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News December 1, 2009

Patent expirations, generics, and packaging

Depending on your perspective, expiring patents on branded drugs could cause anguish or offer opportunity.

Financial's headline, "The fall of the world's best-selling drug”" reports on Pfizer's blockbuster cholesterol-lowering drug Lipitor, and how its patents expire in 2011. Since its 1997 launch, notes, Lipitor has "generated more than $80bn in sales for Pfizer."

For Pfizer--and other branded drug manufacturers whose products will soon go off patent--this is a distressing development. For companies producing generics, it's a financial opportunity. India-based Ranbaxy, for example, will have first rights to sell lower-cost versions of Lipitor in late 2011. Cipla, another Indian firm, is reportedly in talks with Pfizer and other global pharmaceutical makers about potential generics supply deals.

Perrigo Co., producer of generic over-the-counter medications, just announced a 60% spike in profit during the last quarter compared with the same time last year.

As less-costly generic drugs are produced in greater numbers, manufacturers will need to focus more closely on overall equipment effectiveness (OEE) on their packaging lines. To control costs, pharmaceutical firms will look to improve efficiency on existing packaging equipment. Future machinery purchases will likely place greater emphasis on equipment with shorter return on investment timeframes.

Keep an eye on whether pharmaceutical firms will turn more toward outsourcing packaging functions, or if they see greater economies by filling both branded and generic products in-house to help justify equipment. And let's see if savvy companies can employ fiscally sound sustainable/environmentally friendly practices into their packaging operations.

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