are deemed a high priority area so

approvals can be quick.

Some multinational companies such as Pfizer and Novartis are taking advantage of

the potential in India through partially or wholly owned subsidiaries.

So far, India has witnessed five major pharma deals starting from

Ranbaxy Daiichi Sankyo

Dabur Pharma Fresenius

Matrix Mylan

Orchid Hospira and

Abbott - Piramal

Acquisitions of Indian Generic companies by MNCs

No Year Acquirer Target Company

Company Country

1 Jun08 Daiichi SankyoCo Ltd

Japan Ranbaxy Laboratories

2 Aug08 Fresenius KabiAG

Germany Dabur Pharma

3 Jun09 Pfizer (AnimalHealthBusiness)

U.S. Vetnex Animal Health Ltd (earlier ICICIVenture acquired from Ranbaxy)

4 Jun09 Vetoquinol SA France Wockhardt (Animal Care Subsidiary)

5 Jul09 Abbott U.S. Wockhardt (Nutrition Business)

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Laboratories

6 Jul09 Sanofi Aventis FrancethroughMerieuxAlliance

Shantha Biotech (Hiked stake from 60%to 80%)

7 May10 Abbott

Laboratories

USA Piramal Healthcare(Sale of Business)

Table 3

The world over, the pharmaceutical Industry is undergoing a paradigm shift in the

way it conducts business:

To sustain its growth trajectory.

With research pipelines running dry and patents of many blockbusters nearing

expiry, MNCs have to rejig their business model to survive

With the increase in life expectancy, most Governments in developed countries are

battling with ballooning healthcare expenditure:

Increasingly looking at generics to contain healthcare costs e.g United Kingdom and

USA

Countries like Japan who scoffed at generics are beginning to take a second look at

generics, albeit grudgingly

Even the most diehard research based companies have started exploring generic

business:

Generics is a high volume low margin business, when one looks at the world as a

market and also at the biosimilars opportunity, the margins look encouraging.

This has resulted in spate of MNCs acquiring or tying up with Indian generic

companies e.g PFIZER

Indian companies with their US / EU FDA approved , low cost manufacturing

facilities and strong ANDA and para IV pipelines and well trained field force are

becoming potential targets.

The strategy is simple. Once capture Indian market of generic drugs and medicines

and then sell them at the price of their choice.

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Chapter 6. Generic Drug Industry

GENERIC DRUG INDUSTRY

Generic drugs can save patients and insurance companies substantial costs.

The principal reason for the relatively low price of generic medicines is that

competition increases among producers when drugs no longer are protected by

patents.

Companies incur fewer costs in creating the generic drug, and are therefore able to

maintain profitability at a lower cost to consumers.

The costs of these generic drugs are so low that many developing countries can

easily afford them. For example, Thailand has imported millions of doses of a

generic version of the blood-thinning drug Plavix (used to help prevent heart

attacks), at a cost of 3 US cents per dose from India, the leading manufacturer of

generic drugs

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Generic manufacturers do not incur the cost of drug discovery, and instead are able

to reverse-engineer known drug compounds to allow them to

manufacture bioequivalent versions.

Generic manufacturers also do not bear the burden of proving

the safety and efficacy of the drugs through clinical trials, since these trials have

already been conducted by the brand name company

When a generic drug can be produced

When a pharmaceutical company first markets a drug, it is usually under a patent that allows

only the pharmaceutical company that developed the drug to sell it.

Generic drugs can be legally produced for drugs where:

The patent has expired,

The generic company certifies the brand company's patents are either invalid,

unenforceable or will not be infringed,

For drugs which have never held patents, or

In countries where a patent(s) is/are not in force.

The expiration of a patent removes the monopoly of the patent holder on drug sales

licensing. Patent lifetime differs from country to country, and typically there is no way to

renew a patent after it expires

STRATEGIES BY GENERIC COMPANIES

Abbreviated New drug application ( ANDA )(Exclusivity period)

The U.S. Food and Drug Administration offers a 180 day exclusivity period to

generic drug manufacturers in specific cases.

During this period only one (or sometimes a few) generic manufacturers can produce

the generic version of a drug.

This exclusivity period is only used when a generic manufacturer argues that a

patent is invalid or is not violated in the generic production of a drug, and the period

acts as a reward for the generic manufacturer who is willing to risk liability in court

and the cost of patent court litigation.

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There is often contention around these 180 day exclusivity periods because a generic

producer does not have to produce the drug during this period and can file an

application first to prevent other generic producers from selling the drug.

Exclusivity "bonus" provided for by the Hatch-Waxman Amendments:

Drug Price Competition and Patent Term Restoration Act, informally known as the

"Hatch-Waxman Act" [Public Law 98-417], is a 1984 United States federal law which

established the modern system of generic drugs. The informal name comes from the Act's

two sponsors, representative Henry Waxman of California and Senator Orrin Hatch of Utah.

Hatch-Waxman amended the Federal Food, Drug, and Cosmetic Act. Section 505(j) 21

U.S.C. 355(j) sets forth the process by which would-be marketers of generic drugs can

file Abbreviated New Drug Applications (ANDAs) to seek FDA approval of the generic.

Section 505(j)(2)(A)(vii)(IV), the so called Paragraph IV, allows 180 day exclusivity to

companies that are the "first-to-file" an ANDA against holders of patents for branded

counterparts.

Hatch-Waxman Amendments grant generic manufacturers the ability to mount a validity

challenge without incurring the cost of entry or risking enormous damages flowing from any

possible infringement. Hatch-Waxman essentially redistributes the relative risk assessments

and explains the flow of settlement funds and their magnitude. Hatch-Waxman gives

generics considerable leverage in patent litigation: the exposure to liability amounts to

litigation costs.

A prime example:

Simvastatin (Zocor), created and manufactured by U.S. based pharmaceutical Merck & Co.,

which lost its US patent protection on June 23, 2006. India-based Ranbaxy Laboratories (at

the 80 mg strength) and Israel-based Teva Pharmaceutical Industries (at all other strengths)

received 180 day exclusivity periods for simvastatin; due to Zocor's popularity, both

companies began marketing their products immediately after the patent expired.

INDIAN GENERIC INDUSTRY

INDIAN Scenario:

INDIA will be one of the top 10 sales markets by 2020

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Around $70 billion worth of drugs are expected to go off patent in the US over the

next three years

Domestic Indian companies account for 35% of ANDAs highlighting the future

potential of the respective companies.

Highest number of US-FDA approved plants, outside the US, is located in India

India is already producing 20 percent of the global requirement for generic drugs

increases its attractiveness

Over the next five years, products that currently generate more than $142 billion in

sales are expected to face generic competition, including Lipitor, Plavix and

Zyprexa.

India is third largest generic supplier in the world in volume of medicines,

supply amounting roughly Rs.40,000 crores annually

As per IMS health India july2010 Indian pharmaceutical market reached Rs.45,180

crore

Total turnover of Indian pharma industry at end of 2009 was Rs,94,680 crore

Source: Report by Pricewaterhouse Coopers (PwC), Global pharma looks to India:Prospects for growth.

Indian firms have a good success rate in fighting patent holders in the US. (ANDA)

According to a recent report by Royal Bank of Canada (RBC) Capital Markets analysing

patent litigations in the US between 2000 and 2009, Indian pharmaceutical companies have

played this game fairly well. Going by the report, in more than half the cases, Indian drug

companies have either won or entered into an out-of-court settlement with the innovator

drug company.

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Table 4

In the case of Mumbai-based Lupin, the success rate

(both in court and out-of-court settlement) stands

as high as 75 per cent, compared to 61 per cent and

63 per cent for Hyderabads Dr. Reddys Laboratories

and Gurgaon-based Ranbaxy Laboratories, respectively.

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Chapter 7. Review of literature:

Analyst Interviews: Pharma and Biotech Industry Outlook

By Zacks Investment Research on July 20, 2010

The pharmaceutical industry has witnessed major changes over the past few quarters, with

performance being affected by factors like sluggish prescription trends, intensifying generic

competition and limited late-stage catalysts. The next five years are expected to reflect a

significant imbalance between new product introductions and patent losses.

According to IMS Health, this is the main reason global

pharmaceutical market growth will be restricted to the mid-

single digits (5-8%) through 2014. Over the next five years, products that currently generate

more than $142 billion in sales are expected to face generic competition, including Lipitor,

Plavix and Zyprexa.

At the same time, new products are not expected to generate the same level of sales as

products losing patent protection. With revenue growth stalling or slowing down, companies

have been resorting to cost-cutting and share buybacks to drive bottom-line growth.

M&A Activity

With most of the big pharma companies already facing or likely to face patent challenges for

their blockbuster products, the companies have been looking towards mergers and

acquisitions (M&A) and in-licensing deals to make up for the loss of revenues that will arise

with key products losing patent exclusivity.

We saw huge M&A activity over the last few quarters. Major deals include Abbott

Laboratories acquisition of Advanced Medical Optics and the pharmaceuticals business of

Solvay Group, Johnson & Johnsons acquisition of Mentor Corp., Pfizers acquisition of

Wyeth, the merger between Merckand Schering-Plough, and Merck KGaAs acquisition of

Millipore Corporation.

Sanofi-Aventis impending acquisition of TargaGen, a privately-held US biopharmaceutical

company, is aimed at boosting its oncology portfolio. Another big player, Celgene Corp), is

also on an acquisition spree to boost its oncology portfolio. The company will acquire

Abraxis BioScience Inc by year-end, having already acquired the privately-held Gloucester

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Pharmaceuticals earlier in the year. Mylan intends to purchase Irish injectable drug maker

Bioniche Pharma Holdings Ltd. shortly.

Elsewhere, companies have been looking towards biotech firms to build their product

portfolios. Prime examples include Johnson & Johnsons acquisition of Cougar

Biotechnology, Roches acquisition of Genentech, Bristol-Myers Squibbs acquisition of

Medarex, Sanofi-Aventis acquisition of Fovea Pharmaceuticals SA, Astellas Pharmas

acquisition of OSI Pharmaceuticals and Abbotts acquisition of Facet.

We expect this M&A trend to continue. We also expect a significant pickup in in-licensing

activities and collaborations for the development of pipeline candidates. Instead of

developing a product from scratch, which involves a lot of funds, pharma companies are

going shopping for mid-to-late stage pipeline candidates that look promising.

Small biotech companies are also game for in-licensing activities and collaborations. Most

of these companies find it challenging to raise cash, thereby making it difficult for them to

survive and continue with the development of promising pipeline candidates. Therefore, it

makes sense for them to seek deals with pharma companies that are sitting on huge piles of

cash.

We would recommend investors to put their money in biotech stocks that have attractive

pipeline candidates or technology that can be used for the development of novel

therapeutics. Therapeutic areas which could see a lot of in-licensing activity include

oncology, central nervous system disorders, diabetes and immunology/inflammation.

Emerging Markets

Another recent trend seen in the pharmaceutical sector is a focus on emerging markets.

Companies like Mylan Inc., Pfizer, Eli Lilly, (GlaxoSmithKline and Sanofi-Aventis are all

looking to expand their presence in India, China, Brazil and other emerging markets. Until

recently, most of the commercialization efforts were focused on the U.S. market the

largest pharmaceutical market along with Europe and Japan.

However, emerging markets are slowly and steadily gaining more importance and several

companies are now shifting their focus to these areas. IMS Health estimates that these

markets will grow 14-17% through 2014, while major developed markets will grow only 3-

6%. Although the U.S. will retain its position as the single largest market (estimated growth:

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3-6% annually in the next five years), China will soon become the third largest market in the

world.

According to IMS Health, Chinas pharmaceutical market is expected to continue to grow

more than 20% annually, and contribute 21% of overall global growth through 2013.

Growth in emerging markets could help stabilize the base business during the industrys

2010-15 patent cliff.

Will acquisitions of Indian pharma companies benefit or harm Indian patients?

In June, Abbott Laboratories acquired Piramal Healthcare's domestic formulations business.

While this deal is very different from the Ranbaxy-Daichii Sankyo deal, it is likely to be as

much of a gamechanger as the latter. Express Pharma asked key industry professionals toshare their views on the long term impact of this deal and specifically, to debate whether in

the long run this trend will benefit or harm Indian patients. Excerpts from their opinions...

ABSTRACT:

Pharmaceutical industry recently witnessed sale of some crown jewels of the national

industry to foreign companies.

The most significant among them are acquisitions of Ranbaxy, Dabur Pharma and Shantha

Biotech. Ranbaxy for its size, investment in R&D and a rich pipeline of products going offpatents; Dabur Pharma for its investment in oncology research and a very rich pipeline of

off-patent oncology products; and Shantha Biotech for its research in vaccines and its

potential as a major supplier of vaccines to the developing world. A common thread running

across the sale of these jewels was inability of their promoters to generate further resources

to pursue the high-risk high-reward strategy. Unfortunately for the country, there was no

other commercially viable alternate funding mechanism to save them from divestment by

promoters.

Tapan Ray, Director General, Organization of Pharmaceutical Producers of India

(OPPI) expressed following view,

I do not envisage any significant impact on overall competition between the

generic players for M&A moves, as there will be mounting competition from more

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number of new entrants and emerging players, entry barriers in Indian generic pharma

market being quite low

D G Shah, CEO, Vision Consulting Group expressed following view,

It is obvious that the Indian patient will be deprived of vaccines and oncology products

at prices that these companies would have offered as Indian entities. Moreover, one

cannot argue that access to new drugs of original research would not have been possible

without these acquisitions. On the contrary, it can be said that in spite of acquisitions,

new drug may not be accessible for a variety of reasons, unaffordable pricing being the major

reason

Dr Ajit Dangi, President & CEO, Danssen Consulting expressed following view,

The intense competition in the pharma business coupled with authorities like the

NPPA and regulations like DPCO firmly in place the prices are unlikely to go up.

Most MNCs have now realised that aggressive pricing in emerging markets will

not only delay market penetration but will result in loss of market share. Hence

there is a trend in adopting India centric pricing

Smitesh Shah, Chairman & Managing Director, Calyx Chemicals &

Pharmaceuticals expressed following view,

It would be foolhardy to assume that prices in potentially the most competitive

drug market in the world are going to move up thanks to a large M&A deal. Every

therapeutic segment in domestic market has fierce competition; which has

consistently benefited the Indian consumer (i.e. patient)

Observations:

More strategic collaborations between Indian and global pharma companies,

especially in the generic space in near future

Inthe globalised economy such type of business consolidation initiatives areinevitable

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It is obvious that the Indian patient will be deprived of vaccines and oncology

products at prices that these companies would have offered as Indian entities. But the

access to new drugs of original research would not have been possible without these

acquisitions

On the contrary, it can be said that in spite of acquisitions, new drug may not be

accessible for a variety of reasons, unaffordable pricing being the major reason. Not

only new, but even the existing off-patent medicines may also become inaccessible

from the new owners for various reasons such as rationalization of product portfolio,

price increases to pay for the premium paid by the acquirers, discontinuation of

product for inadequate margin, etc.

Authorities like the NPPA and regulations like DPCO firmly in place the prices are

unlikely to go up. Hence there is a trend in adopting India centric pricing.

Less than 40 percent of Indian population has access to essential medicines, there is

enough room for all segments of the industry ie. branded , branded generics and

generic generics to survive

The present trend of MNC - Indian companies collaboration, therefore, will benefit

the Indian patients

8.Case study and Market research

I.1 CASE STUDY

NOS 1

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Merck Serono (EMD Serono in the United States and Canada) is a pharmaceutical

company headquartered in Geneva, Switzerland with 2009 sales of US $27.43billion

In September 2006, Merck KGaA announced its intent to purchase the majority

ofSerono shares from Ernesto Bertarelli and the Bertarelli family

The Merck-Serono merger was announced on September 21, 2006

Merck KGaA is a completely separate company from the US company Merck &

Co.. Therefore, in the US & Canada, Merck Serono is known as EMD Serono, Inc.

Zocor a anticholesterol drug belonged to cardiovascular division of Merck Serono

Zocor got US FDA Aprroval-1991

Launch in USA market 1992

ZOCOR (simvastatin) product launch

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Chart 1
http://en.wikipedia.org/wiki/Seronohttp://en.wikipedia.org/wiki/Ernesto_Bertarellihttp://en.wikipedia.org/wiki/Merck_&_Co.http://en.wikipedia.org/wiki/Merck_&_Co.http://en.wikipedia.org/wiki/Ernesto_Bertarellihttp://en.wikipedia.org/wiki/Merck_&_Co.http://en.wikipedia.org/wiki/Merck_&_Co.http://en.wikipedia.org/wiki/Serono


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Chart 1 shows total sales of Merck including Zocor sales and revenue generated

from Medco Health solutions,Inc

In August 2003, Merck completed the spin-off of Medco Health Solutions, Inc.,

enabling investors to evaluate both companies purely on the basis of their individual

annual financial statements

Hence in chart 2 the total revenue of Merck Serono has been showed as US$22.5

billion excluding the revenue earned from Medco health solution

2005-Total sales decreased 4% for the year due to VIOXX withdrawal in 2004-$80

million settlement

POST 2002 sale

MARKETING STARTEGY

Marketing strategy is a process that can allow an organization to concentrate its limited

resources on the greatest opportunities to increase sales and achieve a

sustainable competitive advantage

Following were strategies adopted by Merck Serono to boost their sales of Zocor

Product Differentiation:Product differentiation is the process of distinguishing

a product or offering from others, to make it more attractive to a particular target

market. This involves differentiating it from competitors' products as well as a firm's

own product offerings

Pricing: Competitive pricing of the product is another strategy adopted

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Chart 2


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Vertical Integration: Vertical integration describes a style of management control.

Vertically integrated companies in a supply chain are united through a common

owner

I. PRODUCT DIFFERENTIATION:

4S-Clinical trials 1995-1996

F.D.A. approval-1998

Heart Protection Study (HPS) - ZOCOR 40 mg

BRISTOL MYERS SQUIBB-Pravachol used to lower cholesterol and triglycerides

in the blood

1) 4S-Clinical trials on scandavians simvastatin survival study

Due to which FDA officially approved it as a product to save lives and prevent heart

disease.(post heart attack).

New prescription sale of Zocor rose -80% -$460million in first 9 months of 1995.

1) BRISTOL MYERS SQUIBB-Pravachol

Conducted study on pre heart attack and angina in those patients with elevated

cholesterol.

In 1995 -post heart attack patients < patients with high cholesterol who had not

suffered heart attack. Merck thought of conducting similar study as Bristol but didnt

thus left an opportunity for competitors to establish market presence.

Product differentiation from competitor BRISTOL MYERS SQUIBB-Pravachol

4S-Clinical trials claim secondary heart attack prevention sale of Zocor rose -80%

-$460million in first 9 months of 1995.

F.D.A. approved Zocor for reducing the risk of stroke in patients who have high

cholesterol and heart disease Merck's shares rose $1.6875, to $129.875, April 2,

1998.

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26% increase in sales to 6.7 billion -2001 from previous year 5.45 billion

3)Heart Protection Study (HPS)

A study conducted by Merck Serono of ZOCOR showed that ZOCOR 40 mg is the first

and only cholesterol-lowering medicine proven to save lives by reducing the risk of heart

attack and stroke in a broad range of high-risk patient

II. PRICING:

Launch of Sandozs-Leschol(anticholesterol) but at wholesale cost in USA only

Drug 20mg(10 tab) 40mg(10 tab)

Zocor $54 $91.20

Leschol $30.60 $34.20

Table 6

Leschol earned 60% more prescriptions in its first year than Zocor had.

Merck slashed priced of Mevacor and Zocor by as much as 32% but raised prices on

many of its other drugs

III. VERTICAL INTEGRATION:

Vertical integration describes a style of management control

Vertically integrated companies in a supply chain are united through a commonowner

Medco health solution advertised for the Merck its various products including Zocor

Merck bought Prescription Benefits Management Company (PBM)-MEDCO-

$6billion in 1993

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Post acquisition Merck volume increased by 10% in 2nd quarter of 1994 and 15% in

third quarter

MEDCO power was its ability to make recommendations to pharmacists

eg:1992 Medco entered in agreement with Bristol-Myers Squibb to recommend thatpharmacists switch patients from Mevacor to Pravachol and where after Pravachol

sale rose quickly by 35%

Merck Medco primarily includes Merck-Medco sales of non-Merck products and

Merck-Medco pharmaceutical benefit services, principally sales of prescription

drugs through managed prescription drug program, as well as services provided

through programs to manage patient health and drug utilization

Medco practiced sending disparaging letter to doctors indicating that competitors

drug did not offer a clinical advantage.

After Medco acquisition Merck volume increased by 10% in 2nd quarter of 1994 and

15% in third quarter.

Chart 3 shows the segregated revenue of Merck obtained from Medco Health sol &Merck Serono

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Chart 3


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Chart 3 shows the segregated revenue of Merck obtained from Medco Health sol,

Merck Serono Zocor sales and other Merck Serono product sales

PATENT EXPIRY OF ZOCOR

During patent expiry (2005) Zocor was $4.5 billion drug.

In 2008 30% of Merck sales were affected due to patent expiration.

Strategies adopted by Merck Serono to avoid market shareloss:

Strategy 1:

Pharmacy benefit managers managed care organization:

Found that by prescribing low cost generic statin instead of high price brand

US$2300-5000 per year could be saved per patient i.e. US$8 billion annually

On this basis they started switching patients from branded to Zocor since 2005 in

preparation for Zocors patent expiry

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Chart 4

Chart 5 shows revenue earned by Zocor over its life cycle till patent expiry


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Strategy 2: Agreement:

Authorized Generic:

Generics sold under license from the patent holder are known as authorizedgenerics; they are not affected by the 180 day exclusivity period as they fall under

the patent holder's original drug application

Here due to continuous threat from generic drug maker to Patent holding company,

parent companies provide license to generic manufacturer. This helps the patent

holding company to gain out of the deal in terms of royalty benefits

To beat generic company --Dr.Reddys lab has an agreement with Merck to make

generic version of Zocor which is sold where generic market is prevalent or patent

implementation is not taken seriously.

Merck received royalties on patent and know how licenses & other rights amounted

to $209.3 million.

In addition, since Merck itself manufactures at least some versions of Dr.

Reddy's authorized generic simvastatin.. An 80 mg, 30-count bottle of Dr. Reddy's

simvastatin obtained July 6, 2006, states it is made by Merck Sharp & Dohme

(Merck & Co.'s name outside the U.S. to avoid conflicts with Merck KGaA) in the

UK, just like 80 mg Zocor, and has a Merck & Co. logo on the bottom; except for

omitting the "80" on one side, the tablets are visually identical to 80 mg Zocor,

including "543" on the other side which is the key part of the National Drug

Code for 80 mg Zocor.

In Israel TEVA Pharma produce the generic form of Zocor

Strategy 3:

Pricing:

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Reduce pricing of drug from $25 to $10-this helps to reduce the competition from

the generic companies as well

Strategy 4:

Drug variation:

Introduce spin-offs of their branded drugs with tweaked indication adding suffixes

like XR (Wyeth antidepressant EffexorXR) or XL(as in Forest Labs

antidepressant Wellbutrin XL) to reflect improvement

Strategy 5:

Drug Combination:

VYTORIN (Zocor+ Zeita of Schering-Plough)

Strategy 6:

Later patent on processes & intermediates related to most economical method ofmanufacture of active ingredient as well as novel composition & formulation

Strategy 7:

Filling the vaccum created by loss of blockbuster drug with another potential blockbuster

Outcome of strategies:

Outcome 1:

Vytorin failure - 41.5 million dollars in damages

The United States District Court for the District of New Jersey gave their approval to

a preliminary settlement on one of the largest class action lawsuits of 2009 against

the companies totaling $41.5 million to be paid out to patients, insurance companies,

and individual insurance claims.

The class action lawsuit claims that both companies made a significant profit from

the medication by overstating the efficacy of the medication compared to competing

anti-hyperlipidemic medication and subsequently inflating the price

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The settlement awards a total of 41.5 million dollars in damages to be split

accordingly: $12,450,000 to consumers, $14,525,000 to insurers, and $14,525,000 to

insurers who are settling their claims individually.

Both companies were implicated in another court-ordered settlement.

On January 14, 2008, the New York Times reported that a clinical trial of Zetia

designed to show that the drug could reduce the growth of fatty plaques in arteries

instead showed a growth of plaques. The trial was called the ENHANCE trial and in

April 2006, Merck and Schering-Plough completed research.

The companies had initially planned to release the findings in March 2007, however,

the companies missed several planned deadlines. In December 2007, the companies

finally agreed to publish the results "soon" after the delays were publicized in news

reports.

In July, 2009 both Merck and Schering-Plough agreed to pay 5.4 million to settle

charges related to a separate violation of consumer protection laws

In that case, attorneys general from 35 states and the District of Columbia alleged

that the companies intentionally delayed the release of results from the ENHANCE

trial in order to promote the efficacy of the two medications and market them as

superior alternatives to traditional therapies.

Outcome 2:

Sales of Zocor decreased gradually and there were low profit margin as selling price of

Zocor were lowered.

Outcome 3:

Investors were losing faith due to unethical practice carried out by company to promote

product also there were no new drug discovery by company.

Outcome 4:

2007 -$4.85 billion pretax charge related to the U.S. VIOXX Settlement Agreement

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Further steps to bolster adopted strategy and attract investors:

Strategy:

MERGER & ACQUISITION:

Bought Schering-plough in November 2009 for $41.1 billion.

Strategic Benefits of the Transaction

Complementary Product Portfolios and Pipelines Focused on Key Therapeutic

Areas:

By leveraging the combined company's expanded product offerings, Merck

have opportunities for life-cycle management through the introduction of

potential new combinations and formulations of existing products

The transactions will double the number of potential medicines Merck has in

Phase III development, bringing the total to 18

The combined company will have a more diverse portfolio across important

therapeutic areas, including cardiovascular, respiratory, oncology, neuroscience,

infectious disease, immunology, women's health and other areas

Cardiovascular:

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Chart 6


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The consolidation of the cholesterol drugs ZETIA (ezetimibe) and VYTORIN

(ezetimibe/simvastatin) into Merck's cardiovascular portfolio will simplify the

combined company's approach to the cardiovascular market and create new

opportunities to leverage the cholesterol franchise through new medicine

combinations.

Finally, the addition of Schering-Plough's Thrombin Receptor Antagonist, a

potential first-in-class antiplatelet therapy, among other late-stage development

candidates, further complements Merck's Phase III cardiovascular development

portfolio and will position the combined company to continue offering

meaningful products for patients in this important therapeutic area.

Neuroscience:

Schering-Plough's strong R&D capabilities in this area complement Merck's

ongoing neuroscience development efforts, which include both migraine and

sleep product candidates.

Schering-Plough brings several promising late-stage candidates, including

SAPHRIS (asenapine), an antipsychotic drug for the treatment of schizophrenia

and bipolar disorder, and BRIDION (suggamadex), a novel anesthesia reversal

agent.

Infectious Disease: Schering-Plough's strong portfolio of HCV candidates.

Boceprevir, is well-aligned with Merck's programs in this critical disease area.

Immunology: Schering-Plough brings distribution rights outside the United States.

REMICADE (infliximab), its well-established biologic product for

inflammatory/immunological diseases

SIMPONI (golimumab), which was filed in Europe in March 2008, as well as a

number of other promising products in development.

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Women's Health: Merck expects to benefit from a solid portfolio of:

Women's health products including GARDASIL [human papillomavirus

quadrivalent (types 6, 11, 16 and 18) vaccine, recombinant]

A broad range of contraceptive options and biologic and

Small molecule fertility drugs, which will allow it to strengthen relationships

with women's healthcare providers

Other Areas: Schering-Plough brings to the combined company a leading Animal

Health business with strength in vaccines and small molecules, as well as many

attractive consumer health brands such as CLARITIN, COPPERTONE, DR.

SCHOLL'S and MIRALAX.

Expanded Global Presence with Geographically Diverse Revenue Base:

Schering-Plough generates 70 percent of its revenue outside of the United

States, including more than $2 billion in annual revenue from emerging

markets. This will dramatically accelerate Merck's own international growth

efforts, including the company's goal of reaching top five market share in

targeted emerging markets.

In addition, with a more geographically diverse mix of business, the combined

company is expected to generate more than 50 percent of its revenue outside

the United States.

Increased Manufacturing Capabilities:

Add more capacity to support anticipated growth in biologics and sterile

medicines. Merck will achieve even greater synergies by applying its lean

manufacturing and sourcing strategies to the expanded operations.

Financial Benefits of the Transaction:

Strong Financial Profile: The combined 2008 revenues of the two companies

totaled $47 billion. Post-transaction, the combined company will have a strong

balance sheet with cash and investments balance of approximately $8 billion.

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Commitment to Maintain Merck Dividend: Current level annual dividend of

$1.52 per share, which, on an as-converted basis, represents a threefold increase for

Schering-Plough shareholders

Substantial Cost Savings: Of approximately $3.5 billion annually beyond 2011.

Accretive to Earnings: The transaction is anticipated to be modestly accretive to

non-GAAP EPS in the first full year following completion and significantly

accretive thereafter.

Complementary Product Portfolios and Pipelines Focused on Key Therapeutic Areas:

Doubles the number of potential medicines Merck has in Phase III development,

bringing the total to 18.

I.1 CASE STUDY NO 2

Pfizer Incorporated is a global pharmaceutical company, ranking number one in

sales in the world with 2010 revenue of over US $67.8 billion

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The company is based in New York City, with its research headquarters

in Groton, Connecticut

It produces Lipitor (atorvastatin, used to lower blood cholesterol); the neuropathic

pain/fibromyalgia drug Lyrica (pregabalin); the oral antifungal medication Diflucan

(fluconazole), the antibiotic Zithromax (azithromycin), Viagra (sildenafil) forerectile

dysfunction, and the anti-inflammatory Celebrex (celecoxib) (also known as Celebra

in some countries outside the USA and Canada, mainly in South America). Its

headquarters are in Midtown Manhattan, New York City

Interesting Things of Lipitor

Blockbuster cardiovascular anticholesterol(atorvastatin)

Annual sales > $12 billion in 2009

IMS Health Publishes Analysis: Most widely prescribed drug in the world Developing a combination therapy

US patent expiry date June 2011

Generics for Lipitor (Claims by Pfizer)

Until now no generic version is available for lipitor.

The medicines available in the name of generic lipitor may be fake, substandard, and

potentially dangerous spurious drugs due to copy markets.

Produce after exclusivity period after the expiration of patent

So far Ranbaxy lab is the only generic manufacturer who has rights to manufacture

generic Lipitor and sale in USA

45
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Strategies to retain market share post patent expiry:

Merger & Acquisition:The phrase mergers and acquisitions (abbreviated M&A)

refers to the aspect of corporate strategy, corporate finance and management dealing

with the buying, selling and combining of different companies that can aid, finance,

or help a growing company in a given industry grow rapidly without having to create

another business entity

Biotech for innovation: Inorder to look out for new blockbuster drugs Pfizer is

moving towards biotechnology for invention and development of new drugs

Drug Combination : Combining 2 or more marketed or non marketed drugs for

developing new potent drug

Agreements: Right to license manufacturing or marketing or both is given to other

organization under agreement done between them

Strategies adopted by Pfizer

Strategy 1:

MERGER & ACQUISITION:

January 2009 : Pfizer bought Wyeth for US $68 billion

Wyeth buyout helps Pfizers India ops

1. Sunil Lalbhais Atul Ltd holds a 6% stake in Wyeth

2. Pfizer has started the integration process by inducted three Wyeth directors

Anoop Sharma, business unit director for womens healthcare

Suresh Muddana, business unit director for specialty and vaccine

Wyeth medical director, Shilpa Patil to the board

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Chart 7

Pfizer did not have a business unit structure in place. Now, with the merger, three

business units have been formed.

Wyeth has around 250 employees. This is on all fronts from purchase of raw

materials to manufacturing to sales and distribution.

Pfizers acquisition of Wyeth complements its products in India.

The company now rides on Wyeths human vaccine portfolio and womens

healthcare products, along with several other products, offering a varied basket to the

end consumer.

Strategy 2 :

Big Pharma Looks to Biotech for Innovation:

Its recent tie-up with Aurobindo pharma from India for RnD on new biotech drugs.

Biotechs to fill in gaps in the development pipeline. Recent deals include:

Roche-ReMynd

Eli Lilly-Anacor Pharmaceuticals

J&J-Ortho-Anchor Therapeutics

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Shire-Acceleron Pharma

BristolMyers-Squibb-Zymogenetics

Sanofi Aventis bought out Shantha Biotech for for its research in vaccines and its potential

as a major supplier of vaccines to the developing world

Strategy 3:

Combination therapy:

Combining 2 or more marketed or non marketed drugs for developing new potent

drug

1. TORCETRAPIB

Lipitor is not interchangeable with competing products like Zocor. Pfizer is also looking to

defend this space by testing Lipitor, which lowers LDL or "bad" cholesterol, in combinationwith the experimental drug torcetrapib, which appears to raise HDL, or "good" cholesterol.

According to some analysts, this combination could add billions of dollars in potential sales,

if the tests are successful and the drug is FDA approved.

2. Caduet

Combination drug of atorvastatin & amlodipine besilate

Figure 1

Strategy 4: Agreement

Right to license manufacturing or marketing or both is given to other organization

under agreement done between them

1) Authorized Generic:

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Generics sold under license from the patent holder are known as authorized

generics; they are not affected by the 180 day exclusivity period as they fall under

the patent holder's original drug application.

Here due to continuous threat from generic drug maker to Patent holding company,

parent companies provide license to generic manufacturer. This helps the patent

holding company to gain out of the deal in terms of royalty benefits.

For eg: Current scenario in India:

Abbott, Ranbaxy settled patent suit:

Abbott Laboratories has settled a patent litigation case against Ranbaxy, allowing it

to launch generic version of US drug makers cholesterol lowering medicine

Tricor (generic-Fenofibrate)

In June 2010 Ranbaxy informed Abbots about its plan to launch its generic version

of Tricor in 45 mg and 145 mg dosages.

Although the patent is supposed to expire by 2018 wherein 3 other drug makers

wanting to launch their version of the same drug ahead of patent expiry.

Abbott has already settled terms with TEVA for 145mg dose of same medicine that

permits the Israeli firm to launch its low price version by March 2011.

The settlement has been reached Terms of settlement are confidential

Strategy 5: Competitive Pricing

Pricing of Lipitor brand/generic in USA

Here the table shows the price of branded Lipitor as well that of generic Lipitor

Thus after patent expiry Pfizer could launch the product at competitive price

inorder to retain market share as well avoid competitor from expanding its

market

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Product Type Dosage Quantity Price

Lipitor Generic 10mg 90 tablets $82.00




Lipitor Brand 10mg 90 tablets $108.00




Table 7

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8.3 INDIAN ANTICHOLESTEROL DRUG MARKET:

The global cardiovascular market is about $115 billion, out of which about $36

billion is the market for cholesterol reducing drugs.

Indian domestic demand is a fraction of the global opportunity.

India, which has over 60 million people suffering with heart diseases, has a cardiac

drug market valued at Rs 3,600 crore, growing at a rate of 15 per cent every

year(2008)

The estimated size of the Indian market is Rs 580 crore ($145 million) for anti-

cholesterol drugs(2007)

Anticholesterol drugs- Statin : Atorvastatin,Simvastatin,Rosuvastatin,Lovastatin

- Fenofibrate etc

PFIZER Vs RANBAXY Ranbaxy now holds a six-month marketing exclusivity for its low-cost version of the

product, as it was the first generic drug maker to challenge Pfizer's patent for Lipitor.

Ranbaxy will also be allowed to start selling copies of Caduet. (Combination drug of

atorvastatin & amlodipine besilate).

Figure 2

Ranbaxy Laboratories and Pfizer entered into a lawsuit settlement, under which

Ranbaxy had agreed not to sell generic versions of Lipitor in US until November

2011.

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As per the agreement, Ranbaxy got the license to sell atorvastatin on varying dates in

other seven countries including Canada, Belgium, Netherlands, Germany, Sweden,

Italy and Australia.

Ranbaxy started selling Atorvastatin as Lipogen to South Africa in 2010june

ABBOTT v/s RANBAXY:

Abbott Laboratories has settled a patent litigation case against Ranbaxy, allowing it

to launch generic version of US drug makers cholesterol lowering medicine

Tricor (generic-Fenofibrate) although the patent is supposed to expire by 2018

wherein 3 other drug makers wanting to launch their version of the same drug ahead

of patent expiry.

PFIZER V/S DR.REDDYS:

Dr Reddys Laboratories too has filed an abbreviated new drug application (ANDA)

with the American drug regulator seeking approval to market an 80 mg dosage

strength of Atorvastatin calcium, which Pfizer sells under the Lipitor brand. Pfizer

has filed a patent infringement case against the Hyderabad-based company in the US

district court of Delaware

PFIZER V/S LUPIN:

Lupin too has managed to wrest some control over Lipitor as the American drug

regulator has granted the Mumbai-based company permission to seek approval for a

copy of the cholesterol drug.

But unlike Pfizers Lipitor, which is in tablet form, Lupins would be a capsule

.

Market Survey:

To study and analyze local Indian market (metro city) via market research for:

Generic version of patent expired product in Anticholesterol drug market

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&

Competition in market prior to launch of generic version of patent expired product in

Anticholesterol (statin) drug market

Study and Analysis gave an insight into Anticholesterol market for Mumbai city

w.r.t:

Different drugs available for treatment in anticholesterol drug market

The number of existing brand/branded generics in Mumbai market consisting same

drug molecule Atorvastatin but similar or different formulation

Competition in the market

Pricing adopted by different brands

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1. ANALYSIS OF DATA

Observation:

I. Number of General Practioners in vicinity of medical shop?

DATA

Nos ofG.P

0generalpractioner

1generalpractioner

2generalpractioner

3generalpractioner

4generalpractioner

5generalpractioner

6generalpractioner

15generalpractioner

Nos ofshops 5 1 2 4 13 10 9 1

Chart 8

Observation:

29% of the shops had 4 G.P in their vicinity

2% of the total shops had 15 G.P in their vicinity while

11% of shops

I. Number of Consultants/specialists in vicinity of medical store?

DATA

Nos ofspecialists 0 spcl

1spcl

2spcl 3spcl

4spcl

5spcl

6spcl 7spcl 8spcl 9spcl

10spcl

15spcl

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Nos ofshops 6 5 10 12 6 2 2 1 0 0 1 1

Chart 9

Observations:

26% of the total shops had 3 specialist in their vicinity

2% of the total shops had 15 specialist in their vicinity while

13% os the total shops had 0 specialists in their vicinity

I. Number of hospitals in vicinity of medical stores?

DATA

Number ofhospitals

0hospitals

1hospital

2hospital

3hospital

4hospital

5hospital

Nos ofshops 6 24 10 4 5 1

Chart 10

Observations:

48% of the total shops had 1 hospital in their vicinity

2% of the total shops had 5 hospitals in their vicinity while

12% of the total shops had 0 hospitals in their vicinity

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I. What percentage of total inventory constitutes medicines for heart patient?

DATA

Inventory forcardiacpatients Nos of shops

1%-10% 6

11%-20% 11

21%-30% 24

31%-40% 6

41%-50% 2

Chart 11

Observations:

49% of the total shops had inventory in range of 21%-30% for cardiac patients out of

total inventory stocked in shop

I. Which are the anticholesterol drugs stocked for heart patients?

DATA

Drugs shop

Atorvastatin 50

Simvastatin 43

Rosuvastatin 29

Fenofibrate 41

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Clopidrogel 10

Prevastatin 2

Lovastatin 9

Chart 12

Observation:1. Atorvastatin2. Rosuvastatin3. Fenofibrate4. Aspirin5. Clopidrogel6. Simvastatin

7. Lovastatin8. Prevastatin9. Atorvastatin combination(Ezetimibe/Fenofibrate etc)

I. What is the percentage of individual drug sold of the entire total drugs sold to heart

patient?

DATA

% ofAtorvastatinsold out of totalinventory

Nos ofshops

30%-40% 12

41%-50% 4

51%-60% 7

61%-70% 12

71%-80% 11

81%-90% 4

Chart 13

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Observation:

24% out of total shops had atorvastatin sold in the range of 61%-70% out of total

inventory for anticholesterol drug

24% out of total shops had atorvastatin sold in the range of 30%-40% out of total

inventory for anticholesterol drug

I. What are the sales (quantity) of Atorvastatin per week/strips and next best sold drugin that category?

DATA

Sales Shops1 - 20strips/week 821-40strip/week 2841-60strip/week 1161-80strip/week 381-100strip/week 1

Chart 14

Observation:

55% out of the total shops had sales of 21-40strips/week

2% out of total shops had sales of 81-100 strips/week

I. Of the total sales of Atorvastatin what percent constitutes branded and nonbranded/generic?

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DATA

Branded 47Generic and Brandedgeneric 3

Chart 15

Observation:

94% out of the total shops had stockes Generic & Branded generic

6% of shop had Branded medicines

I. What are the different strengths (x mg) of atorvastatin tabs/cap sold and whichstrength is sold maximum?

DATA

Atorvastatin is available in various strengths of 5mg, 10mg, 20mg, 40mg,60mg, 80mg

Chart 16

Observation:

Atorvastatin is available in various strengths of 5mg, 10mg, 20mg, 40mg,

60mg, 80mg of which highest selling strength is 10mg

93% out of the total shop had 10mg as the highest selling strength

I. Different Brands of Generic Atorvastatin available?

Brandname

Number ofshopshaving it

genx

vast 50stator 50

storvas 50atorsave 50

aztor 50

atorfit 50

atorlip 50

59

strength

number ofshops

10mg 42

20mg 3


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tonact 8

lipicure 6

x tor 4

catt 2

pleotur 1

atorvaa 5modlip 1

zivast 9

tg tor 3

atormac 1

atocor 1

Chart 17

Observation:

All 50 stores were having the brand

Brand name/Mfg Quantity/number Price in Rs.Genx vast(Gen x) 10mg/10 tablets 12Stator(Nicholas) 10mg/10 tablets 38Storvas(Ranbaxy) 10mg/10 tablets 120Ator save(Eris) 10mg/10 tablets 72Aztor(Sunpharma) 10mg/10 tablets 83Atorfit(Ajanta) 10mg/10 tablets 36Atorlip(Cipla) 10mg/10 tablets 85

Table 8

Depending upon the clinical trials being carried and reputation of company generic

Atorvastatin was available at different prices with same weight and quantity

1. FINDINGS

1) From Observation 1,2,3 its clear that

Majority of the medical shops are either situated near

a) General Practioners or Consultant/Specialists and Hospitals

b) Consultant/specialist or General Practioners and Hospitals

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c) Hospitals or General Practioners and Consultants/specialist

As the number of hospitals in vicinity of shops increased the per week sale of

Atorvastatin increased but sales also declined as number of hospitals

increased further suggesting that the sales depends on the 2 factors

a) Type of hospital

b) Competition in market

Shops situated near hospitals had higher sales figure of 80-100 strips/week

(Hospital in vicinity of the shop that showed sales of Atorvastatin 80-100

strips/week was J.J Hospital situated at Byculla)

1) 8%-45% of total inventory was constituted by drugs for cardiac heart patient this

gives an indication that

Indians are at greater risk of heart related disease

On an average 1/4th of medicinal store inventory is stocked with drugs for

treating cardiac heart patients.

1) Of the different drugs stocked for cardiac patients majority of them are for treating

Cholesterol level

Blood thinners that reduce platelet counts to increase blood flow e.g.:-clopidrogel,aspirin

1) Highest selling drug in anticholesterol segment was

2% out of total shop had Rosuvastatin as highest selling drug along with

Atorvastatin

98% out of total shop had Atorvastatin as highest selling drug and hence

constituted major percentage of inventory

1) Atorvastatin constituted almost in the range of 30%-90% of inventory of

anticholesterol drug stocked for heart patients.

2) Of the different strengths of Atorvastatin available

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10mg was the highest selling strength in 40 shops as it is recommended for

the patients on the recovery stage and post recovery stage to maintain low

cholesterol level

1) Atorvastatin sales were in range of 10-100 strips per week(10 tab/strip)

2) All the above findings suggest that atorvastatin is the most potent and highly

efficient drug to treat high cholesterol level in human

3) As almost 90% of the shops audited had Branded drugs which suggest that

PFIZERS LIPITOR should be best selling drug as per International FDA

norms but this is not the case.

Neither any Pharma company licensed by Pfizer is selling the branded drug.

In India Atorvastatin manufactured and sold by following companies are termed as branded

drugs:

1. Ranbaxy-Storvas

2. Dr.Reddys

3. Cipla(Atorlip)

4. Nicola Piramal(Stator)

5. Sun Pharma(Aztor)

6. Ajanta Pharma(Atorfit)

7. Genx pharma-Hetero lab(Gen X vast) etc...

This also indicates that medical shop owners are least informed about the

difference between branded and generic drug

Since Atorvastatin is prescription based drug so major influencers over here

are General Practioners,Surgeons,Consultants in private clinics and hospitals

1. RESULTS

Hypothesis 1:Generic drug manufacturing companies are at an advantageous position for launching the

generic version of patent expired product or where a patent(s) is/are not in force

1. As stated in the initial context and from the findings of the study it is quite

evident that generic drug manufacturing companies are at an advantageous

position for launching generic drug under different brand name

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2. e.g.: Ranbaxy is already selling generic Atorvastatin under brand name

Stator in local Indian market as well as in South African market under

brand name Lipogen

3. In India due to majority of population lying in low income group the

affordability to purchase branded drug is still less as compare to Europe and

America which acts as limiting factor for prescribing branded drug by

Medicinal Practioners

4. Also government policies are framed to support Indian generic

manufacturers to certain extent

5. A recent acceptance to prescribing generics has been seen in USA post

recession in order to save money in process from insurance claimed by

patients in USA

Hypothesis 2 & 3:

Patent expiry of blockbuster drug leads to loss of market share of a company

Patent expiry of blockbuster drug leads to decrease in revenue of a company

1. Yes Patent expiry of blockbuster drug lead to loss of market share and eventually

decrease in revenue for company

2. Due to presence of Hatch-Waxman Amendments it grant generic manufacturers the

ability to mount a validity challenge thus getting the exclusivity period for of 6

months to manufacture and produce generic version officially in USA as well as in

other countries

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3. e.g.: Ranbaxy has won the ANDA application for Lipitor and will be launching the

generic version of Lipitor in USA in November 2011

4. As Ranbaxy enters USA it will lead to price war since generics are cheaper and eat

away the market share and revenue of Pfizer

5. Another major reason to it is was The Patient Protection and Affordable Care Act,

which President Obama signed on March 23, 2010, authorized the Food and Drug

Administration to approve generic versions of biologic drugs

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1. SUGGESTION/CONCLUSION

PFIZERs LIPITOR a $12 billion drug will have its market share and revenue

reduced in next 5 years due to generics

SWOT

1. Strength-

Multinational company

vast experience

RnD facility

NPD capacity

Huge Funding

1. Opportunity- Diversify into neutraceuticals,health products through parent

company or by subsidiary

2. Weakness-different legislation in different countries affect its market expansion

i. Patent expiry

1. Threat generic drug manufacturers

Strategies by Pfizer to fill the vaccum created by patent expiry

1. Buyout Indian generics

2. Price reduction prior to expiry saying it has achieved efficiency in production

or other new strategic facility built-up.

3. New drug combination/new product development.

Buyout not a solution..So here instead of pumping money to retain market share they

could use the money to diversify.

Diversification into Health(nutraceuticals) /medicated food this will lead to identifying

products that help in Brand Building for next 5 years causing Brand equity development

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Additionally take steps for social causes and justify pricing which is higher due to

continuous chemical trials

In India pharmacovigilance obligation plays less hurdle as compare to USA.As equity

builds up automatically Indian people trust in Pfizer increases so prior to lawsuit people

will think twice

[Market is created that people in India going to suffer from heart disease]

Pfizer should launch innovative medicated food product/health food at affordable price

which will be used by people either in case to prevent disease or patient on the verge of

recovery. Diet is main issue & limited diet is given to patient undergoing cure treatment.

So pricing has to be deliberate & penetrative to capture market share as market develop

for the product

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1. LIMITATION

Since the sector selected to study was very large it was not possible to have in depth

knowledge (commercial and technical) of all the drugs from cardiac division as well

as study the other category of blockbuster drugs whose patents are due to expire.

Because of time and money constraint primary data was collected from Mumbai city

while all India figures were referred from secondary data of trusted source

Many of the information regarding deals/agreements done between Patent holder and

the generic company for manufacturing and sales of drug are not available because

confidentiality of the information restricts it to be published

While collecting primary data, Hospital pharmacy and Medicinal Practioners were

not questioned or interviewed due to trade secrets or other reasons

Was not able to judge the highest selling brand in Atorvastatin market due to lack of

companies confidential retail/sales data

1. APPENDIX

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ANTICHOLESTEROL (STATIN MARKET)

1) Name of medical store:______________________________________________________________________________________________

2) Address/location/contact nos of shop:

_______________________________________________________________________________________________

3) Year of establishment: __________

4) Number of G.P(General Practioners) in vicinity:

5) Number of specialists/consultants:

6) Number of hospitals in vicinity:

7What percent of total inventory constitutes medicines for heart patient:

8) Which are the anticholesterol drugs stocked for heart patients?(Eg: Atorvastatin, Simvastatin, lovastatin etc)

Drug 1:_____________________________________

Drug 2:_____________________________________

Drug 3:_____________________________________

Drug 4:_____________________________________

Drug 5:_____________________________________

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9) What is the percentage of individual drug sold of the entire total drugs sold to heart

patient?

E.g. Simvastatin: 30%, lovastatin: 27 % (Starting with maximum sold drug)

Drug 1:______________________________________

Drug 2:______________________________________

Drug 3:______________________________________

Drug 4:______________________________________

Drug 5:______________________________________

10) What are the sales (quantity) of Atorvastatin per week/strips and next best sold drug in

that category?

Drug 1 _____________ : ____________________________

Drug 2 ____________: ____________________________

11) Of the total sales of Atorvastatin what percent constitutes branded and non

branded/generic?

Branded:

None branded (generic):

12) What are the different strengths (x mg) of atorvastatin tabs/cap sold and which strength

is sold maximum?

__________________________________________________________________________

______________

13) What are different branded/non branded drugs in anticholesterol medicine available at

your store?(Tick the ... appropriate brand/non brand and mention if any other brand

available )

Gen X vast (Genx pharma-Hetero lab)

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BIBLIOGRAPHY

1. Risk sharing in the pharmaceutical industry The case of out licensing

Author Dr.Gerrit Reepmeyer- University of St.Gallen Switzerland

2. Pharmaceutical industry Antitrust handbook(2009)American Bar Association

3. The law & economics of generic drug regulationChristopher Scott Hemphill

4. Generic drug entry prior to patent expirationAn Federal trade commission study July 2002

5. Pharmaceutical Patent IssuesOrrin G Hatch-2002

6. Leading pharmaceutical InnovationOliver Gassmann, Maximilian von Zedtwitz, Gerrit Reepmeyer

7. Business World Magazine Issue March 2010

8. PricewaterhouseCoopers report Issue April 2010

WEBLIOGRAPHY

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http://www.business-standard.com/india/storypage.php?autono=317986

http://www.financialexpress.com/news/lipitor-busters/746838/0

http://timesofindia.indiatimes.com /business/india-business/Indian-pharma-sector-grows-at-165-in-2010/articleshow/7356869.cms#ixzz1C4g8BgbX

www.expresspharmaonline.com

http://www.pfizer.com/investors/financial_reports/financial_reports.jsp

http://phx.corporate-ir.net/phoenix.zhtml?c=73184&p=irol-reportsannual

http://www.merck.com/finance/annualreport/ar2005/financial_section.html

http://www.merck.com/investors/financials/home.html

http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-industry/

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Documents

MMS Project Guidelines revised (2)