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Pfizer, Inc., the world’s largest research-based pharmaceutical company, announced on October 1 that it plans to discontinue research and development in the areas of heart disease, cholesterol, obesity and bone health. The company predicated its decision on the scheduled 2011 expiration of the company’s patent for its bestselling, cholesterol-reducing drug, Lipitor. Research and development in these areas will continue for drugs in the late stages of development and for those that are close to receiving FDA approval.
Lipitor sales bring in billions of dollars per year for Pfizer, and in recent years, Lipitor has been the top-selling drug in the United States. However, Pfizer expects these sales to fall dramatically once a generic form becomes available.
The surge of generics into the market is the inevitable result of a name-brand drug losing its patent protection. The Drug Price Competition and Patent Term Restoration Act, also known as the Hatch-Waxman Act, amended the Food, Drug and Cosmetic Act to specify the process that generic drug manufacturers must undergo to obtain FDA approval for their drugs. This process is much less difficult than obtaining FDA approval for the initial name-brand drug. To secure FDA approval, generic drug manufacturers simply submit an Abbreviated New Drug Application, in which they certify that the generic drug is the bioequivalent of the name-brand drug, with the same active ingredients, strength, dosage, route of administration and use indications.
The Abbreviated New Drug Application process is far less expensive and time-consuming than the millions of dollars and years pharmaceutical companies spend to secure approval for the initial drug. The consumer benefits from the low research and development cost for generics, and is thus much less likely to purchase the name-brand drug.
Pfizer got a taste of the economic impact of a generic equivalent’s emergence in the market when Merck’s competitor cholesterol-reducing drug, Zocor, lost its patent protection in 2006. Zocor sold for approximately three dollars per pill, but the generic equivalent sets consumers back only a third of that price per pill. Zocor’s generic equivalent negatively impacted not only Zocor sales but also Lipitor’s market shares.
Pfizer has not been immune to a decline in sales of its other drugs, as Zocor has not been the only drug to impact the company’s profits. Pfizer took a hit in 2007 when Norvasc, a multi-billion dollar hypertension drug, lost its patent protection. Pfizer has also experienced recent glitches in its research and development process. In 2006, Pfizer ceased research and development of Torcetrapib, another cholesterol-reducing drug, before the drug received FDA approval. The drug had been linked to numerous clinical trial enrollees’ heart problems and deaths. Torcetrapib’s failure was a major disappointment for the pharmaceutical manufacturer and its investors. At the time, Pfizer’s chief executive called it,”one of the most important compounds of our generation.”
Pfizer now plans to turn its attention to researching and developing drugs to treat Alzheimer’s disease, diabetes, and cancer, which Pfizer has tagged as “high priority areas” and for which they believe drugs will be more profitable. The drug approval process specified in the Hatch-Waxman Act assures that generic drug manufacturers will continue to develop generic equivalents for Pfizer’s new drugs. However, the Act also enables Pfizer to take advantage of the “Patent Term Restoration” section of the Act which was not available when Lipitor was first marketed.
Pharmaceutical companies like Pfizer often apply for, and receive, patent protection for a drug long before the drug is FDA-approved and on the market. Hatch-Waxman allows for the extension of a drug’s patent term, in essence “restoring” a limited part of the patent term that Pfizer lost because it was unable to market or sell the drug during the clinical trial and FDA approval process. Thus, when Pfizer patents a new drug to treat Alzheimer’s disease, for example, the company may apply to restore part of the patent term that it lost while the drug was unapproved and not on the market.
Hatch-Waxman results in a win-win situation for consumers, who can more easily buy generic drugs, and pharmaceutical companies, who need not worry that their profits will be significantly reduced because patent protection fails to account for the drug approval process. However, the high cost of medicine for consumers (remember, generic equivalents are not available until patent protection runs out) and the resulting profit for the pharmaceutical industry remain issues of public policy that continue to plague our health care system, and may perhaps only be addressed with new legislation.