Prescription Drug Sales in USA +8% in 2006 to $275 Billion

Prescription drug sales in the United States rose 8.3 percent in 2006 to $274.9 billion. Pharmaceutical consulting firm IMS Health reported that growth was fueled by the Medicare Part D prescription benefit, the increased utilization of generics within new therapy classes, and the launch of new drugs targeted to specific diseases such as cancer and diabetes.

The number of prescriptions dispensed to patients rose 4.6 percent.

“Demand for pharmaceutical products in the world’s largest pharmaceutical market grew significantly for the third straight year,” said Diana Conmy, corporate director, IMS Market Insights. “This growth was driven by factors that include an aging population and the introduction of the Medicare prescription drug benefit, which increased prescription coverage to the previously uninsured and underinsured, and provided generous plan benefits to seniors.”

How do top pharmaceutical stocks perform? Overall performance from March 2002 to closing bell 9 March 2007 -- companies listed by rank. *Joined New York Stock Exchange after March 2002
Pfizer	-39.5% to $25.41
Bristol-Myers Squibb	-46.2% to $26.92
GlaxoSmithKline	+15.8% to $55.59
*Sanofi-Aventis	+53% to $42.84
Novartis	+44.3% to $56.27
Merck & Co.	-28% to $44.61
AstraZeneca	+14.3% to $56.58
Abbott Laboratories	-1.1% to $54.39
Johnson & Johnson	-2.9% to $62.14
Wyeth	-21.2% to $49.66
Eli Lilly	-34.3% to $52.59

However, IMS does predict prescription drug sales to drop in 2007, but stick within an annual compounded growth rate of between 6 percent and 9 percent through year 2010 as the Medicare Part D benefit is annualized and more generic products enter the market.

Conmy said, “Legislative attempts to control drug expenditures, the increased influence of payers to drive more cost-effective healthcare, generics competition, and the introduction of new biosimilars will impact United States' prescription growth over the next five years."

The annualization of Medicare Part D also would affect growth rates for 2007, placing new pressures on manufacturers to gain a deeper understanding of evolving market dynamics when launching new products. In practice the shift intensifies the need for pharmaceutical companies to focus upon health economics and outcomes research to demonstrate the value of their medicines Conmy concluded.

Medicare Part D --an important growth contributor in 2006-- lifted retail prescription volume by an estimated 1 percent to 2 percent and pharmaceutical sales by less than 1 percentage point. More than 38 million Medicare beneficiaries had some form of prescription drug coverage by June 2006, another 3 million did not enroll, but those who were previously uninsured and enrolled benefited from access to needed medicines at a more affordable cost.

Insurers were required to reimburse for substantially all of the brands in six large, highly utilized classes, including: Anti-depressants, anti-psychotics, anti-convulsants, anti-retrovirals, anti-neoplastics, and immuno-suppressants. Due to this requirement, these classes together comprised nearly one-fifth of pharmaceutical sales in 2006.

Prescriptions dispensed through a Medicare Part D program accounted for 17 percent of retail prescriptions by year-end. Of the top 20 products dispensed by Medicare Part D prescription volume, 15 were unbranded generic drugs. By the end of 2006, utilization of unbranded and branded generics through Medicare Part D accounted for 63 percent of all dispensed prescriptions.

“Medicare Part D clearly was the most significant event to occur within the industry in 2006,” said Gerhard Gallwitz, vice president of Managed Care for IMS. “Consumers found the program especially beneficial because it offered greater choices and better access to medicines with fewer formulary restrictions than commercially available plans. For pharmaceutical manufacturers, Medicare Part D helped increase product demand through a larger pool of patients with prescription drug coverage.”

The second major growth factor in 2006 was prescription volume increased for less-expensive generic drugs. Although volumes rose across a number of therapeutic areas, the emergence of new generic forms of lipid regulators, anti-depressants and inhaled nasal steroids resulted in significant double-digit growth for these classes of medications. In 2006, prescription volume of unbranded generics grew by 13 percent. Sales of unbranded generics grew by 22 percent in 2006, driven by sales of $911 million for Teva’s simvastatin, generic Zocor®; $902 million for Apotex’s clopidogrel, generic Plavix®; and $480 million for Greenstone’s sertraline, generic Zoloft®. Other brands to lose patent protection and experience generic competition were Pravachol®, Flonase®, and Mobic®.

“Last year, we saw two of the most successful and largest brands – Zoloft and Zocor – lose patent protection,” said Conmy. “Although the impact to the market was moderate, competitive pricing in generics is expected to intensify. We expect to see the full effect of these patent expirations, as well as that of additional branded blockbuster drugs such as Norvasc® and Ambien®, impact the market in 2007.”

Product Innovation

Biotech products were (again) a major growth engine in 2006, with sales increasing 20 percent to $40.3 billion. Within this market, Amgen’s Aranesp® led the way, growing 42 percent on the year to reach $3.9 billion. Amgen’s Enbrel® rose 12 percent to $3.1 billion, and Amgen’s Neulasta® climbed 28 percent to $2.9 billion. Major cancer-fighting therapies also realized strong growth: Rituxan® grew 18 percent to $2.1 billion, Avastin® rose 79 percent to $1.7 billion and Herceptin® increased 66 percent to $1.2 billion.

Also noteworthy within the biotech market was the landmark approval of a biosimilar. In May 2006, the FDA (Food and Drug Administration) approved Sandoz’s Omnitrope, a human growth hormone. Approved under the existing 505(b)2 pathway, the FDA’s decision provides a narrow opening for other biosimilars. Omnitrope had still not been launched as of the end of 2006.

In 2006, the FDA also approved 18 new molecular entities (NMEs), four therapeutic biologics and four vaccines, including Merck’s ground-breaking cervical cancer vaccine Gardasil®. This is up slightly from the 18 NMEs and two therapeutic biologics approved in 2005, which was the lowest approval number since 1980. Perhaps more notable than the actual number of new products approved was the market potential of the products launched. Among those expected to reach blockbuster status (more than $1 billion in annual sales globally) are Merck’s Gardasil and Januvia™ (the first of a new class of diabetes treatments) -- Genentech’s Lucentis™ (for macular degeneration) -- Pfizer’s Sutent® (for renal cell carcinoma) -- and Celgene’s Revlimid® (for transfusion-dependent anemia.)

In 2005, there were a number of new brand launches that became top performers in 2006, including Pfizer’s Lyrica® (for epilepsy/pain) -- Sepracor’s Lunesta® (for insomnia) -- and Amylin/Lilly’s Byetta® (for diabetes.)

Market Outlook

IMS forecasted up to 9 percent annual growth through 2010 due to the influence of lower-priced generics. Generics will have a greater impact on 2007 performance as the market realizes the full impact of the $14 billion in branded products that were exposed to generics in 2006. It is anticipated that the primary drivers behind the market trends include: The introduction of new, novel biologics and vaccines, the annualization of the Medicare Part D drug benefit, future patent expiries and increased competition among generics.

Additionally, four to seven new products with potential global blockbuster status are expected to launch in the United States during 2007. Along with the 2006 class of innovative new products, the 2007 class will help offset the lower prices for some generics in 2007 and the additional $12 billion in brand value likely to be exposed to generics this year.

###

---This content is copyrighted by Think & Ask, reproduction of any kind is not permitted without written consent.---