IMS analyzes sales growth of US pharma market

Pharma's `slowing' pains - Prescription drug sales growth in U.S. hits lowest point since 1961
March 13, 2008

The Star-LedgerBUSINESS

The nation's pharmaceutical industry experienced its weakest growth last year in more than four decades, a trend fueled by the continued loss of patent protection on blockbuster drugs and a slowdown in approval of innovative medicines, according to the market research firm IMS Health.
IMS said sales growth in the U.S. prescription drug market moderated to a 3.8 percent increase in 2007, compared with more than 8 percent in 2006. It said total U.S. prescription sales last year reached $286.5 billion, compared with $274.9 billion the year before.
"In 2007, the U.S. pharmaceutical market experienced its lowest growth rate since 1961," said Murray Aitken, an IMS senior vice president.
"The pharmaceutical market has entered a new era, one characterized by more modest growth due to the continuing impact of new generic products, fewer and more narrowly indicated novel medications, and closer scrutiny of safety issues."
The sluggish sales growth has led to sweeping cost-cutting moves and massive layoffs by some of the biggest drugmakers, including 10,000 job losses at Pfizer, 7,600 at AstraZeneca, 7,000 at Merck, 4,800 at Johnson & Johnson and 4,300 at Bristol-Myers Squibb.
Aitken said the slowdown began in 2001, but was briefly interrupted by a boost in revenue stemming from the creation of the Medicare Part D prescription drug program for seniors. Aitken said the Part D sales growth has leveled off.
Barbara Ryan, a pharmaceutical analyst with Deutsche Bank, said "industry performance for the past several years has been very difficult."
"Stock prices are at new historic lows relative to the S&P 500," Ryan said. "They have had a challenging period, and this will continue to be the case, although individual companies may fare differently."
Ken Johnson, vice president of the Pharmaceutical Research and Manufacturers of America, said the fact revenue growth has slowed counters the "common misconception that drug costs are skyrocketing and are responsible for an increase in health-care costs."
IMS forecasters said they expect compound annual U.S. pharmaceutical sales growth through 2012 to be in the 3 percent to 6 percent range. That compares with double-digit annual sales growth for much of the 1990s and early part of this decade, peaking at about 19 percent in 1999.
On the plus side, IMS also predicted the introduction of novel biologic medicines and vaccines, as well as the launch of five to eight products this year with the potential for annual sales of $1 billion or more. But IMS said this will be offset in part by an additional $13 billion in branded products that are likely to be exposed to generic competition during 2008.
The IMS report said brand-name drugs representing $17 billion in sales lost patent protection in 2007. Generics increased their share of total dispensed prescriptions to 67.3 percent in 2007, from 62 percent in 2006, but account for only about 20.4 percent of the dollars spent.
Drugs that lost patent protection in the past two years and now face competition from lower-cost generics include Merck's Fosamax osteoporosis medicine; Bristol-Myers Squibb's Pravachol and Merck's Zocor, both cholesterol drugs; Pfizer's Zoloft antidepressant; Sanofi-Aventis' sleeping pill Ambien; and GlaxoSmithKline's Coreg hypertension and heart medicine.
At the same time such big-selling, high-profit drugs were coming off patent, IMS said innovative new medicines represented just $441 million of total sales in 2007, reflecting the slowest period for product launches in the past three decades.
IMS said slowed sales growth also was affected by a significant number of "black box" label warnings - representing the most serious safety concerns - as well as product withdrawals and safety issues raised by the Food and Drug Administration for anemia, diabetes and antidepressant medicines.
"Safety issues contributed to significantly lower-than-expected sales for products accounting for approximately 10 percent of the total prescription market," IMS said.
The report said cholesterol medicines continued to be the largest revenue-producing therapy class in the United States, despite a 15.4 percent year-over-year sales decline. Cholesterol drugs accounted for $18.4 billion in domestic sales, with Pfizer's Lipitor leading the pack with $8.1 billion.
Acid reflux medicines ranked second, with sales of $14.1 billion and growth of 2.8 percent. Antipsychotics replaced antidepressants as the third-largest therapeutic class in 2007, with prescription sales growth of 12.1 percent, to $13.1 billion.
In terms of the number of prescriptions written by doctors, antidepressants ranked as the leading therapy class, followed by cholesterol, codeine and combination pain medications, ace inhibitors and beta blockers.

Robert Cohen may be reached at rcohen@starledger.com.
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