UpClose with Ken Dowell, Evergreen Rx Practice Leader

SPECIALTY DRUGS ON THE RISE

Tools to better control expense

Made out of living cell cultures instead of simple molecules used to create traditional pharmaceuticals, the number of biotech drugs on the market and in the pipeline is on the rise as more pharmaceutical companies are investing in the development of these wonder drugs.

According to a recent report, the big pharmaceutical firms are moving toward biotech because it is a fast growing business generic competitors can’t touch. The result is the biotech industry is expanding much more rapidly than traditional pharmaceuticals.

U.S. biotech sales grew 20 percent to $54 billion in 2006, while pharmaceutical sales grew 8 percent to $221 billion.  Estimates for 2010, indicate biotech will grow to 28% of the total drug sales, or approximately $99 billion.

These biotech wonder drugs are also attractive because in many cases they're not vulnerable to patent expirations and generic competition, which has cost the large pharmaceutical companies $26 billion worth of annual drug sales to patent expirations during the past two years, according to IMS Health.

Biotechs don't have to compete with "biogenerics" because the Food and Drug Administration hasn't created a system for regulating them, which is a requirement for drug companies to get their products onto the market.

The bulk of traditional pharmaceutical sales have come from name-brand drugs that are protected by patents, but only until the patents expire. After that, generic drug makers can produce low-cost versions of the drug, which will cause sales to decline by up to 80 percent.

For the moment, biotech drugs are safe from generic competition.  The FDA is still in the early stages of creating a regulatory pathway for generic biotech drugs.  Even then, the complicated process of creating “biosimilars” may keep most players out of the game.

For more information, join the upcoming AHIP webinar by visiting www.ahip.org/solutions/webinar/march2008.