[exclusive] look at the picture: on the American generic drug market - "Red Sea"? "Blue ocean"? Or the dead sea?

1 The legal environment patent protection, free pricing, drug substitution, medical insurance payment, and legal proceedings of the pharmaceutical industry in the United States constitute the legal framework of the pharmaceutical industry in the United States Under this framework, the unique business model of the pharmaceutical industry in the United States has emerged Figure 1 Legal environment of the pharmaceutical industry in the United States 1) patent protection Figure 2 R & D Input-Output chart data source: Journal of the statistical land social inquiry society of Ireland 2014 takes 10-15 years, with an investment of 1-1.5 billion US dollars, it is possible to get a new drug Figure 3 Anti Moore's law data source of new drug research and development: naturereview| drugdiscovery2014 diagram: in today's other high-tech fields, the income per unit of investment will double up in a certain period of time, commonly known as "Moore's law" of science and technology In the pharmaceutical field, the number of new drugs input and output per billion US dollars has doubled every 10 years, so it is called "anti Moore's law" of the pharmaceutical industry Patent protection is the only way for the United States to guarantee the recovery of new drug investment and profit However, due to the fact that hatch Waxman act of 1984 greatly simplified the application of generic drugs, the cost of generic drugs entering the market was very low, which greatly offset the development intention of patent drugs In order to balance the interests of patent drugs and generic drugs, the U.S Congress has launched the patent connection system as well as the simple new drug application anda The system covers patent extension, data monopolization, patent registration and patent challenge for 180 days Figure 4 Conclusion 1 of patent connection system: in the United States, making medicine is making patents 2) The development of free pricing American pharmaceutical industry is based on huge medical expenditure Strong medical spending is the source of free pricing of drugs In turn, free pricing stimulates investment in the pharmaceutical industry and ensures the value of pharmaceutical patents Figure 5.1929-2010 source of US medical expenditure and US GDP: Torreya 2016 Conclusion 2: free pricing pushes up the price of patent drugs and squeezes the price of generic drugs 3) Drug substitution law has created a big market term explanation of generic drugs in the United States: "generic substitution law" - the laws and regulations of drug substitution have been formulated in every state of the United States in the 1950s The original purpose of the regulation is to ensure that consumers are not disturbed by fake or substandard drugs and that doctors have the right to enforce prescription drugs After the emergence of generics in the 1970s, in order to reduce the cost of drug use, states have enacted laws to replace the original drugs, that is, which generics can replace the original drugs in which cases In 1965, Medicaid and Medicare programs (to increase the proportion of generic drug reimbursement and reduce the cost of generic drug out of pocket) were launched in the US health care reform The plan has greatly accelerated the substitution of generic drugs for original drugs States in the United States have also rapidly introduced drug substitution laws that allow generic drugs to replace patented drugs, such as generic generic name rules, substitution without the consent of doctors and / or consumers, and so on Figure 6 The new definition of generic drugs in the United States in 1984 Figure 7 Drug substitution schematic translation: today, there are 8 generic drugs in every 10 prescription drugs in the United States Figure 8 Generic drugs benefit the American people conclusion 3: drug substitution law guarantees the market legal status of generic drugs 4) Figure 9 Payment sources of outpatient prescription drugs in the United States from 1973 to 2023: customeroutofpocket - employer sponsored private insurance - employer funded public funds - public medical individual phurchasedprivateinsurance - individual purchased commercial insurance Although the medical expenditure in the United States is increasing year by year, the medical insurance payment is becoming more and more common In recent years, employer health care payments and public funds have borne the bulk of drug spending But Americans pay a high premium Conclusion 4: medical insurance payment is the main body of drug consumption in the United States 5) Patent litigation is the daily work of American pharmaceutical industry The court is the mediator and referee of American pharmaceutical industry Figure 10.patent litigation statistics of generic drugs in 2009-2016 2 80 / 20 phenomenon in the U.S pharmaceutical market figure 11 Sales of generic drugs and patent drugs in the U.S in 2005-2016 compared to figure 12 Prescription ratio of generic drugs and patent drugs in the U.S in 2005-2016: 90% of prescription drugs, 10% of patent drugs; 20% of drug sales, 80% of patent drugs Figure 13 2012-2016 U.S sales statistics of patent drugs and generic drugs for prescription drugs (invoice, US $1 billion) source: byrichard Anderson business reporter, Bbcnews6november2017 3 US generic business difficulties 1) relative monopoly of generic manufacturing 14 2014 US generic market share 2) competitors 15 Country distribution of the number of andas approved by FDA over the years 16 US generic market manufacturer country distribution data source: baidu.com 2017 Illustration: pharmaceutical companies in the United States and India account for most of the market share of generic drugs in the United States Even international companies like Teva, Sandoz and Apotex dominate the U.S market If we consider the $74 billion generic market in 2014, of which $29.9 billion is authorized generics (or brand generics), the remaining generic market is even less In addition, FDA generally does not allow generic drugs to become a dominant company In order to suppress the price of patent drugs through the market entry of generic drugs, FDA will approve multiple andas according to the value and market capacity of patent drugs 3) "More wolves and less meat" Figure 17 After the first year of imitating anda in 1995-2008, FDA approved other anda statistical data sources: IMS diagram: less than $100 million, $150-250 million, $250-1 billion, more than $1 billion, FDA will approve multiple anda to enter the market according to the market situation Figure 18 Statistics on the approval of rosuvastatin anda by FDA in 2016 source: n / A in 2016, the FDA approved 764 anda, and in 2018, it may be more than 800 After the new FDA director took office in 2017, he proposed to speed up the approval of Anda again, and ensure that at least three generic drugs are listed for each original research drug 4) The way to monopolize sales, trade volume for price and squeeze profits for American pharmaceutical companies to sell generic drugs is actually very simple: medical insurance payment calculates the retail price through PBMs Then the druggist lowers the purchase price, and all the difference is the profit of the druggist Therefore, the more monopoly, the stronger the bargaining power of drug companies, the higher the profit, and the lower the price of generic drugs Figure 19 Data source of monopoly formation of drug sellers in the United States: toreya 2016 diagram: before 2007, drug sales and wholesalers in the United States had monopolized the U.S market, but in recent years, a larger monopoly was formed on the basis of monopoly, and the original 11 giants such as wholesale, retail and PBMs merged into the situation of 4 giants Figure 20 Data sources of four U.S generic purchasers: Biovalley, Murphy diaries, 2016 5) making money from selling generic drugs compared with making money from selling generic drugs figure 21 Profits from three U.S drug wholesalers 6) making money from selling generic drugs compared with selling patented drugs Figure 22 Comparative data sources of profits of three U.S wholesalers in 2009: pembrokeconsulting While the United States encourages the sale of generic drugs, it also cedes the profits of generic drugs to the sellers Therefore, in the past 15 years, the price of patent drugs has increased and the price of generic drugs has decreased The average profit from generic drugs is said to have fallen to 5% in 2017 The average profit of the US pharmaceutical industry has been around 20% Figure 23 Price trend of U.S generic drugs source: AARP, Public Policy Institute 2017 U.S generic drugs quickly turned down after a short price rise in 2013 In 2017, the price reduction of generic drugs has been around 10% Conclusion 5: American generic drugs "sell well without money" 4 Patent challenge - the last "fair dinner" for generic drugs why is patent challenge the "last fair"? Because 80% of patents are useless patents; because the value of drugs has nothing to do with the quality of patents; because the higher the value of drugs, the weaker the risk tolerance of patent drugs, the more likely it is to reconcile; because judges are not scientists; because the results of patent litigation are full of "random" and "accidental"; because no one can monopolize patent litigation now! Why is the success rate of generic drugs challenging patents 75%? Because 50% of disputes will be settled; because the average winning rate of generic drugs and patent drugs is 50% Figure 24 Patent challenge - the orange part of the "price of patent drugs + cost free profits" figure is the profit part of generic drugs devouring patent drugs Figure 25 The value challenge space left by patent drugs to generic drugs in 2011-2016 figure 26 Patent cliff in 2016 source: pharmacist'sletter / Premier'sletter.feb.2016 figure 27 Total value of U.S generic drug market in 2016 and patent cliff value in 2016 (unit: 1 billion US dollars) source: self-made by the author Note: patent cliff 1 includes xiumeile, and patent cliff 2 does not include xiumeile Figure 27 is compiled by the author according to the data in the previous figure It can be seen that the potential value of challenging blockbusters in 2016 is higher than the sum of the remaining market value outside the generic giant! Figure 28 Challenge patents The success rate of generic drugs is 75% 5 Who is challenging patents? Figure 29.2009-2015, statistical data sources of PIV patent challenges in various countries: Thomson Reuters, 2016 figure 30 Crazy Indian generic drugs (1) Thomson Reuters: in 2013, Indian Pharmaceutical submitted more than 600 patent challenges Figure 31 Crazy Indian generic (2) Thomson Reuters: in 2015, Indian Pharmaceutical filed nearly 800 patent challenges Figure 32 Teva is always the biggest challenge patent source: Teva -- FDA patent challenge report 2017 diagram: in 2016, 14 of the total 27 patent challenge varieties came from Teva pharmaceutical, and through the patent challenge Teva gained 88% of the total value of patent drugs in that year! Conclusion: the U.S generic market is neither a "Red Sea" nor a "blue sea" If we do not challenge patents, it is a "Dead Sea"! Just learned that in 2017, FDA approved 1027 andas in total, and President trump proposed to modify the generic challenge patent rules, with the second anda approval date as the ftf180 day start-up deadline!