Excessive dependence on aging blockbuster franchises
Many of the largest pharmaceutical companies derive an outsize share of their revenues from a single product. In several cases, this is a direct result of successful efforts to delay generic competition, as discussed in the previous section. In other situations, companies are directing R&D dollars toward expanding indications or creating new formulations of existing products – which is lower risk than developing new drugs and has the benefit of layering additional periods of exclusivity on prized franchises. In recent years, this practice has been particularly common in oncology and immunology.
- The top 20 products generated an average of 23% of their manufacturer’s US revenues in 2019.
- Revlimid is a minor improvement over its predecessor Thalomid, but has managed to have 15 years of market exclusivity.
- Notably, several of these franchises have just starting facing biosimilar competition, including Roche’s Avastin, and Rituxan and Biogen’s Tecfidera, which make up over 40% of their manufacturer’s sales.
Evaluating the percentage of 2019 U.S. product sales from drugs that have been on the market greater than 4 years or 7 years provides a glimpse at companies’ reliance on aging franchises vs. new products.
- On average, nearly two-thirds of sales come from products that have been marketed for 7 years or longer. This is notable, since the exclusivity period for small molecule drugs is 7-years. In fact, the weighted average age of top drugs is 11 years.
- Only 14% of these companies’ products have been on the market for 4 years or less.
Increasing reliance on orphan drugs
The last five years have seen a notable trend toward FDA approvals of drugs with orphan drug designation, meaning they are targeting US patient populations of <200,000. As an incentive for companies to develop drugs for these rare diseases or narrow indications, the FDA offers financial incentives and a streamlined regulatory process. Many of these drugs have entered the market at historically high prices.
There is no disputing that novel drugs for rare diseases have had an invaluable benefit in numerous disease categories, with spinal muscular atrophy being a recent example. However, as the economics have favored the development of medicines for rare diseases, we’ve seen major companies shift away from broad therapeutic areas such as diabetes, cardiovascular medicine and women’s health.
Strong investment on already-approved drugs
From 2016-2018, the industry has consistently spent about 14% of its R&D budget on Phase IV clinical trials, which are post-marketing R&D activities. In addition, substantial additional R&D dollars are spent on clinical trials aimed at securing new indications for already marketed trials. These practices have helped fuel numerous blockbuster products that drive over a quarter of their US sales.