H E A LT H C A R E

The Blockbuster Drugs Outlook

Optimum management strategies throughout the
product lifecycle
Copyright © 2001 Business Insights Ltd
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Table of Contents
The Blockbuster Drug Outlook

Executive Summary 11

Chapter 1 Introduction to the blockbuster

market 19
Key findings 19
Defining a blockbuster product 20
Significant improvements in drug therapy 20
Products that drive or create top-tier pharmaceutical companies 21
The rise of blockbuster drugs 22
Drivers and resistors of blockbuster sales 24
Drivers 25
Growth of the pharmaceutical market 25
Increased size of pharmaceutical companies 25
DTC marketing 26
Marketing power 26
Unmet need 27
Increased screening and diagnosis 28
Resistors 28
A lack of R&D portfolio management 28
Cost containment 29
The blockbuster market: Overview 31
Growth of the blockbuster market 31
Blockbuster therapy areas 32

Chapter 2 Managing blockbusters 35

Key findings 35
Launching blockbusters 37
Pre-launch awareness 40
Peri-approval DTC promotion 42
Dissemination of information through the mass media 44
Mass media awareness of lifestyle drugs and diseases 45

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 Eisai and Pfizer’s experience with Aricept 46
Aligning the divergent aims of medical and marketing departments 48
Global launch strategies 49
Will high investment in global launch and marketing benefit all products? 51
Managing marketed, patented blockbusters 51
Allocation of investment 51
Co-promotion of blockbuster products 53
Co-promoting Lipitor: Pfizer and Warner-Lambert 55
Co-promoting CNS blockbusters: Scios, SmithKline Beecham and
Johnson & Johnson 56
Branding of blockbuster products 57
DTC marketing throughout a blockbuster’s lifecycle 60
Impact of stage of lifecycle on media mix 61
Disease versus brand awareness 62
When is raising disease awareness appropriate? 62
When is raising brand awareness appropriate? 63
Forecast split between disease and brand advertising to 2005 65
Continued clinical trials and studies 67
New indications 67
New formulations 68
Pharmacoeconomics 69
Managing blockbuster patent expiry 71
Tactics for responding to generic competition 72
Short term versus long term generics defence strategies 73
New formulations 74
Extending product sales through new formulations: Pfizer and
Procardia XL 75
New indications 78
Patent nesting: AstraZeneca’s Losec 79
Rx-to-OTC switching 80
‘True’ switches 81
Limitations to Rx-to-OTC switching 81
Benefits of Rx-to-OTC switching 83
Company philosophy: brand reliance or genericise? 84
DTC marketing: defending the off-patent branded blockbuster 85
Bridging the revenue gap 85
Supporting OTC switches 86
Impact of a blockbuster’s patent expiry on other blockbusters 87
Surviving a blockbuster’s patent expiry 88
Internal development of replacement products 89
Leaving pipeline gaps: Lilly 90
Protecting blockbuster sales until replaced by new product sales:
Pfizer’s Procardia and Norvasc 91
In-licensing replacement products 93
M&A 94

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Chapter 3 The current blockbuster market 97
Key findings 97
Growth of the blockbuster market 98
Blockbuster drugs, 1998–2000 101
Geographic source of total blockbuster sales 106
US dependence of blockbuster sales 107
Higher levels of diagnosis and treatment in the US 109
Non-launch of blockbusters in Japan 109
DTC marketing driving blockbuster sales in the US 109
US focus of companies and marketing strategies 110
Early launch of blockbusters in US 110
Higher prices for blockbusters in US 111
Implications of US focus of blockbuster sales 111
Blockbuster market by therapy area 113
Companies with blockbuster drugs 116
Company dependence on blockbusters 117
Patent expiries 122

Chapter 4 Profiles of current blockbuster

drugs 127
Losec/Prilosec (omeprazole) 127
Zocor (simvastatin) 129
Lipitor (atorvastatin) 131
Norvasc (amlodipine) 135
Claritin/Claritin D (loratadine/loratidine & pseudephedrine) 138
Procrit (erythropoietin) 141
Celebrex (celecoxib) 143
Prozac (fluoxetine) 146
Takepron/Prevacid (lansoprazole) 147
Zyprexa (olanzapine) 149
Seroxat/Paxil/Deroxat (paroxetine) 151
Vioxx (rofecoxib) 153
Zoloft (sertraline HCl) 155
Epogen (epoietin alfa) 156
Premarin family (conjugated estrogens) 158
Augmentin (coamoxiclav) 160
Pravachol (pravastatin) 162
Vasotec (enalapril) 164
Glucophage (metformin HCl) 166
Cozaar (losartan) and Hyzaar (losartan + hydrochlorothiazide) 168
Cipro (ciprofloxacin) 170
Risperdal (risperidone) 172
Taxol (paclitaxel) 175
Novolin, Insulatard, Actrapid (insulin) 177
Mevalotin (pravastatin) 179
Zithromax (azithromycin) 180

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 Intron A (interferon alpha-2b) and Rebetron (revarin) 182
Viagra (sildenafil) 184
Effexor/Effexor XL (venlafaxine) 186
Neurontin (gabapentin) 188
Flixotide/Flovent (fluticonase propionate) 189
Biaxin (clarithromycin) 191
Fosamax (alendronate sodium) 193
Neupogen (filgrastim) 195
Sandimmun/Neoral (cyclosporin) 197
Zestril (lisinopril) 199
Humulin (insulin) 201
Allegra/Telfast (fexofenadine) 202
Prinivil/Prinizide (lisinopril/lisinopril + hydrochlorothiazide) 203
Imigran/Imitrex (sumatriptan) 204
Adalat (nifedipine) 205
Diflucan (fluconazole) 207
Rocephin (ceftriaxone) 209

Chapter 5 Blockbusters of the future 212

Key findings 212
Unmet need: opportunities for future blockbusters 213
Patient population 213
Payer/purchaser unmet need 214
Cost and cost-effectiveness 215
Patient compliance 215
Therapeutic unmet need 216
Efficacy 217
Low resistance profile 217
Ease of administration 217
Good side effect profile 218
Unmet need addressed by current blockbusters 218
Unmet need: opportunities and forecast blockbuster disease areas 221
Arthritis 222
Future trends in the prevalence of arthritis 222
Therapeutic and payer/provider unmet need in the treatment of
arthritis 223
Blockbusters forecast for the treatment of arthritis 223
Asthma 224
Future trends in the prevalence of asthma 224
Therapeutic and payer/provider unmet need in the treatment of
asthma 225
Blockbusters forecast for the treatment of asthma 226
Cancer 226
The prevalence of cancer 226
Therapeutic and payer/provider unmet need in the treatment of
cancer 227
Blockbusters forecast for the treatment of cancer 228
Depression 229

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 Future trends in the prevalence of depression 229
Therapeutic and payer/provider unmet need in the treatment of
depression 229
Blockbusters forecast for the treatment of depression 230
Diabetes 231
Future trends in the prevalence of diabetes 231
Therapeutic and payer/provider unmet need in the treatment of
diabetes 232
Blockbusters forecast for the treatment of diabetes 233
Hyperlipidaemia 234
Future trends in the prevalence of hyperlipidaemia 234
Therapeutic and payer/provider unmet need in the treatment of
hyperlipidaemia 234
Blockbusters forecast for the treatment of hyperlipidaemia 235
Hypertension 237
Future trends in the prevalence of hypertension 237
Therapeutic and payer/provider unmet need in the treatment of
hypertension 238
Blockbusters forecast for the treatment of hypertension 239
HIV 239
Future trends in the prevalence of HIV 239
Therapeutic and payer/provider unmet need in the treatment of HIV 241
Blockbusters forecast for the treatment of HIV 242
Blockbuster lifestyle drugs 242
Defining lifestyle drugs 243
Disease characteristics 246
Product characteristics 248
Speed is of the essence 248
Side effects are acceptable 249
Simplicity and convenience 249
Forecast blockbuster lifestyle drugs 250
Erectile dysfunction: Viagra 250
Obesity: Xenical (orlistat) 251
Drivers and resistors of blockbuster sales 254
Future drivers of blockbuster sales 254
Increased global launches 254
DTC in Europe 254
Preventative care 256
Innovative products/cures from genomic research 256
Increased use of R&D portfolio management 257
Future resistors of blockbuster sales 258
Increased pharmacoeconomic restrictions by healthcare payers 258
Decreased unmet need in traditional blockbuster therapy areas 259

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List of Figures
Figure 1.1: Number of pharmaceuticals with sales of $1bn or more, 1990–2000 23
Figure 1.2: Historic drivers and resistors of blockbuster drugs 24
Figure 1.3: Total sales of blockbuster drugs, 1996–2000 31
Figure 1.4: The blockbuster market by therapy area, 2000 32
Figure 2.5: Penetration rate curves 37
Figure 2.6: Market penetration of Lipitor, Zocor and Pravachol 38
Figure 2.7: Targeting consumers with pre-launch DTC campaigns 43
Figure 2.8: Pros and cons of co-promotion and co-marketing 54
Figure 2.9: Schematic representation of the role of DTC marketing throughout the product
lifecycle 60
Figure 2.10: Shifting segmentation of DTC marketing investment in brand and disease awareness,
1997–2005 66
Figure 2.11: Sales of Pfizer’s Procardia and Procardia XL, 1990–2000 76
Figure 2.12: The lifecycle of a pharmaceutical product, with and without an Rx-to-OTC switch 83
Figure 2.13: Sales of Pfizer’s Procardia, Procardia XL and Norvasc, 1990–2000 92
Figure 3.14: Blockbusters as a proportion of the total ethical pharmaceutical market, 1996-2000 99
Figure 3.15: Growth of the blockbuster and total ethical pharmaceutical markets, 1996-2000 100
Figure 3.16: Estimated geographical division of blockbuster sales, 2000 106
Figure 3.17: Contribution of the US to the blockbuster and total ethical pharmaceutical markets 107
Figure 3.18: Growth of blockbuster sales by therapy area, 1996–2000 113
Figure 3.19: Proportion of companies’ ethical sales derived from blockbusters, 2000 117
Figure 3.20: US patent expiries of blockbusters, 1999-2011 124
Figure 5.21: Forecast total prevalence of osteoarthritis in seven major markets* to 2005 222
Figure 5.22: Forecast total prevalence of asthma in seven major markets* to 2005 224
Figure 5.23: Point prevalence of five cancers in seven major markets*, 2000 227
Figure 5.24: Forecast prevalence of depression in seven major markets* to 2005 229
Figure 5.25: Forecast prevalence of diabetes in seven major markets* to 2005 232
Figure 5.26: Forecasts for the prevalence of hyperlipidaemia in seven major markets* to 2005 234
Figure 5.27: Forecast prevalence of hypertension in seven major markets* to 2005 237
Figure 5.28: Forecast prevalence of HIV in the US, Europe and Japan 2000–5 240
Figure 5.29: Forecast prevalence of AIDS in the US, Europe and Japan 2000–5 241
Figure 5.30: Characteristics of lifestyle drugs 243
Figure 5.31: Future drivers and resistors of blockbuster sales 255

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List of Tables
Table 1.1: Number of pharmaceuticals with sales of $1bn or more, 1990–2000 23
Table 1.2: Total sales of blockbuster drugs, 1996–2000 31
Table 1.3: The blockbuster market by therapy area, 2000 33
Table 2.4: Market penetration of Lipitor, Zocor and Pravachol 39
Table 2.5: Shifting segmentation of DTC marketing investment in brand and disease awareness,
1997–2005 66
Table 2.6: Sales of Pfizer’s Procardia and Procardia XL, 1990–2000 77
Table 2.7: Selected patents and other legal forms of protection for Losec 79
Table 2.8: Sales of Pfizer’s Procardia, Procardia XL and Norvasc, 1990–2000 92
Table 3.9: Blockbusters as a proportion of the total ethical pharmaceutical market, 1996-2000 99
Table 3.10: Growth of the blockbuster and total ethical pharmaceutical markets, 1996-2000 101
Table 3.11: Global sales of blockbuster drugs, 2000 102
Table 3.12: Sales of blockbusters, 1998–2000 105
Table 3.13: Estimated geographical division of blockbuster sales, 2000 107
Table 3.14: Contribution of the US to the blockbuster and total pharmaceutical markets 108
Table 3.15: Blockbuster sales by therapy area, 1996–2000 114
Table 3.16: Companies with blockbuster drugs, 2000 116
Table 3.17: Proportion of company revenues derived from blockbusters, 2000 119
Table 3.18: Patent expiry dates of products with blockbuster sales in 2000 122
Table 4.19: Sales of Losec, 1998–2005 128
Table 4.20: Sales of Zocor, 1998–2005 131
Table 4.21: Sales of Lipitor, 1998–2005 134
Table 4.22: Sales of Norvasc, 1998–2005 138
Table 4.23: Sales of Claritin/Claritin D, 1998–2005 140
Table 4.24: Sales of Procrit, 1998–2005 143
Table 4.25: Sales of Celebrex, 1998–2005 145
Table 4.26: Sales of Prozac, 1998–2005 147
Table 4.27: Sales of Takepron/Prevacid, 1998–2005 149
Table 4.28: Sales of Zyprexa, 1998–2005 151
Table 4.29: Sales of Seroxat/Paxil/Deroxat, 1998–2005 152
Table 4.30: Sales of Vioxx, 1999–2005 154
Table 4.31: Sales of Zoloft, 1998–2005 156
Table 4.32: Sales of Epogen, 1998–2005 158
Table 4.33: Sales of the Premarin family of drugs, 1998–2005 160
Table 4.34: Sales of Augmentin, 1998–2005 161
Table 4.35: Sales of Pravachol, 1998–2005 164
Table 4.36: Sales of Vasotec, 1998–2005 166
Table 4.37: Sales of Glucophage, 1998–2005 168
Table 4.38: Sales of Cozaar/Hyzaar, 1998–2005 170
Table 4.39: Historical and forecast sales of Cipro, 1998–2005 172
Table 4.40: Sales of Risperdal, 1998–2005 174
Table 4.41: Sales of Taxol, 1998–2005 176
Table 4.42: Sales of Novolin, 1998–2005 179
Table 4.43: Sales of Mevalotin, 1998–2005 180
Table 4.44: Sales of Zithromax, 1998–2005 182
Table 4.45: Sales of Intron A and Rebetron, 1998–2005 183

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Table 4.46: Sales of Viagra, 1998–2005 185
Table 4.47: Sales of Effexor, 1998–2005 187
Table 4.48: Sales of Neurontin, 1998–2005 189
Table 4.49: Sales of Flixotide/Flovent, 1998–2005 191
Table 4.50: Sales of Biaxin, 1998–2005 193
Table 4.51: Sales of Fosamax, 1998–2005 195
Table 4.52: Sales of Neupogen, 1998–2005 197
Table 4.53: Sales of Sandimmun, 1998–2005 199
Table 4.54: Sales of Zestril, 1998–2005 201
Table 4.55: Sales of Humulin, 1998–2005 202
Table 4.56: Sales of Allegra, 1998–2005 203
Table 4.57: Sales of Prinivil, 1998–2005 204
Table 4.58: Sales of Imigran, 1998–2005 205
Table 4.59: Sales of Adalat, 1998–2005 206
Table 4.60: Sales of Diflucan, 1998–2005 209
Table 4.61: Sales of Rocephin, 1998–2005 210
Table 5.62: Global sales forecasts for arthritis blockbusters, 2000–5 223
Table 5.63: Global sales forecasts for asthma blockbusters, 2000–5 226
Table 5.64: Global sales forecasts for cancer blockbusters, 2000–5 228
Table 5.65: Global sales forecasts for depression blockbusters, 2000–5 230
Table 5.66: Global sales forecasts for diabetes blockbusters, 2000–5 233
Table 5.67: Global sales forecasts for hyperlipidaemia blockbusters, 2000–5 236
Table 5.68: Global sales forecasts for hypertension blockbusters, 2000–5 239
Table 5.69: Global sales forecasts for HIV blockbusters, 2000–5 242
Table 5.70: Global sales forecasts for erectile dysfunction blockbusters, 250
Table 5.71: Global sales forecasts for obesity blockbusters, 2000–5 254

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Executive Summary
The Blockbuster Drug Outlook provides a comprehensive examination of the strategic
issues relating to pharmaceuticals that achieve annual sales of over $1bn, examining
both generic issues and trends in their route to commercial success, and the market
dynamics of individual drugs. In addition to being a source of key data, this report also
focuses on the characteristics of blockbusters, how they can best be managed, and how
sales can be maximised throughout the product lifecycle. Drawing on detailed profiles
of current blockbusters, best practice in product launch and sales protection in the face
of patent expiry can be identified. In addition, analysis of current blockbuster drugs
provides insight into future opportunities for such high selling products. The strategies
and considerations identified within the report can also provide guidance for the
management of non-blockbusters, as well as identifying the weaknesses of current
blockbusters and the unmet needs that they have failed to address.

Chapter 1 is an overview of the blockbuster market, examining the characteristics of

blockbusters, trends in the market, and drivers and resistors of sales. It is argued that
drugs should be classed as blockbusters not only on the basis of therapeutic success, but
also on the basis of commercial success, concluding that annual global sales of $1bn is
an appropriate criterion for a blockbuster drug. Although there were only four products
with sales of over $1bn in 1990, the number of these products has increased rapidly,
and currently exceeds 40, showing the increasing significance of such high selling
drugs as part of the overall ethical pharmaceutical market.

The increase in the number of blockbuster products has been driven by various factors,
including the growth in turnover and geographical presence of top tier pharmaceutical
companies. Increased size has increased pharmaceutical companies’ abilities to produce
blockbuster drugs due to increased R&D activity and more developed marketing
capabilities. The marketing expertise and power of companies will become even more
important in driving blockbuster sales to 2005 because of the increasing importance of
a global launch of a potential blockbuster product and the probable legalisation of

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direct-to-consumer (DTC) marketing in Europe and the rest of the world. DTC
marketing in the US has been particularly significant in driving the sales of
blockbusters, with approximately 60% of blockbuster sales derived from the US at
present.

Chapter 1 also identifies the resistors to blockbuster sales over the past decade. These
include a relative weakness in R&D portfolio management that may have restricted the
number of blockbusters produced by pharmaceutical companies. Cost containment by
healthcare payers has also resisted blockbuster sales; as healthcare costs continue to
rise, the impact of cost containment on the sales of blockbuster drugs can be expected
to increase.

Based on primary research interviews with pharmaceutical executives, Chapter 2

examines the management of blockbusters, or potential blockbusters, through the
product lifecycle. In focusing on maximising blockbuster product sales, this chapter
examines strategies to optimise launch, to maximise market penetration and peak sales,
and to maintain sales in the face of patent expiry. In addition, Chapter 2 considers how
a company can best survive the loss of patent protection of a blockbuster.

If total blockbuster sales are to be maximised, it is vital that the launch of a potential
blockbuster is conducted so as to optimise market penetration through the use of global
roll out and the development of pre-launch awareness. Pharmaceutical companies have
been generally poor in generating pre-launch awareness, especially within the target
patient population. The benefits of an effective launch strategy have been illustrated by
the highly successful launch of Warner-Lambert’s (now Pfizer’s) Lipitor.

Traditional co-marketing of products with high sales potential is now being replaced by
co-promotion agreements. Although establishing co-promotion partnerships can be
more complicated and time consuming than co-marketing agreements, recent examples
of the co-promotion of blockbusters illustrate that co-promotion can be a highly
profitable route for the developer of a potential blockbuster drug. Such examples

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include the successful co-promotion of Lipitor (atorvastatin) by Warner-Lambert and
Pfizer, prior to the merger of these two companies.

Branding, which remains under-exploited by the pharmaceutical industry, can aid

maximisation of blockbuster sales during launch and initial market penetration. To be
most successful, branding blockbuster drugs must encompass all mediums whereby
users of pharmaceuticals, be they the physicians prescribing them or the patients
consuming them, gain an impression of the products.

Once a blockbuster’s patent expiry is imminent, pharmaceutical companies must focus

on long term strategies for defending against generic competition. Long term generics
defence strategies offer three major benefits:

‰ long term market share is protected for the off-patent brand;

‰ purchaser goodwill is retained;

‰ market share for a new product is established.

However, although new indications and formulations, Rx-to-OTC switching, branding

and DTC marketing can all be used to maintain the sales of an off-patent blockbuster,
pharmaceutical companies must focus on obtaining replacement sources of revenue
prior to blockbuster patent expiries.

Chapter 3 examines various aspects of the blockbuster market, including trends in its
growth, the breakdown of the market by geographic markets, the segmentation by
individual blockbuster product sales and comparisons to the growth of the total ethical
pharmaceutical market. In addition, Chapter 3 examines the dependency of individual
pharmaceutical companies on the sales of blockbuster drugs, focusing on the proportion
of total ethical sales that each company derives from its blockbusters and the patent
expiry dates of those blockbuster products.

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The total sales of blockbuster drugs reached almost $85bn in 2000. The proportion of
the total ethical pharmaceutical market derived from blockbuster drugs has increased
steadily over a number of years. The blockbuster market has grown considerably faster
than the global ethical pharmaceutical market.

The US accounts for approximately 60% of the blockbuster market but only
approximately 30% of the total ethical pharmaceutical market, largely due to the
marketing focus of many pharmaceutical companies, higher drug prices and the legality
of DTC marketing in that country.

The highest selling drug in the years 1994–1996 was Glaxo Wellcome’s (now Glaxo
SmithKline’s) Zantac (ranitidine), an H2 antagonist used in conventional maintenance
therapy for the treatment of gastroduodenal ulcers. However, despite having
extraordinary sales in 1994, sales of Zantac suffered more than any other blockbuster.
The initial decrease in sales of Zantac was due to competition from a new class of
gastroduodenal ulcer treatment, proton pump inhibitors (PPIs), which included Astra’s
(now AstraZeneca’s) Losec (omeprazole). The impact of Losec on Zantac’s sales
illustrated the competitive threat posed by a new product offering a significant
improvement in clinical efficacy. Zantac and other H2 antagonists built their huge sales
on partially filling an area of unmet need in ulcer treatment that was subsequently better
filled by a new class of product. As Zantac’s successor in gastroduodenal ulcer
treatment, in 1997 Losec assumed the position it retains today as the highest selling
blockbuster, and remains the highest selling drug ever. However, the patents protecting
Losec have already begun to expire in the EU and are due to expire in the US in 2001,
after which its sales may be expected to decline.

Amgen is in the unique position if being almost entirely reliant upon two blockbusters
for all of its ethical revenues. Sales from these products have consistently increased
since their launch and now generate combined sales of over $3bn annually. The
company has maintained its focus on the development of recombinant protein products
and now applies its research knowledge to a wider variety of therapy areas. In an effort

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to maximise sales from Epogen, Amgen developed an alternative form of this product
that has a serum half life approximately three fold greater than the original. This is
likely to sustain Amgen’s strong position within the haematological market. In addition,
Neupogen is patent protected until 2010 throughout the world, and so will continue to
drive revenue for the immediate future.

The recently merged Glaxo SmithKline (GSK) reported ethical sales amounting to
$23.3bn in 2000. Of this, the company’s five blockbusters accounted for 28% of the
total. Both Novartis and Roche are considerably less dependent upon the sales of their
blockbuster products, and therefore these two companies have less to fear from patent
expiry of their blockbusters.

In 2000, Pfizer had the highest number of blockbusters in its portfolio, with seven
products exceeding the $1bn annual sales mark. This cluster of products accounted for
65% of its total ethical sales of $24bn. This indicates that, although the company has
been highly successful in producing a large number of high selling drugs, it is, on the
surface, rendered vulnerable to the patent expiry of those products. In the case of Pfizer,
however, this vulnerability is substantially reduced as its blockbusters’ patents are due
to expire gradually and not all at once. In addition, as Pfizer has a large number of
blockbusters, its total blockbuster sales are less vulnerable to increased competition in
any single therapy area.

Chapter 4 contains snapshot profiles of all branded ethical products that achieved
blockbuster sales in 200. The profiles include the products’ main indications, historic
and forecast sales, and an analysis of the market dynamics governing the current and
future performance success of each blockbuster.

Chapter 5 begins by investigating the types of unmet need that can provide the
opportunity for a drug to achieve blockbuster sales, both by examining the nature of
unmet needs themselves and by focusing on the unmet needs that have previously been
addressed by blockbuster drugs. This chapter focuses on the drugs identified as having

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blockbuster potential and examines the market dynamics surrounding each of these
drugs. Finally, special considerations pertaining to blockbuster lifestyle drugs and the
future drivers and resistors of blockbuster sales are analysed.

Analysis leads to the belief that there is insufficient unmet need in the treatment of
bacterial infections to provide opportunity for many new blockbusters before 2005. Of
those compounds in development, Lilly’s Zovant (drotrecogin alfa) appears to offer
significant potential as the first effective treatment for sepsis. In March 2001, the FDA
boosted Zovant’s commercial prospects by agreeing to halve its approval time in
recognition of it offering an important breakthrough and significant life-saver. In light
of this decision, Zovan could actually be launched before the end of 2001.

In the case of the anti-hyperlipidaemia market, the launch of Lipitor propelled what was
already thought to be a saturated market further towards complete saturation, reducing
the opportunity for future blockbuster statins. Lipitor could potentially become the
highest selling drug ever, with annual sales of $7,500m by 2005.

Treatments for asthma and arthritis were both slow to produce blockbuster drugs. Now,
however, two arthritis treatments launched in 1998, Celebrex (celecoxib) and Vioxx
(rofecoxib), have both now surpassed $2bn in annual sales, recording $2,624m and
$2,160m, respectively, in 2000.

The treatment of asthma provided the opportunity for GSK’s drug, Flixotide
(fluticasone), to achieve sales of $1,332m in 2000. The same company’s other asthma
drug, Serevent (salmeterol xinafoate) is nearing blockbuster status, with sales of $941m
in 2000.

Despite competition from generic forms of Prozac after its patent expiry in 2001, the
depression therapy area encompassed one new blockbuster in 2000, when Wyeth’s
Effexor (venlafaxine) achieved sales of $1,336m.

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To 2005, Blockbuster sales have been forecast only for two lifestyle drugs, Viagra
(sildenafil) and Xenical (orlistat), despite the opportunities that this ‘class’ of products
provide for effective use of all forms of marketing, and the increase in age-related
lifestyle conditions. Sales of lifestyle drugs are expected to continue to be restricted by
cost containment measures of healthcare payers. Indeed, it is expected that the overall
impact of resistors on blockbuster sales will increase, while the impact of the drivers
will decrease. Therefore, although there will be new blockbusters in the next six years,
there will be fewer than emerged over recent years.

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18
Chapter 1 Introduction to the
blockbuster market

Key findings

This chapter is an overview of the blockbuster market, examining the characteristics of

blockbusters, trends in the blockbuster market, and drivers and resistors of blockbuster
sales. Trends in the blockbuster market are further examined in Chapter 2. Major
findings of Chapter 1 are as follows:

‰ drugs should be classed as blockbusters not only on the basis of therapeutic success,
but also on the basis of commercial success. Therefore annual global sales of $1bn
is an appropriate criterion for a blockbuster drug;

‰ although there were only four products with sales of over $1bn in 1990, the number
of these products has increased rapidly, reaching a total of 43 in 2000;

‰ the growth in turnover and geographical presence of top tier pharmaceutical

companies has increased their ability to produce blockbuster drugs due to increased
R&D and expanded marketing capabilities;

‰ the marketing expertise and power of companies will become even more important
in driving blockbuster sales in the period to 2005 because of the increasing
importance of a global launch of a potential blockbuster product and the probable
legalisation of direct-to-consumer marketing in Europe and the rest of the world;

‰ direct-to-consumer marketing in the US has been significant in driving the sales of

blockbusters;

‰ a relative lack of R&D portfolio management over the past decade may have
restricted the number of blockbuster drugs produced by pharmaceutical companies;

‰ as healthcare costs continue to rise, the impact of cost containment on the sales of
blockbuster drugs can be expected to increase;

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‰ cardiovascular disease is the most important therapy area in terms of blockbuster
sales, accounting for 29.7% of the global blockbuster market in 2000.

Defining a blockbuster product

The term ‘blockbuster drug’ is widely used in the trade and general press, but is there a
strict definition? The general press often uses the term freely, attaching it to any drug
that has either has high sales, high therapeutic benefits, or simply enjoys high public
awareness. The pharmaceutical industry and trade press use the term more selectively,
although there is still inconsistency. For example, blockbuster drugs are often defined
as products with global sales of $1bn or more, but other definitions include products
with sales of over $500m, or simply drugs that stand out in their class either in terms of
sales or therapeutic benefit.

In the author’s view, there are four main factors that define blockbusters as a distinct
group of products. Blockbusters are drugs that:

‰ represent significant improvements in drug therapy;

‰ drive the growth of, or even create, top-tier pharmaceutical companies;

‰ form a top rank of products with exceptional sales;

‰ generate global sales of at least $1bn for each of the companies that market them.
While this cut-off point may seem arbitrary, it is suggested that products which
fulfil all the criteria listed above will also have sales of over $1bn.

Significant improvements in drug therapy

New pharmaceutical therapies that signify a substantial improvement in the treatment

of a disease or condition are often dubbed blockbusters. Some of these products show
improvements over existing treatments such as a leap in efficacy, a significant

20
reduction in side effects or an improved formulation. Other drugs that are referred to as
blockbusters are the first drug-based therapy for a specific indication.

However, simply being a ‘better’ drug than other products with the same indication is
not sufficient reason to call a new pharmaceutical a blockbuster. Indeed, products that
are referred to as blockbusters in the press prior to their launch often lose the title soon
after, at least until their sales increase to the point at which they are large in comparison
to all drugs with any indication. In these cases, the term blockbuster is used only to
indicate a significant medical advance in a specified therapeutic area, often by the press
to increase interest in the story.

Simply being an innovative product is not sufficient reason for a drug to be a true
blockbuster. In the author’s view, a blockbuster will usually fill a large area of unmet
need, both in terms of patient potential and in terms of demand from patients and
physicians. Products that meet a high degree of unmet need signify a large step in drug
therapy as a whole, reducing the total unmet need that could be met through treatment
with new pharmaceuticals. A drug that comprises an improvement of treatment in a
therapy area that has limited unmet need, while still being significant, would not be a
global blockbuster. In use of the term blockbuster, however, a drug is not classed as a
blockbuster only on the basis of its therapeutic success; a blockbuster is also a
commercial success.

Products that drive or create top-tier pharmaceutical companies

A blockbuster drug that belongs to a top tier company (defined for the prurposes of this
report as having annual ethical sales in excess of $6bn) will, at its peak sales level,
typically account for 20–30% of that company’s total sales. Blockbusters, therefore,
will often comprise a major focus for that company, defining the therapeutic areas upon
which the company focuses. A blockbuster, being one of the company’s highest profile
products, will heavily impact that company’s image and perceived area of expertise and
success. Blockbusters are, therefore, often products that define a company.

21
The defining nature of blockbusters is more relevant to companies that have only
become top tier companies due to sales derived from one or two particularly successful
products. This has been the case for Amgen, which has become a global pharmaceutical
payer because of its success with Epogen and Neupogen, and Astra (now AstraZeneca),
whose growth was been driven by the success of Losec.

The rise of blockbuster drugs

Estimates suggest that in 1990 there were only four products with sales of over $1bn.
However, in the intervening decade, the number of these products has increased rapidly,
reaching a total of 43 in 2000, as Figure 1.1 below illustrates. The development of
blockbuster drugs has become a focus for the research-based pharmaceutical industry,
with a number of companies reaping the benefits of such high selling products.
However, with patent expiry around the corner for many blockbusters, the future
possibilities for billion dollar drugs and the future impact that they will have on their
originators and their competitors is uncertain. Will there be blockbuster drugs in the
future, or is the golden age of blockbusters in decline? To answers this question, this
report provides a timely analysis of the nature of blockbuster drugs, how they have
achieved such sales success, how they are managed, and future possibilities for
developing new billion dollar drugs.

22
 Figure 1.1: Number of pharmaceuticals with sales of $1bn or more, 1990–
2000

50

45

40
Number of blockbuster drugs

35

30

25

20

15

10

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Ye ar

Source: Datamonitor

Table 1.1: Number of pharmaceuticals with sales of $1bn or more, 1990–

2000

Year Number of blockbusters

1990 4
1991 6
1992 8
1993 10
1994 12
1995 14
1996 25
1997 25
1998 31
1999 37
2000 43

Source: Datamonitor

23
Drivers and resistors of blockbuster sales

The following diagram illustrates the historic drivers and resistors that have governed
the emergence of blockbuster drugs since 1990. The drivers and resistors are not
specific to individual products, but are the factors influencing the rise in the number of
blockbuster drugs as a whole.

Figure 1.2: Historic drivers and resistors of blockbuster drugs

Resistors
• cost containment by healthcare payers
• relative lack of R&D portfolio management
• pricing regulations
• reimbursement restrictions

Blockbuster drugs

Drivers

• general expansion of pharma market

• increased size and marketing capability of
pharma companies
• large areas of unmet need
• significant advances in innovation
• increasing screening and diagnosis rates
expanding the treated patient population
• DTC marketing in US

Size of arrow is relative to strength of force

Source: Datamonitor

24
As Figure 1.2 shows, since 1990, the drivers of blockbuster drugs have outweighed the
resistors, leading to the increase in the number of billion dollar products. These drivers
and resistors are discussed in more detail in the following paragraphs.

Drivers

Growth of the pharmaceutical market

One of the key drivers of blockbuster drugs is the growth of the pharmaceutical market
as a whole. As the total value of the market has expanded, this has provided the
opportunity for individual products to achieve high sales through maintaining the same
market share. Comparisons of the growth of the pharmaceutical market as a whole,
different therapy areas and blockbuster drugs are the focus of Chapter 2 of this report.

Increased size of pharmaceutical companies

The increased size of the top tier pharmaceutical companies in terms of turnover and
geographical presence has, for two major reasons, increased their ability to produce
blockbuster drugs:

‰ an increasing number of products in R&D increases the probability of one of them

becoming a blockbuster;

‰ expansion and globalisation of marketing capabilities more effectively drives

physician uptake of new products.

The marketing power of a pharmaceutical company is important if products are to fulfil

their blockbuster potential, although it remains debatable whether a drug can be made
into a blockbuster on the basis of marketing or whether a significant clinical
improvement over previous therapies is vital. Certainly, those drugs that have achieved
blockbuster status to date have generally offered a significant improvement in the
treatment of a disease or medical condition, and none seem to owe their sales success to
good marketing alone. Indeed, a number of drugs have become blockbuster products
despite being developed and largely marketed by small and reasonably inexperienced

25
companies, albeit often with help from marketing agreements with large companies.
Amgen’s Neupogen and Epogen (erythropoietin), are examples of blockbusters
developed and marketed by a relatively small company. However, for many blockbuster
drugs, high sales have depended upon a mix of significant improvements in clinical
profile and marketing power. For example, the global sales of Losec (omeprazole) were
driven both by the product’s clinical superiority and the combined marketing
capabilities of Astra and Merck & Co.

DTC marketing

The importance of marketing power has increased in the US following increasing levels
of direct-to-consumer (DTC) marketing of ethical pharmaceuticals. Following the
relaxation of FDA regulations governing DTC marketing in August 1997, marketing
directly to patients, including television advertising, became a more viable and
potentially useful tool for pharmaceutical companies. Primary research interviewees
believe that DTC marketing in the US has been significant in driving the sales of
blockbusters, particularly since the majority of sales of many of these high selling
products is derived from the US. DTC marketing is a particularly pertinent driver of
blockbuster drugs since pharmaceutical companies are willing to allocate a substantial
proportion of their marketing budget to them.

Marketing power

The marketing expertise and power of companies is set to become even more important
for driving blockbuster sales through two potential future developments:

‰ the increasing importance of a global launch of a potential blockbuster product;

‰ DTC marketing of ethical products becoming legal in Europe and the rest of the
world.

A global launch for a potential blockbuster drug is not a prerequisite of a blockbuster

drug, largely because it is not vital, or even appropriate, for all products. However, the
successful global launch strategies of Viagra (sildenafil) and Celebrex (celecoxib), both

26
of which rapidly attained blockbuster status, illustrate the potential benefits of this
strategy. Global launch is most likely to have a positive impact upon high profile drugs
that capture the interest of the general media as well as the trade press, as was the case
for Viagra. This is because if these products are available in most major markets soon
after they have been focused upon in the general media, then patients are more likely to
present to their physician and request the new product. If there is a lag between
widespread media coverage and launch, public awareness will fall and fewer patients
will seek that product by presenting and putting pressure on their physician. This is
particularly pertinent to ‘lifestyle’ drugs, such as Viagra, which have encouraged large
numbers of previously untreated patients to present to their physicians for the first time.

The use of DTC marketing in Europe and the rest of the world is expected to increase
over the next five years, depending upon the lifting or easing of regulatory constraints.
Once this occurs, a company’s capacity to invest in DTC marketing and its experience
in this type of marketing will become more important contributing factors to driving
blockbuster sales.

Unmet need

As has been explained, many blockbuster drugs have reached such high sales, at least in
part, because they offered significant clinical benefits over previous therapies. For
example, Lipitor (atorvastatin) has demonstrated superior efficacy over previous lipid-
lowering drugs. However, improved clinical profiles must be combined with a large
unmet need for a product to become a blockbuster. Many blockbusters have been in
therapy areas with considerable unmet need, either because that therapy area lacked an
effective treatment or because the previous treatments had inconvenient formulations or
severe side effects. For example, sales of Prozac (fluoxetine) were driven by its highly
superior side effect profile over previous antidepressants, allowing its use in patients
who could not previously tolerate pharmacotherapy. Whether therapy areas that have
traditionally provided potential for blockbuster drugs, such as cardiovascular disease,
will continue to have sufficient unmet need to allow new blockbusters to emerge will
be discussed later in this report.

27
Increased screening and diagnosis

Another factor driving the rise of blockbusters has been the expansion of certain patient
populations due to improved screening and diagnosis. For example, increased testing
for high cholesterol in the US has led to a larger patient population, which has in turn
contributed to the sales growth of the statin class of lipid lowering drugs, including the
blockbusters Zocor (simvastatin), Lipitor (atorvastatin) and Mevalotin (pravastatin).

Prozac benefited from increased diagnosis of depression following increased

understanding of the condition. Growth of the treated patient population was also
driven prior to the launch of Prozac in 1988 by the attrition of the social taboos
surrounding depression during the preceding two decades.

Resistors

A lack of R&D portfolio management

A relative lack of R&D portfolio management in the last decade may have actually
restricted the number of blockbuster drugs produced by pharmaceutical companies.
R&D portfolio management helps companies to identify potential commercially
successful products, including blockbusters, at an early stage in their development, and
so focus their investment on bringing these products to market quickly. The use of
portfolio management, therefore, focuses a pharmaceutical company’s R&D process on
developing high selling drugs and blockbusters, and on prioritising these products so
that they reach the market while there is sufficient unmet need and while there is
limited competition, so that the drugs can fulfil their sales potential. However, the use
of structured R&D portfolio management processes is still in its early stages. Primary
research has revealed that only 25–30% of pharmaceutical companies are currently
implementing structured R&D portfolio management processes. The non-application of
R&D portfolio management appears to have reduced the ability of companies to push
potential blockbusters through development due to investment being spread too thinly
over too many different drugs.

28
Cost containment

Cost containment by healthcare payers impacts the sales of almost all drugs, but often
affects high selling products more as these are seen as obvious targets for reducing
costs. In Japan and countries in the EU, where the healthcare payer is generally the
government, various cost containment systems exist, many of them limiting the
reimbursement prices of drugs. For new products that expect to be in demand and
widely used soon after launch, these pricing restrictions often mean that a drug cannot
be given a price that reflects patient and physician demand. Government regulations are
in place so that the free market forces that determine prices in other industries (i.e.
supply and demand) do not drive prices up. In the US, drug prices are generally high,
due to the lack of government regulation of prices, but cost containment by health
management organisations (HMOs) and managed care organisations (MCOs) drives
prices down to an extent, largely through the practice of excluding higher priced drugs
from formularies.

As healthcare costs continue to rise, the impact of cost containment can be expected to
increase. A tool increasingly being implemented for cost containment is
pharmacoeconomics. The introduction of pharmacoeconomics as a criteria for
government reimbursement in a number for countries, including Finland, The
Netherlands, Italy, Canada and Australia, can potentially restrict value sales of some
pharmaceutical products that have been found to be pharmacoeconomically cost
ineffective, by limiting their reimbursement price. However, pharmacoeconomics will
also drive sales of products that can demonstrate pharmacoeconomic benefits. The lack
of cost-effective products is shown in this report to be a payer/purchaser unmet need.
Therefore, by addressing this area of unmet need, products that demonstrate
pharmacoeconomic benefits have the potential to achieve blockbuster sales.

The introduction of pharmacoeconomics in some regulatory and health authorities may

act as a resistor for a number of potential blockbusters, especially lifestyle drugs.
Indeed, the focus on these products, particularly Viagra, arguably made the introduction
of pharmacoeconomics more attractive. Products such as Viagra, the medical necessity

29
for which is debated but the demand for which is potentially huge, present a problem to
healthcare payers. It is expected that Viagra will treat a large erectile dysfunction
patient population that does not currently present to physicians. These extra patients,
combined with the high price of Viagra relative to other therapies, form a substantial
extra cost to healthcare payers. However, the regulatory bodies that now use
pharmacoeconomics effectively have an additional barrier to restrict the use of Viagra
and other lifestyle drugs that present the same budgetary problem. Reimbursement
authorities that now use pharmacoeconomics could limit the cost of Viagra to the
healthcare system by denying or restricting reimbursement due to a lack of cost
effectiveness.

In the UK, where the National Institute for Clinical Excellence (NICE) uses
pharmacoeconomics to produce clinical guidelines for physicians, the prescription of
expensive lifestyle drugs could be restricted by NICE’s recommendations. However,
NICE was established too late to preside over the UK government and National Health
Service’s initial reactions to Viagra. Instead, in 1998, the Department of Health sent out
a circular advising UK physicians not to prescribe Viagra, an act ruled to be unlawful
by a UK High Court in May 1999. This overturning of government advice to physicians
through the law courts could set a precedent for pharmaceutical companies to fight
regulatory authorities’ rulings that restrict the use of lifestyle drugs, especially in
Europe where governments must act in accordance with EU legislation. This ruling was
good news for the manufacturers of high selling drugs.

Although the use of pharmacoeconomics has already begun to take effect, its use
remains restricted to a few markets. So far, pharmacoeconomics has had little impact in
the major markets of the US, Japan, Spain and Germany, and is not expected to
significantly affect sales in these countries in the near future. However, once the use of
pharmacoeconomic increases, it could act both as a driver and resistor of blockbuster
drugs.

30
The blockbuster market: Overview

Growth of the blockbuster market

As has already been shown in this report, the number of blockbuster products has risen
steeply over the last decade, from only four in 1990 to 43 in 2000. This obviously
entails a large increase in the total global sales of the blockbuster market. The graph
below shows the growth of the blockbuster market from 1996 to 2000.

Figure 1.3: Total sales of blockbuster drugs, 1996–2000

90,000

80,000

70,000
Total blockbuster drug slaes ($m)

60,000

50,000

40,000

30,000

20,000

10,000

0
1996 1997 1998 1999 2000

Source: Insertsourcenamehere

Table 1.2: Total sales of blockbuster drugs, 1996–2000

($m) 1996 1997 1998 1999 2000 CAGR

(%)
Total blockbuster
sales 37,992 41,407 53,193 69,759 84,699 22.2

Source: Datamonitor

31
Blockbuster therapy areas

The following graph shows the breakdown of the global blockbuster market by therapy
area in 2000.

Figure 1.4: The blockbuster market by therapy area, 2000

Cancer Others
5% 1%
Haematologicals
6%

Musculoskeletal Cardiovascular
and pain 30%
6%

Resipiratory
6%

Endocrine
9%

Anti-infectives CNS
10% 17%
Gastrointestinal
10%

Source: Datamonitor

As illustrated, in 2000, nine therapy areas included at least one blockbuster drug.
Cardiovascular is still the most important therapy area in terms of blockbuster sales,
accounting for 29.7% of the blockbuster market in 2000. CNS has recently achieved
significant increases in blockbuster sales to $14,733m, accounting for 17% of the total
blockbuster market in 2000. The other therapy areas account for much less of the
blockbuster market, with some only having two blockbuster products, both of which
generate substantial sales revenues (e.g. Losec and Prevacid in gastrointestinal). Trends

32
in the growth of the blockbuster market and comparisons with the whole
pharmaceutical market are examined in the Chapter 2 of this report.

Table 1.3: The blockbuster market by therapy area, 2000

Therapy area Total sales 2000 ($m)

Cardiovascular 25,177
CNS 14,733
Gastrointestinal 8,760
Anti-infectives 8,199
Endocrine 7,583
Resipiratory 5,418
Musculoskeletal and pain 4,774
Haematologicals 4,669
Cancer 4,172
Others 1,215

Total 84,699

Source: Datamonitor

33
34
Chapter 2 Managing blockbusters

Key findings

Based on primary research interviews with pharmaceutical executives, Chapter 2

examines the management of blockbusters, or potential blockbusters, through the
product lifecycle. In focusing on maximising blockbuster product sales, this chapter
examines strategies to optimise launch, to maximise market penetration and peak sales,
and to maintain sales in the face of patent expiry. In addition, analysis is provided as to
how a company can best survive the loss of patent protection of a blockbuster. The
major findings of this chapter are as follows:

‰ if blockbuster sales are to be maximised, it is vital that the launch of a potential

blockbuster is conducted so as to optimise market penetration through the use of
global roll out following the development of pre-launch awareness;

‰ pharmaceutical companies have been generally poor at ensuring that pre-launch

awareness is created, especially within the patient population;

‰ traditional blockbuster co-marketing has started to be replaced by co-promotion

agreements, whereby promotional spend can be reduced while still producing a
higher level of awareness, and hence return on investment, amongst both physicians
and the public;

‰ branding, though currently underused by the pharmaceutical industry, can aid

maximisation of blockbuster sales through launch and market penetration;

‰ branding of blockbuster drugs must encompasses all mediums whereby users of

pharmaceuticals, be they the physicians that are prescribing them or the patients,
gain an impression of the product;

‰ although additional indications may contribute little to a blockbuster’s target patient

population, new indications can be used effectively to drive PR, marketing and a
company’s sales force;

35
‰ the impact of pharmacoeconomic studies on the sales of blockbusters in the EU will
increase in the first decade of the 21st Century;

‰ long term generics defence strategies have three major benefits: long term market
share is protected for the off-patent brand; purchaser goodwill is retained; market
share for a new product is established;

‰ although new indications and formulations, Rx-to-OTC switching, branding and

DTC marketing can all be used to maintain the sales of an off-patent blockbuster,
pharmaceutical companies must focus on obtaining replacement sources of revenue
prior to blockbuster patent expiries.

36
Launching blockbusters

Datamonitor identifies three general market penetration curves:

‰ rapid penetration rate;

‰ average penetration rate;

‰ slow penetration rate.

These penetration curves are illustrated below.

Figure 2.5: Penetration rate curves

Sales ($m)

Time (years)

Rapid penetration rate

Average penetration rate

Slow penetration rate

Source: Datamonitor

As can be seen from the figure above, a rapid penetration rate will mean greater total
sales for a product before it reaches a sales plateau. It is, therefore, vital that the launch

37
of a potential blockbuster is conducted so as to optimise market penetration. This is
illustrated by the graph below, which shows the market penetration of three
hyperlipidaemia blockbusters, Lipitor, Zocor and Pravachol.

Figure 2.6: Market penetration of Lipitor, Zocor and Pravachol

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0
0 1 2 3 4 5 6 7 8 9
Years since product's first launch

Lipitor Zocor Pravachol

Lipitor sales gained by rapid penetration

Zocor sales lost through slow penetration

Source: Datamonitor

If the graph above is compared to the average, slow and rapid penetration curves, it can
be seen that Lipitor rapidly penetrated the hyperlipidaemia market following its launch
in early 1999. This has been in part due to the superiority of Lipitor’s clinical profile
over that of previous hyperlipidaemia treatments, and to the success of its global

38
launch. Lipitor’s rapid penetration continues to drive considerably more revenue for the
product than an average penetration rate would, as illustrated by the shaded area on the
graph.

The market penetration of Pravachol, on the other hand, equates to an average

penetration curve, and the penetration of Zocor equates to a slow penetration rate,
despite the fact that it achieved higher sales than Pravachol after eight years on the
market. If the penetration of Zocor had been rapid or even average before beginning to
plateau after nine years on the market, it would have achieved considerable additional
sales, as represented by the shaded area on the graph.

Table 2.4: Market penetration of Lipitor, Zocor and Pravachol

Years since Lipitor sales Zocor sales Pravachol sales

first launch ($m) ($m) ($m)

1 865 280 45
2 2,185 400 185
3 3,732 475 370
4 5,031 902 505
5 5,100e 1,255 775
6 5,700e 1,955 1,068
7 6,300e 2,800 1,437
8 6,900e 3,575 1,643
9 7,500e 3,945 1,704

e denotes Datamonitor estimates

Source: Datamonitor

Companies can maximise the market penetration rate of a new blockbuster through the
following strategies:

‰ generating pre-launch awareness;

‰ aiming for global launch;

‰ co-promoting the product with another company.

39
These three strategies are discussed below:

Pre-launch awareness

To maximise the effectiveness of the launch of a new potential blockbuster,

pharmaceutical companies need to raise patient and physician awareness of the new
drug, and in some cases awareness of the medical condition, prior to launch. If
physicians are anticipating the launch of a new therapy and are already in possession of
information about the clinical profile of that new product, they are less likely to delay
any change in their prescribing habits. Likewise, if patients are made aware of a new
product, they are likely to request that new drug from their physician as soon as it
becomes available (if such awareness is generated through DTC marketing, this is
currently only legal in the US). In addition, patient sub-groups that are particularly
appropriate for treatment with a new blockbuster (such as patients who cannot tolerate
previously available therapies) need to be made aware of the drug as early as possible
so that they can pre-present to their physician to obtain a new or changed prescription.

It is suggested that marketing prior to launch should, whenever relevant, focus on the
following disease or product characteristics:

‰ building awareness of symptoms or the disease and highlighting the current lack of
treatment options as a basis for subsequent product awareness campaigns;

‰ first-to-market, meeting a high degree of unmet need;

‰ innovative or representing a fundamental change in the treatment of a condition;

‰ safety and efficacy profile (such messages should be particularly potent in the
absence of any competing products);

‰ launch date.

For products that are first-to-market in a particular therapy area, it is often necessary to
raise disease awareness prior to launch to ensure that patients make the association

40
between a set of symptoms and the need for treatment, or at least the availability of an
appropriate treatment. A good example of this was the need for Pfizer to raise the
awareness of erectile dysfunction prior to the launch of Viagra. Although there were
alternative treatments available before Viagra, their formulation was inconvenient and
there was low public awareness that the condition could be treated. Viagra, and the
media attention that preceded and accompanied its launch, has considerably increased
the number of patient presenting with erectile dysfunction. If the level of awareness had
not been raised prior to launch, it is unlikely that Viagra would have achieved the rate
of uptake that it experienced in many countries.

There are a number of methods used by pharmaceutical companies to raise physician

and patient awareness prior to launch. However, primary research indicates that
pharmaceutical companies have been generally poor at ensuring that this pre-launch
awareness is created, especially within the patient population. In certain patient groups,
such as HIV or cancer sufferers, awareness of drugs in development is generally high,
due to the impact that these diseases have upon their daily lives. However, public
interest in and awareness of medical developments is growing in most major
pharmaceutical markets, due to increasing availability of information and increasing
patient co-payment of healthcare costs. It is vital that pharmaceutical companies use
this to maximum effect. This is especially important in the pre-marketing of potential
blockbusters, as these drugs are expected to be used to treat a large patient population,
either by being prescribed for previously untreated patients, as Viagra largely does,
and/or cannibalising prescriptions of other treatments. Furthermore, since competing
products tend to be launched relatively rapidly, it is essential that companies fully
exploit their product’s period of market monopoly, without having to generate interest
in that product after it has been launched.

Most of the methods that pharmaceutical companies can use to increase physician and
patient awareness prior to launch are the same information channels that are used after
launch, and are examined later in this chapter. However, the use of DTC marketing and
the press and mass media are particularly relevant to pre-launch marketing.

41
Peri-approval DTC promotion

DTC marketing is an extremely potent means of raising physician and patient

awareness prior to launch, and supports pharmaceutical sales reps’ efforts to influence
physicians’ prescribing habits. However, due to current regulations in Europe, DTC
marketing is only legal in the US. In addition, pre-approval DTC marketing of ethical
products is not permitted in the US, and attempts to circumvent this ruling have not
been successful. For example, in March 1999, it was announced that the FDA had
commenced an investigation into Serono Laboratories’ illegal promotion of an
experimental drug.

It is suggested that the post-approval to pre-launch period is eminently suitable for DTC
marketing, particularly when products will be the first-to-market in a particular category
and address a high level of therapeutic unmet need. There is nothing wrong with
creating a sense of anticipation in patients (along the lines of “Coming soon...a product
to alleviate the symptoms associated with....”). In fact, the benefit of pre-launch DTC
marketing is that patients who are suitable candidates for an advertised drug will go
through the process of precontemplation and contemplation prior to launch and thus be
ready for action (i.e. contacting a physician with a request for a branded product) as
soon as a product is available. Consequently, high initial sales volumes will be achieved
and products will experience a rapid and, given a continuing DTC commitment,
sustained take-up curve. The development of contemplation from precontemplation
prior to launch is illustrated in the following figure.

42
 Figure 2.7: Targeting consumers with pre-launch DTC campaigns

APPROVAL

Start DTC campaign

Disease awareness
1. Precontemplation
Product awareness

Disease awareness
2. Contemplation
Product awareness

LAUNCH

3. Action 2. Contemplation

4. Maintenance 1. Precontemplation

5. Termination/
continuation

Source: Datamonitor

Although pre-approval DTC marketing of named ethical products is not legal in the US,
it is possible to raise disease awareness through DTC marketing prior to approval.

43
However, this is a relatively risky strategy that could result in a negative return on
investment if a product is not approved by the FDA.

Dissemination of information through the mass media

Although it is possible for pharmaceutical companies to use the media to disseminate

information later in a product’s lifecycle, the mass media are most likely to be
interested in a product either before or soon after its launch. Stories about upcoming or
new therapies are more likely to interest the mass public, and therefore the mass media.
Viagra is a case in point. Around its launch, and for some time after, Viagra was of
considerable interest to the mass media, largely due to the nature of the disease it treats,
but subsequently general press coverage has decreased markedly. On the other hand,
Viagra does still receive some patient attention because it has entered public awareness
and become a household name.

Use of the mass media to disseminate information is particularly relevant to blockbuster

drugs. While other therapies are of interest to the mass media, many of the drugs that
capture public attention are those for the treatment of high profile conditions, or
diseases for which there is considerable unmet need. These therapies are therefore
likely to at least have the potential to become blockbusters.

If the pharmaceutical industry cannot directly promote products to patients, then mass
media involvement in circulating information is, in some cases, an alternative means of
generating patient interest in prescription drugs and, therefore, of increasing sales and
the rate of market penetration. In Europe, this can have the effect of partly obviating
existing regulations that preclude DTC marketing. There are two possible ways in
which this can be done:

‰ promoting lifestyle drugs and diseases;

‰ re-aligning medical information with marketing to portray slightly less neutral

images of new products’ efficacy and outcomes.

44
These two issues are discussed in greater detail below.

Mass media awareness of lifestyle drugs and diseases

Lifestyle drugs do not need DTC marketing to be successful - the following product
features can be readily understood by journalists and the public and can, therefore, be
conveyed to the media prior to and upon launch:

‰ true innovation;

‰ improvements in quality of life, supported by real-life case studies;

‰ immediacy of relief/cure of symptoms;

‰ simple and convenient dosing regimen and formulation.

A rise in public interest in healthcare and increased mass media attention to healthcare
issues has created an environment which can take an innovative product that treats
unmet quality of life needs from relative obscurity to global veneration, literally within
days. The commercial success of many lifestyle drugs can thus be assured because they
enter the public psyche. Subsequently, patients who have self-diagnosed and decided
that they are candidates for the lifestyle drug in question, pressure physicians to
prescribe the drug. This leads to a dramatic, and often immediate, improvement in
patients’ quality of life and locks them into long-term drug therapy. Such success stories
attract further media attention and product sales continue to soar. Such a scenario may
actually be more effective (and certainly more cost-effective) than DTC marketing itself.
Pfizer’s experience with Viagra also showed that intermittent scare stories, if unproved,
do not significantly detract from product sales but, if anything, merely serve to fuel mass
media speculation and patient interest.

However, ‘media marketing’ removes virtually all corporate control over the messages
a company wishes to convey about its product to patients. This is particularly true in
Europe, where DTC marketing is not an option to which pharmaceutical companies can
resort to rectify media misinformation—ideally, companies would wish to ensure that

45
the equivalent of a ‘fair balance’ warning is contained within all media articles on
lifestyle drugs.

If patients request a lifestyle product from physicians and are satisfied with its efficacy,
immediacy and side effect profile, mass media marketing will not be detrimental to
product sales, in fact quite the opposite. Such good fortune cannot always be
guaranteed. If shortly after launch the product in question fails to impress on any of
these points, the media circus can rapidly turn full circle from positive to negative with
significant consequences for product sales and corporate images. This is the tightrope
that Pfizer walked when Viagra was first launched, with a few highly publicised deaths
of Viagra patients and reimbursement arguments delaying the product’s registration in
several countries. Perhaps not surprisingly, Pfizer used DTC marketing for Viagra in
the US, probably to counteract media hype.

The knife-edge between, on the one hand, potential blockbuster sales, and, on the other,
death at the hands of the mass media, emphasises the need for extensive phase III
clinical trials and thorough, non-expedited, regulatory approval for lifestyle drugs.
Failure to conduct either of these processes could result in suffering to, and litigation
from, thousands of patients worldwide, a fate that haunted Grünenthal following the
global ban of its 1960s lifestyle drug, thalidomide.

Eisai and Pfizer’s experience with Aricept

In 1997, Eisai and its co-promoter Pfizer launched Aricept (donepezil) in the UK, an
acetylcholinesterase inhibitor for the treatment of mild to moderate Alzheimer’s
disease, in the UK. Following a press release in early April 1997, the mass media ran
articles at both a regional and national level to highlight the medical benefits of the
drug for patients and the cost to the National Health Service (NHS) if it was to be
widely prescribed. Media figures suggested that as many as 200,000 patients might be
suitable candidates for Aricept treatment, at a cost of £1,000 ($1,600) per patient per
year, or £200m ($320m) in total annually. However, given that many patients simply do
not attend a doctor for drug treatment, and that only around 50% of treated patients are

46
likely to receive six months of treatment, the total cost of ‘adequate’ drug provision to
the NHS would more accurately be £45m–55m ($72m–88m) per year, which represents
only a fraction of the total costs associated with Alzheimer’s disease.

Eisai claimed that the media circus surrounding Aricept was not instigated by the
company on purpose and that events somewhat spiralled out of control. However,
physicians had not been briefed by either Eisai’s or Pfizer’s sales reps about the costs of
treatment and this generated widespread disquiet amongst physicians that their patients
were more informed than medical professionals. Thus, health authorities took the
decision to limit reimbursement of Aricept.

Update

In January 2001, Health authorities and trusts in England and Wales wre instructed to
end the rationing of drugs to treat Alzheimer's disease and to make them available to all
patients in whom they might slow the progression of the disease.

NICE issued guidance on the drugs Aricept, Exelon (rivastigmine), and Reminyl
(galantamine), saying that drug treatment should now form one component of care in
people with mild to moderate symptoms.

At this time, the estimated number of Alzheimer's sufferers in England and Wales was
put at 400,000, with up to 35,000 of them eligible for drug treatment. As the benefit of
treatment is thought to last three years the number receiving treatment could rise to
75,000 a year.

It is estimated that the wider use of these drugs for dementia could cost the NHS £67m
($100m) a year: £42m ($63m) for the drugs and £25m ($37m) to pay for the extra staff
needed to monitor the effects of the drug. Part of these costs, however, will be offset by
the fact that patients can put off the need for care in a nursing home for longer.

47
Aligning the divergent aims of medical and marketing departments

Traditionally, conflicts between physicians working in medical information

departments of pharmaceutical companies and their colleagues in marketing have
centred on the desire to sell versus the desire to adequately convey safety features.
Superimposed upon both these desires is the need for manufacturers to produce legally
defensible materials.

The reticence of pharmaceutical companies in interacting with the press primarily

reflects the heavy regulation of the pharmaceutical industry. For example,
manufacturers are obliged to publish trial results in peer reviewed journals and must
adhere to strict regulations on language which effectively prevent them from claiming
that their products are ‘safe’. However, the author contends that inherent distrust of the
media has forced medical departments to be even more cautious than is entirely
necessary when approving marketing messages. The effect of this is to dilute the
message conveyed to both the press and the public about new products that are likely to
have a significant impact on health and quality of life.

Journalists are confused by the reluctance of pharmaceutical companies to emphasise

the positive attributes of their products. However, given the prohibition of DTC
marketing in Europe, if pharmaceutical marketers and medics do not at least attempt to
work more closely with the media to publicise their activities, they must hold
themselves responsible for regular bad press coverage. This suggests that
pharmaceutical companies’ marketing and medical departments can work more closely
together and influence the media by:

‰ using more sophisticated language in press statements—the media are attracted by

superlatives such as newest, cheapest and first;

‰ integrating case studies into press releases to generate real-life interest and empathy;

‰ predicting how the media may attempt to sensationalise stories and, therefore, what
the public reaction to this may be;

48
‰ releasing healthcare information at times when stories with high news potential are
scarce. In Europe, this is generally the case in the summer months, known within
media circles as, for example, the ‘silly season’ in the UK and ‘Saure Gurken Zeit’
in Germany. At such times, journalists are more likely to explore alternative
avenues for news leads.

Global launch strategies

Primary research reveals that, once a potential blockbuster is ready for launch, its sales
success partially depends upon the speed with which it can be rolled out globally. Sales
success is, of course, also dependent upon the depth of market penetration that the new
product is able to achieve, but global launch allows increased sales uptake. This is
illustrated by the uptake curve of Lipitor, as detailed previously. While Lipitor’s
success in terms of sales has been driven by its clinical profile, simultaneous launch in
many major markets has allowed this success to be realised very rapidly. Other
examples of simultaneous multi-country launches driving rapid sales growth include
Viagra and Pharmacia’s Celebrex (celecoxib). Lilly has driven high sales growth for its
psychoses drug, Zyprexa (olanzapine), having filed approval applications on the same
day in the US and the EU. Zyprexa subsequently attained blockbuster sales in its second
full year on the market.

There are two prerequisites for a successful global roll-out:

‰ simultaneous regulatory approval in major markets;

‰ global branding for the new product.

Currently a ‘global launch’ actually focuses on launch in the US and the EU. Many
blockbusters are not launched in Japan, or at least are not Japan focused. This is
principally due to extra delays caused by the regulatory system in Japan, thus providing
a disincentive to prioritise Japanese launch. However, western pharmaceutical
companies are becoming more interested in launching products into the Japanese
market. In addition, the International Conferences on Harmonisation, harmonisation

49
agreements between Japan and the US, and reform of the Japanese pricing process
contune to smooth the Japanese launch of western pharmaceutical companies’ products.
Therefore, it is likely that the attraction of launching in Japan soon after US and EU
launch will increase. However, this section focuses on the benefits of simultaneous or
near simultaneous launch in the US and the EU.

Simultaneous regulatory approval in the US and the EU became more feasible with the
introduction of the European Medicines Evaluation Agency (EMEA) centralised and
decentralised approval processes. It may be thought that delaying approval in one EU
market will not impact total sales if the period of patent protected market exclusivity in
each country is unaffected. However, launching in the US and the EU at the same time
produces synergies in the marketing effort that accompanies launch. For example,
marketing materials and information that is made available to physicians in the US will
come to the attention of and be accessed by physicians in the EU. This is particularly
true of marketing that is made available via the Internet, but information is also likely to
reach physicians through conferences and trade press. In addition, mass media interest
is likely to be more effective if the launches in the US and the EU at least follow soon
after each other. An innovative product that initially becomes available only in the US
will receive some coverage in the EU at the time of its US launch, but is unlikely to be
a focus of media attention for a second time when it is launched in the EU as it will
have become ‘old news’. However, if the EU launch follows soon after the US launch
(or vice versa) then media interest can be maintained at a higher level for a longer
period of time.

For a global launch to effect these synergies in marketing, it is necessary for a new
potential blockbuster to have universal branding, including details such as logos and
marketing message. A universal brand and brand name at the time of a product’s launch
allows pharmaceutical companies to drive EU media coverage through the use of DTC
marketing in the US. This also applies to the medical trade press, which is more likely
to run articles on a well-defined and global brand.

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Will high investment in global launch and marketing benefit all products?

There may be exceptions to the strategies examined in this section, whereby a new
product will not benefit significantly from simultaneous multi-country launches or from
marketing and awareness campaigns prior to and around product launch. This may be
due to special considerations in terms of marketing messages needing to be specific to
particular countries, or when a product is unlikely to be a subject of particular interest
to the mass or medical media, or if DTC marketing is inappropriate. However, these
considerations are less likely to apply to a potential blockbuster than to a drug with
lower sales expectations. A new product for which these considerations are important is
unlikely to achieve blockbuster sales anyway, and therefore high investment in ensuring
simultaneous launch or in comprehensive pre/peri-launch marketing is unlikely to
produce adequate returns. For new products that do have the potential to attain
blockbuster sales, investment in marketing (both prior to and during launch) and
simultaneous launch in the EU and US will provide considerable benefits in terms of
initial rapid sales growth.

Managing marketed, patented blockbusters

This section examines a number of aspects of the management of blockbuster products.

Some of these are also relevant to a product’s launch, but are more or less as important
throughout the product’s lifecycle and so are included here instead of in the previous
section on blockbuster launch. In addition, aspects of blockbuster launch that have been
examined in the previous section, such as DTC marketing, are re-examined here in the
light of the management of a blockbuster after its launch.

Allocation of investment

Primary research interviews with pharmaceutical executives who market blockbuster

products uncovered two main approaches through which pharmaceutical companies
allocate investment to marketing:

‰ annual investment for a product is based on the forecast sales of that product for
that year;

51
‰ annual investment for a product is calculated on the basis of the costs that will be
incurred to maximise the sales of that product (i.e. the costs of sales teams, DTC
marketing, physician detailing, etc.).

The adoption of these two approaches is not universal in the pharmaceutical industry.
For example, Pfizer employs the first approach as the basis for investment allocation
for non-blockbuster products. Lilly, on the other hand, considers this approach to be
flawed and to involve insufficient consideration of each drug. Instead, Lilly has
portfolio management committees that actively reallocate funds and investment
between both marketed products and those in R&D. The consideration of all aspects of
all products requiring investment does not lead to optimum investment in each product;
the funds allocated to some products will be less than necessary to produce maximum
return on investment for a particular product. This is because the funds will have been
allocated to other products that promise a greater return on investment. However, Lilly
feels that its process will lead to more effective investment allocation on a macro level,
leading to maximum return on investment overall.

Of the pharmaceutical companies contacted, none use the first of the two approaches to
investment allocation listed above when allocating funds for blockbuster, or potential
blockbuster, products. The first approach is only used for allocating investment to
products with lesser sales potential. For blockbusters, or potential blockbusters,
investment is based upon what is needed to optimise that product. Research also
indicates that the allocation of investment in blockbusters varies depending upon the
age of that product. For blockbusters that have been on the market for some time, it is
often harder to gain optimum funding with a company. This is generally because:

‰ the blockbuster is nearing patent expiry and therefore additional expenditure on

marketing may produce limited returns once generics are available;

‰ blockbuster sales are only reached in the plateau phase and therefore additional
funding is likely to produce greater returns if invested in a product showing
potential for further sales growth.

52
However, for recently launched blockbusters, investment is usually set at a level that
will maximise drug sales. This will often mean that the sales and marketing spend of a
blockbuster as a proportion of annual sales is higher than that of a lower selling
product. Pharmaceutical companies are willing to accept a lower net profit for a
blockbuster because of the magnitude of the total revenues that can be gained from that
product. One major reason for the reduced profitability of blockbusters is the spend on
DTC marketing in the US, discussed in Chapter 3.

Co-promotion of blockbuster products

As explained earlier, fast penetration of all major markets is important for the
successful launch of a new blockbuster. However, effective marketing and market
penetration continues to be vital. If a potential blockbuster is not effectively marketed
in any of the major markets, particularly the US, which accounts for 60% of total
blockbuster sales, then the product may never fulfil its potential. For companies lacking
sufficient marketing power to optimise the sales of a new drug, joining forces with
another company can be highly beneficial.

Traditionally, companies that have been unable to maximise their blockbuster

marketing efforts in particular markets have either licensed out their blockbusters in
these markets (for example, Sankyo has licensed the marketing rights for pravastatin to
Bristol-Myers Squibb in almost all markets outside Japan) or have entered co-
marketing agreements, whereby the product is marketed by the two companies in the
same country under different brand names. A blockbuster example of co-marketing was
the collaboration between Amgen and Ortho Biotech, whereby the latter sold its brand
of Epogen (Procrit) for non-dialysis indications in the US market, such as use in
conjunction with AZT (for AIDS patients) and anaemia associated with certain cancers,
thereby avoiding direct competition with Amgen.

However, it must be noted that traditional co-marketing of the same drug under two
different brand names has started to be replaced by co-promotion agreements, whereby
the same drug is marketed under one brand name by two allied companies. Co-

53
promotion agreements are often between companies that would otherwise compete
against each other. For example, prior to the merger of the two companies, Warner-
Lambert had a co-promotion agreement with Pfizer, whereby Pfizer co-promoted and
continued the development of the blockbuster Lipitor in the US and throughout the
world. The figure below illustrates the arguments for and against co-promotion and co-
marketing.

Figure 2.8: Pros and cons of co-promotion and co-marketing

Co-promotion pros
• Sharing of risk in entering highly competitive market
• Use of partner’s reputation and knowledge of a disease area
• Use of partner’s marketing power
• Appeasement of health authorities and physicians through coherent
marketing strategy

Co-marketing
Co-promotion

Co-promotion cons
• Difficulty in defining cost responsibilities
• Difficulty in agreeing sales division and rewards
• Increased management complexity Appeasement of health

Co-marketing pros
• Quick and easy to implement
• No shared decision making

Co-marketing cons

• Higher promotional spend

• Lack of consistency in marketing message and product positioning
• Loss of control over the product by the developer

Source: Datamonitor

Co-promotion is a particularly attractive strategy for a potential blockbuster that needs

to penetrate a highly competitive market, such as the hypertension and hyperlipidaemia
markets. In such a case, the drug benefits from the combined resources and abilities of
the two competitors for a defined period of time to capture market share from
established therapies and to optimise the total sales of the product.

54
By presenting a coherent marketing message and brand to physicians, instead of two
separate ones through co-marketing, co-promotion can avoid conflicting information
and images of a new product, leading to increased awareness of the brand. Healthcare
payers are increasingly reluctant to reimburse the same active ingredient under different
guises and brand names, and therefore co-promoting companies benefit again from
providing a clear brand and message. In addition, by focusing both partners’ efforts on
the same brand name, promotional spend can be reduced while still producing a higher
level of awareness, and hence return on investment, amongst both physicians and the
public.

However, establishing co-promotion partnerships can be more complicated and time

consuming than co-marketing agreements. This is largely due to the division of
responsibility that has to be agreed. Clear objectives and responsibilities have to be
agreed, including cost sharing and the level of commitment at each level of the partner
companies. In addition, decision making is made more complex by the simple fact that
there are potentially two management chains working in tandem. Despite these
complications and limitations, however, examples of co-promotion of blockbuster
products examined below illustrate that co-promotion can be a highly profitable route
for the developer of a potential blockbuster drug.

Co-promoting Lipitor: Pfizer and Warner-Lambert

In 1996, Warner-Lambert entered into an alliance with Pfizer to co-promote the Parke-
Davis cholesterol lowering drug, Lipitor, which was subsequently launched in the first
quarter of 1997. Warner-Lambert and Pfizer co-promoted and continued the
development of the drug both in the US and throughout the world. Pfizer lent its
reputation as a prominent marketer of cardiovascular drugs to the alliance, while the
two companies also shared the cost of development of the drug. Pfizer’s investment
made it possible for Warner-Lambert to expand the development programme and to
increase drug sales, as a significant part of Pfizer’s sales force was dedicated to the
product.

55
Lipitor’s performance in its first two years on the market was exceptional, achieving
sales of $2,185m for Warner-Lambert in 1998. A niche was exploited in what was
previously thought to be a well satisfied market, allowing the drug to monopolise new
prescriptions, propelling it to second place in the market in less than two full years
despite the competition from established drugs marketed by the leading companies in
the cardiovascular field. In Pfizer, Warner-Lambert found a very strong marketing
partner with knowledge and experience in detailing to the cardiovascular market,
particularly to primary care physicians.

After Warner-Lambert and American Home Products (AHP) had announced their
intention to merge in November 1999, Pfizer launched a disputed counterbid for
Warner-Lambert, partly to defend its interest in Lipitor. The cost of terminating the
merger agreement between Warner-Lambert and AHP was utlimately set at $1.8bn, to
some degree reflecting the high expectations for Lipitor as it is launched in new
markets, such as Japan (May 2000).

Co-promoting CNS blockbusters: Scios, SmithKline Beecham and Johnson &

Johnson

In 1998, Scios entered into two separate agreements with what was then SmithKline
Beecham (SB) and Johnson & Johnson (J&J) to co-promote the CNS blockbusters,
Seroxat (paroxetine) and Risperdal (risperidone), in the US.

Seroxat

In September 1998, SB announced that Scios would co-promote Seroxat in the US with
the intention that SB, Scios and Janssen (which also co-promotes the product) would
each target specific and predefined groups of psychiatrists and physicians in order to
maximise sales of Seroxat. Approval of additional formulations and additional
indications will increase the competitive strength of what is now GSK’s Seroxat in the
future, and with a more concerted and aggressive marketing effort from GSK, Seroxat
could potentially become the top selling antidepressant by 2005. Such a deal takes
advantage of Scios’ experience in detailing to psychiatric care professionals. However,

56
this combined marketing force will be face the challenge of increased competition to
Seroxat from generic forms of fluoxetine after the patent expiries of Lilly’s branded
version, Prozac, in 1999 in the EU and in 2001 in the US.

Risperdal

Whilst sales of Risperdal have shown significant year on year increases since 1994, the
product has been surpassed as the best selling schizophrenia therapy by Zyprexa
(olanzapine). It seems likely that Zyprexa will continue to erode the product’s market
share in the near future as it strengthens its grip on the US market. One of the reasons
for this is that J&J has not had a sufficient degree of marketing presence within the US
primary care market to effectively counter Lilly’s competitive positioning of Zyprexa.

J&J attempted to remedy its relative lack of presence within the US psychiatric primary
care markets by signing an agreement with Scios in May 1998 to co-promote Risperdal
to maintain future revenue growth.

Branding of blockbuster products

Primary research shows that successful branding is not in isolation considered to be a

driving force behind the creation of a blockbuster. However, this is not to say that
blockbusters cannot benefit from successful branding. The fact that blockbusters are
used to treat very large numbers of patients, and that companies are willing to invest
heavily in sales and marketing (including DTC marketing) for these products, means
that blockbusters are the most appropriate ethical pharmaceuticals for increased brand
investment.

Branding can be used at various stages of a product’s lifecycle; the use of branding
during the launch period of a blockbuster has been discussed above, and the use of
branding at patent expiry will be discussed later in this chapter. However, branding can
also be used to increase the sales of a blockbuster in between these two stages of its
lifecycle.

57
Consumers continue to buy their favourite brands of non-pharmaceutical products, be it
toothpaste or washing-up liquid, even when they acknowledge that competing products
offer identical features and benefits. The brand gives them confidence in their choice,
making them secure in their decision. This concept of user loyalty to a brand has not
been widely embraced by the pharmaceutical industry. While DTC marketing in the US
can be used to promote a new pharmaceutical product, branding is more about
developing user loyalty. Branding, therefore, encompasses all mediums whereby users
of pharmaceuticals, be they the physicians that are prescribing them or the patients, gain
an impression of the product.

Branding is not just about optimising the use of DTC marketing where it is allowed and
well handled dealings with the press, although, of course, these are important branding
tools. Branding should be considered during any interaction between physicians and the
marketing company, such as:

‰ clinical information supplied by physician detailing;

‰ online information sources for healthcare professionals;

‰ disease management programmes;

‰ presentations at conferences and conventions;

‰ clinical trials, both before and after marketing approval.

Successful blockbuster branding to physicians must, therefore, pervade all the dealings
between physicians and the pharmaceutical company concerning that product. In
addition, as blockbusters may be considered the flagship products of the pharmaceutical
manufacturer, their branding to physicians should also be in accord with the company’s
corporate image.

Likewise, blockbuster branding to patients must pervade all the information that they
receive concerning the drug if it is to successfully persuade patients that they want a

58
particular product to be prescribed by their physician. Patients are becoming
increasingly aware of available drugs, and increasingly keen to understand which
products are effective and convenient for them to use. This is particularly the case in the
US, driven in part by DTC marketing, although there are other mediums by which
pharmaceutical companies can influence patients with their blockbuster’s image,
including:

‰ the mass media;

‰ Internet patient information sources;

‰ company contact with patient and disease associations;

‰ presentations at patient conventions.

An example of a successfully branded blockbuster is Schering-Plough’s Claritin

(loratadine). Total Claritin sales, which reached $3,011m in 2000, have been driven in
part by the research and development of extensions to the Claritin product line, both in
terms of formulation and indication. However, growth of all the Claritin products was
also fuelled by an intensive marketing campaign by Schering-Plough in the US. Since
1995, it has steadily increased its sales force and implemented a DTC campaign
promoting all forms of the drug, which is believed to have contributed directly to the
product’s success, increasing prescription levels as well as brand awareness.

59
DTC marketing throughout a blockbuster’s lifecycle

Figure 2.9: Schematic representation of the role of DTC marketing

throughout the product lifecycle

Inform physicians Heighten Maximise Cut DTC spend if not planning Switch to OTC
DTC activities/investment

of imminent Rx awareness return on OTC switch or maintain lower level promotion or

launch and with intense investment awareness prior to switch or launch promotion of
accompanying DTC exposure of new Rx product corporate image
DTC campaign prior to new
Rx launch
Start ‘coming
soon’ Rx ads OTC switch planned

No OTC switch planned

Revenue

Patent expiration
product launches

Peak sales
Launch

Competing

Pre-launch

Source: Datamonitor

DTC marketing is not, and should not be, the sole preserve of marketers with new
and/or innovative products. Its value lies in not only alerting consumers to the launch of
a new product, but in maintaining compliance, supporting sales through the period of
patent expiration and, potentially, promoting subsequent OTC sales of the same
product. Furthermore, companies can use DTC marketing to maintain awareness of
their presence and expertise in particular therapy areas, thereby improving the sales of
later product launches in the same therapy areas. The competitive advantages that DTC

60
promotion can offer throughout the product lifecycle are summarised in the previous
figure.

Product launch and patent expiry are obvious times to consider high investment in DTC
marketing for a blockbuster drug. The DTC marketing considerations particular to these
stages of a blockbuster’s lifecycle are examined in the relevant sections of this chapter.
However, a discussion of how to optimise the use of DTC marketing throughout the
lifecycle follows below.

Impact of stage of lifecycle on media mix

The resources available for DTC marketing vary throughout a product’s lifecycle. This
is primarily reflected in the overall decision to cease or continue DTC promotion.
Assuming the latter, it is also reflected in a reallocation of the marketing/DTC budget
as new products enter and consideration for DTC promotion and alternative media
mixes are evaluated.

If the ultimate objective of DTC campaigns is to increase product sales, it is clearly

more cost-effective to invest more heavily in DTC marketing in the early stages of a
product’s lifecycle than as it moves closer to patent expiry. However, this need not
necessarily imply a significant decline in DTC return on investment over time (unless
competing products with clear advantages over existing products are launched). By
changing the media mix of a DTC campaign as a product moves through its lifecycle,
companies can sustain a satisfactory return on investment in DTC marketing.

When a product is launched, television promotion, supported by extensive exposure

through other media outlets, may be most effective in generating a large and relatively
rapid response to a blanket campaign. Subsequently, through DTC marketing, the
product’s manufacturer can gain detailed information on the patient population and,
therefore, target campaigns more accurately. This may result in a switch from television
to print advertising or the Internet, dependent upon the lifestyle attributes of the patient
pool. Both of these DTC media are significantly cheaper than television advertising.

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However, they also result in a decrease in exposure to the DTC message, so it is
important to balance the objectives of the campaign with both the product’s and
patients’ characteristics before electing to continue DTC marketing over the longer
term.

Disease versus brand awareness

In 1999, research suggested that two-thirds of pharmaceutical companies were focusing

their DTC investment on raising disease awareness. However, as DTC marketing has
become increasingly widespread and aggressive, brand awareness is coming to the fore.

The issue of whether pharmaceutical companies should pursue disease or brand

awareness campaigns remains pivotal to the DTC debate. It extends beyond making
patients understand the link between a set of symptoms and a particular disease state to
deciding whether patients are more likely to respond to non-product specific
promotions (e.g. because of complex side effect profiles or dosage regimens). In these
respects, a subtle change in opinionis noted, as examined in this section of the report.

When is raising disease awareness appropriate?

Raising disease awareness has traditionally been thought to precede product awareness
since patients must have an understanding of a disease, its symptoms and the need for
pharmacotherapy before they can form an opinion of the type of treatment they may
require. Whilst, as a rule, this is the correct order, it is not always necessary for disease
awareness campaigns to evolve into product awareness over time.

Products that are first-to-market in a therapy area, particularly for diseases which do not
have a very high public profile, generally require initial disease awareness
advertisements before product campaigns can be launched. Such disease campaigns
should take an educational format, focusing on symptoms, and encourage patients to
visit a physician for further information. Websites and toll-free numbers may be
advertised as sources of additional materials. Whilst this form of advertising has
considerable advantages for the company and product which dominates a market, it can

62
also raise the profile of all other drugs and companies involved in the therapy areas
concerned.

Despite the number of DTC advertisements and diseases currently being aired, there are
still significant opportunities for pharmaceutical marketers to launch disease awareness
campaigns. For example, men are now taking a greater interest in their own healthcare,
in part precipitated by the managed care system in the US, but also by the rise in DTC
advertising and the launch of Viagra. Women have traditionally been the major targets
of DTC campaigns for three main reasons:

‰ they often assume the greatest responsibility for their families’ healthcare;

‰ 60% of all visits to physicians in the US are made by women;

‰ women are more than twice as likely to request specific prescription products than
men.

The hitherto untapped potential of men as the focus of DTC promotions is slightly
surprising given that physicians are generally more likely to prescribe a product
requested by a male patient than a female patient. A rise is therefore expected in
expenditure on DTC campaigns promoting male conditions, such as prostate
enlargement, testicular cancer, and sports-related injuries. However, the treatment of
these conditions has yet to produce many blockbuster drugs. DTC disease awareness
campaigns focused at men are therefore more likely to affect blockbuster sales if they
raise awareness of conditions to be treated by lifestyle drugs. Examples of such
‘lifestyle conditions’ include erectile dysfunction, balding and other conditions
connected with the ageing process.

When is raising brand awareness appropriate?

The rationale behind product awareness campaigns is straightforward; patients

understand the need for medical treatment, realise that a product is available to treat
their symptoms, request that product, and the product is prescribed. If an adequate

63
proportion of the patient population follows this process, product sales increase and, if
the disease requires chronic therapy, the focus of DTC campaigns then switches to
compliance and refills. If successful, companies benefit from long-term brand equity
since they have effectively differentiated their product offerings from those of the
competition. One of the most potent competitive advantages in this respect is if a brand
name alone can sell a product. This is certainly true for Lilly’s Prozac, which may be
recognised for its branding successes as much as its therapeutic benefits. Following on
its heels is Pfizer’s Viagra. However, both of these products have the additional
advantage of falling into the lifestyle drugs category and, therefore, having attracted
significant media attention.

Like disease advertising, brand promotion generally has a positive reciprocal effect on a
therapeutic category and/or other products within a well-branded product’s disease
class. For smaller pharmaceutical companies unable to afford costly DTC marketing
campaigns, this offers a cost-effective means of generating increased sales for certain
products. For example, whilst Prozac undoubtedly enjoys the highest profile of all
antidepressants, it has also served to increase public awareness of the condition. In turn,
this has prompted patients to consult a physician for treatment and, since not all
patients are suitable candidates for Prozac, it has boosted sales of other antidepressants.
The benefits that could accrue to smaller companies with products in the same category
could be augmented if they are attractively priced. Companies should consider whether
it is practicable to price their drugs below the price point of a category’s leaders. Since
managed care formularies, physician practises and pharmacists are keen to control drug
expenditure, they are likely to look more favourably upon cheaper, yet effective,
products. Therefore, if the number of patients requesting expensive products increases
due to DTC promotion, physicians have more opportunities to prescribe cheaper
alternatives.

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Forecast split between disease and brand advertising to 2005

It is extremely difficult to gauge a consensus of opinion regarding the division of

marketing budgets between disease and brand awareness. This reflects the current
variation in ‘when’ and ‘for what’ the two different types of promotion should be used.
It seems unlikely that such disparity will converge significantly, since brand versus
disease advertising decisions are now made with longer-term aims in mind and through
analyses of the competitive environment.

Immediately post-August 1997, following the FDA’s relaxation of DTC marketing

guidelines, the fact that pharmaceutical companies could finally launch product
campaigns meant that they invariably did launch them, even if they were not the most
appropriate advertising medium. In the appraoch to 2005, there may even be a
(potentially temporary) backlash in favour of disease advertising, particularly for
products with complicated side effects and treatment regimens. Furthermore, as an
increased number of diseases are considered suitable for DTC marketing, there will be a
greater need to introduce these diseases to consumers before product advertising can
become viable. Thus, the figure below is presented as a potential scenario for future
marketing resource allocation. The increasing sophistication of consumers and
improved ability of the pharmaceutical industry to measure and track return on
investment should eventually contribute to a higher spend on product awareness by at
least 2005.

65
Figure 2.10: Shifting segmentation of DTC marketing investment in brand and
disease awareness, 1997–2005

100 Brand awareness

% allocation of marketing budget

90 Disease awareness

80
66
70 60
60
50 50
50
40
40 33
30
20
10
0
1997 1999/2000 2005

Source: Datamonitor

Table 2.5: Shifting segmentation of DTC marketing investment in brand and

disease awareness, 1997–2005

(%) 1997 2000 2005

Disease awareness 66 43 37
Brand awareness 33 57 63

Source: Datamonitor

66
Continued clinical trials and studies

Clinical trials and studies carried out after a product’s initial launch are generally aimed
at obtaining either a new indication, a new formulation or pharmacoeconomic data for a
drug.

New indications

Primary research has revealed two different reasons for investing in researching new
indications for a marketed blockbuster drug:

‰ increased patient population;

‰ focus for PR, sales and marketing.

The first of these is perhaps the most obvious and self-explanatory; increasing the
number of conditions for which a product is indicated increases the total target patient
group and so increases total product sales. This is certainly the case for anti-infective
blockbusters such as GSK’s Augmentin (co-amoxiclav) and Pfizer’s Zithromax
(azithromycin), the sales growth of which have been driven by an expansion of their list
of indications (see Chapter 4 for details).

However, many new indications have only a small impact on the total patient
population for which a blockbuster can be prescribed. The initial indication for a
blockbuster has to be very large for billion dollar sales to be reached, and so subsequent
indications only add a small proportion to the treatable patient population. For example,
Pfizer’s Zoloft has gained approval for the additional indications of panic disorder and
obsessive compulsive disorder (OCD); both these markets are very small when
compared to Zoloft’s primary indication, the treatment of depression. While these
additional indications will contribute some additional sales, the use of new indications
to drive PR, marketing and Pfizer’s salesforce was an important part of the decision to
invest in the necessary clinical trials.

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The approval of a new indication for a blockbuster can have the following positive
effects:

‰ increased interest in the blockbuster from the mass media;

‰ increased interest in the blockbuster from the medical press;

‰ a new focus for sales and marketing aimed at physicians;

‰ a new focus for DTC marketing.

Most of the positive effects of a new indication focus on raising the overall profile of
the product. It is therefore believed that a new indication for a blockbuster can be
successfully used to drive sales for the product’s original and most important indication
through increased brand awareness and the marketing and sales drive that can
accompany a new indication. For the impact of a new indication to be most beneficial,
it is recommended that indications are not developed too early in a blockbuster’s
lifecycle, but are rather reserved until physician interest and sales force impetus are
beginning to wane. This does not apply, however, to new indications which would
significantly increase the number of patients for which a blockbuster could be
prescribed, as these indications should be sought as soon as possible in the R&D and
immediate post-approval period.

New formulations

New formulations for a blockbuster can be used in a similar way as new indications to
raise the profile of a blockbuster and to provide a new drive for PR, marketing and the
product’s sales force. However, while a new formulation is cheaper and easier to
develop, it is generally less important to physicians than a new indication unless it
represents very significant benefits for physicians or patients. Primary research
conducted for this report suggests that a new formulation is considered worth
developing for a blockbuster under two circumstances:

‰ if the new formulation fills a specific physician requirement;

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‰ if the new formulation gives the blockbuster a new market.

If a new formulation does not open a new market for a drug, then it must address a need
perceived by the physician. Formulations that increase patient compliance or that
provide a sustained release are examples of formulations that may meet unmet need.
However, it is vital that the need is one that physicians consider to be unmet for the
new formulation to have any serious impact on the use of a product.

The development of a formulation that provides a new market for a blockbuster is more
significant, as this increases the potential patient population through far less investment
than would be necessary for a new indication. For instance, developing an oral
formulation for a product that was previously only available as an injection allows not
only easier use for those physicians that already prescribe it, but also allows the drug to
be widely used outside hospitals. Roche’s successful anti-infective, Rocephin
(ceftriaxone), for example, is only available in an injectable formulation and remains
largely restricted to hospital use. While being the only once daily broad-spectrum
antibiotic available as an intravenous injection has driven sales growth, an oral
formulation would potentially increase Rocephin’s use outside hospitals. In addition, by
moving its blockbuster into the retail business outside hospitals, Roche would be in a
far better position to built and defend Rocephin’s brand, an issue becomingly
increasingly important following the expiry of its patent in 2000.

Pharmacoeconomics

As explained earlier in this report, the use of pharmacoeconomics by regulatory and

pricing authorities may act as a resistor for blockbuster sales, especially for high priced
lifestyle drugs. However, companies may also be able to use pharmacoeconomic data to
encourage use of their product. In those countries where pharmacoeconomics is applied
by the regulatory authority to contain costs and/or advise physician prescribing
practices (i.e. Australia, Canada, Finland, Italy, The Netherlands and the UK), a drug
that demonstrates a positive pharmacoeconomic profile may gain a higher
reimbursement price or preferential use by the national healthcare providers, leading to

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higher sales. However, since blockbusters are usually innovative products with clear
clinical benefits, pharmacoeconomics is unlikely to have a large impact on sales, either
positively or negatively, in these countries in the near future (except potentially for
lifestyle drugs).

In the US, the results of pharmacoeconomic studies could potentially be used to

influence the positioning of a blockbuster on an MCO’s or HMO’s formulary. This
would be most pertinent for products that compete against other blockbusters with
similar clinical profiles and the same indication, since pharmacoeconomic benefits for
the HMO/MCO might lead to one being included on the formulary instead of another.

US pharmaceutical companies have recently become more proactive in using cost-

effectiveness as a tool to influence reimbursement decisions. An example where this
has occurred is J&J’s Risperdal (risperidone), an anti-psychotic used to treat
schizophrenia. J&J actively targeted reimbursement through both public and private
healthcare settings. It constructed an economic model that identified the direct cost
savings available to an institution through reduced hospitalisation and the use of
Risperdal, and quantified the net economic savings available to the institution by
placing risperidone on its formulary. J&J reported mixed success with its strategy.
Some providers were impressed by the quality of the data and the potential savings
available to them and subsequently included risperidone on their formulary. Most
providers did not respond positively to the model. This illustrates that, to change
reimbursement practices in the US, a series of pharmacoeconomic studies need to be
presented to decision-makers. A single study or model in isolation will have limited
success influencing formulary decisions.

In addition, pharmacoeconomic studies cannot be used to distinguish between different

brands of the same generic, as each should have the same pharmacoeconomic profile.
Therefore, pharmacoeconomics is not a useful tool to protect against generic
competition after patent expiry.

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In the course of the primary research, it became apparent that interviewees do not
expect pharmacoeconomics to have a significant impact on the sales of blockbusters in
the near future. Given the lack of influence that pharmacoeconomics has had on
reimbursement decisions in the US, the market upon which blockbuster sales are
heavily dependent, successful branding and marketing are more likely to benefit the
sales of a blockbuster, especially since the effects of branding can last after patent
expiry. However, the implementation of mandatory pharmacoeconomic requirements in
Finland, The Netherlands and the UK may well set a trend for the introduction of
pharmacoeconomics elsewhere in Europe as a government regulatory and
reimbursement tool. Therefore, it is felt that the impact of pharmacoeconomic studies
on the sales of blockbusters in the EU will increase over the next decade.

Managing blockbuster patent expiry

There are three main aspects to the patent expiry of a blockbuster drug: postponing the
patent expiry as long as possible, maintaining sales of that blockbuster after the patent
expires and maintaining company revenues once sales drop significantly. It is important
that strategies to postpone patent expiry and maintain the sales of a blockbuster are not
a focus to the detriment of preparing the company for the loss of sales that will
eventually occur. Thosee companies that are in particular danger from patent expiry are
identified in Chapter 3. The high sales generated by blockbusters make them prime
targets for the generics industry. This section examines the various strategies that can
be used to reduce the erosion of a blockbuster’s sales by competition from generics
once its patent expires.

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Tactics for responding to generic competition

The primary responses of the ethical pharmaceutical industry to generic competition

can be broadly classified as:

‰ buying time, either through the introduction of new formulations or line extensions.
The former is a means of accruing unique value-added benefits (i.e. product
differentiation) and is manifest in recent moves into drug delivery technology;

‰ consolidation, reflecting the need to achieve greater levels of cost-efficiency. For

example, reducing the price of branded products lowers the margins available to
generic competitors. This process is aided in some European countries by laws
stating that generic products must be at least 20% cheaper than their branded
competitors;

‰ switching products from prescription-only to over-the-counter status. This option is

only available with a limited number of drugs, and cannot be considered a generally
available strategy;

‰ shifting the emphasis of a business to bundled, service-oriented contracts, so that

the particular qualities of any one product become less significant to both parties at
the negotiating table.

The first option is an example of product differentiation, whereby the manufacturer

attempts to retain market share by adding further value to a product about to lose its
patent protection. The second option, consolidation, reflects a desire to be the cost-
leader and provides manufacturers with access to the market share of companies with
low cost generic products, whilst preserving the benefits of brand value.

The last tactic, which has been employed with some success by a number of companies
in the US, builds upon the concept of supplying a service to purchasers of
pharmaceuticals. It is used not only for selling drugs in the face of generic competition,
but also for selling into difficult markets. In contrast, in bundling, companies ask

72
purchasers to buy bundles of drugs—several lines at a time. Some of these lines will be
discounted (for instance, those facing generic competition) and others will not, but the
purchaser has bought them all, and has therefore bought into the manufacturer to a
much greater degree.

Short term versus long term generics defence strategies

What must be recognised about all of the aforementioned options is that they can
provide only limited protection for product prices, irrespective of how successful they
are in maintaining market share. In essence, the net effect of generic competition is
always to change the focus of a market’s value, and hence the sales strategies of ethical
manufacturers, from price towards volume. Thus, it is not surprising that, in practice,
drug manufacturers are pursuing cost-leading, differentiation and bundling strategies in
attempts to minimise the impact of generics.

Other tactics can also be pursued. Some have short-term benefits at the potential
expense of long term profitability: for others, the opposite applies. As an example of
the former, a company may raise prices for a high value product during its final months
or years on patent, to improve revenues as far as possible before the onset of generic
competition. However, this tactic can have serious repercussions if buyers are powerful
and if they choose to act in concert (or hold significant or monopolistic shares in the
market). In that case, the buyer may switch allegiance following patent expiry and
precipitate a fall in sales for the product. This is a particular danger in markets where
purchasers have the freedom to limit the prescribing habits of doctors, as is the case for
the more closed formularies in operation in the US.

A longer-term approach is that of the company that seeks to protect the value of its
product after patent expiry through negotiation with its purchasing partners. In this
approach, companies reward loyalty to a brand by purchasers after expiry in two ways:

‰ lowering the price of the brand to a degree (although for a high quality product,
considerations of potential damage to a brand will limit this);

73
‰ lowering the price of other products, particularly high value innovative products
that purchasers will be keen to use.

There are three major benefits of this longer-term approach: long-term market share is
protected for the off-patent brand; purchaser goodwill is retained; market share for a
new product is established.

New formulations

The use of new formulations to maximise sales of a blockbuster prior to patent expiry
has already been discussed. This section will look at the use of new formulations to
extend the patent protected life of a blockbuster. There are essentially two methods that
can be employed to alter the formulation of a product, effectively prolonging the
duration of its patent life and inhibiting the market penetration of generics:

‰ a change in the drug delivery mechanism (DDM) associated with a product;

‰ a change in the chemical composition of a product.

In many cases, changing the method by which a drug is administered and changing the
chemical composition of a product are actually one and the same thing, since a drug’s
composition must frequently be altered before it can be accommodated in a new DDM.
In contrast, the use of a medical device to deliver a drug has no influence on the
chemical composition of a product, as is seen in the use of turbohalers and
sophisticated needle injection systems. With respect to these drug delivery systems, the
drug delivery device itself may be patented, without reference to the drug itself, since
this is the key value-added feature of the product.

The benefit of an improved DDM is that it effectively converts an existing drug into a
new, more competitive generic product, which in turn prolongs the life cycle of the
product. In other words, whilst the patent on the product’s active ingredient expires,
potentially exposing it to generic competition, the use of a new DDM to administer the
drug may add as much as five additional years of patent protection to the new product.

74
A patent covering an advanced delivery system extends to any pharmaceutical
formulated using that delivery system.

The problem with using DDMs as a means of limiting the impact of generic
competition is that they are only commercially viable if they actually add value to the
treatment of a particular condition. Such value may be in the form of improved ease of
use or compliance, which subsequently serve to reduce the need for hospitalisation.
These are clearly attractive features to prescribing physicians and formulary decision-
makers. However, it is possible to change the DDM of a particular product without
adding any significant extra value and, consequently, a cheaper generic version of the
off-patent product will be preferentially prescribed by physicians. In reality, some
generics defence strategies merely confuse the brand image of a product. For example,
producing new formulations of an existing product, each with marginally different
brand names, could undercut sales of the product range in question, since customers
may be confused as to the therapeutic benefits of each individual product.

The question of whether it is worthwhile developing a new DDM for a pre-existing

product should also be answered in the light of whether there is actually a therapeutic
unmet need which can be ameliorated by improvements to drug delivery systems. It is
believed that this question will become increasingly pertinent and increasingly difficult
to answer in the affirmative within the next decade, as the use of more advanced DDMs
is incorporated into the R&D stage of more and more products, rather than being a
post-launch addendum.

Extending product sales through new formulations: Pfizer and Procardia XL

Pfizer’s introduction of a new formulation of nifedipine illustrates the successful use of

new DDMs to maintain product sales. In 1982, Pfizer launched Procardia (nifedipine), a
calcium antagonist out-licensed by its owner, Bayer. Its major therapeutic effects are
vasodilation, coupled with a reduction in peripheral resistance, blood pressure and
afterload. Procardia began to lose patent protection in 1991. In 1989, Pfizer launched
Procardia XL, an extended release formulation of nifedipine, utilising Alza’s OROS

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delivery system that acts via the digestive tract and reduces the dosing requirements of
nifedipine to once daily. The OROS DDM is patent protected until 2007 and thus
presents a significant barrier to entry for generic copies of the sustained release version
of Procardia. Other companies have attempted to develop nifedipine with alternative
delivery systems, although a number of failures in this area (notably that of
Genta/Gensia) highlight the difficulties of producing a drug which is comparable to
Procardia XL, without infringing Alza's patents.

Following the introduction of Procardia XL, sales of Procardia, which at one stage was
one of Pfizer’s leading drugs, began to decline due to market share cannibalisation by
Procardia XL and, more recently, by generic competition. Procardia XL sales are also
now in decline, partly as a result of the launch of generic nifedipine. These dynamics
are illustrated in the following figure.

Figure 2.11: Sales of Pfizer’s Procardia and Procardia XL, 1990–2000

1,400
Procardia Procardia XL

1,200

1,000
Global sales ($bn)

800

600

400

200

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: Datamonitor

76
 Table 2.6: Sales of Pfizer’s Procardia and Procardia XL, 1990–2000

Sales ($m) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Procardia 323 108 56 34 15 - 6 - - - -

Procardia XL 404 788 1,062 1,175 1,177 1,134 1,005 822 714 510 311

Source: Datamonitor

The development of Procardia XL generated an additional $9.1bn of sales for Pfizer

between 1990 and 2000, relative to the $542m achieved by Procardia over the same
period.

In March 2000, Mylan announced that it had reached a settlement with Pfizer for the
patent litigation involving nifedipine extended release tablets. Pfizer and its licensor
Bayer filed an action for patent infringement in a federal court in Pittsburgh. This
settlement ends the legal process that began in 1997 with Mylan’s filing of an
application with the FDA for approval to market a generic equivalent of the 30mg
dosage strength of Procardia XL.

Under the terms of the settlement, Mylan will be selling versions of all three dosage
strengths (30mg, 60mg, and 90mg) of Procardia XL supplied by Pfizer. Bayer and
Mylan are yet to settle. However, Mylan will be entitled to market the products
supplied by Pfizer, subject to the agreement, irrespective of the fate of its litigation with
Bayer.

In September 2000, Biovail received final approval from the FDA for its generic
version of Procardia XL. The company’s US marketing partner, Teva, launched the
product immediately following the FDA decision.

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New indications

The introduction of new indications as a blockbuster nears patent expiry can limit the
impact of generic competition. Essentially, it builds upon brand image and brand
loyalty to maintain sales and prolongs the productive life of a pharmaceutical.
However, it is important that the product with the new indication is launched at the
right time prior to patent expiry; too close to the loss of patent protection will not give
sufficient time to build brand awareness and customer loyalty for the new indication.

Opportunities to develop and launch new indications for existing products are expected
to decline in the future as more companies elect to market multiple indication products.
However, the R&D costs to develop such products may be prohibitive for smaller
companies. Indeed, it would be inadvisable for a company of any size to perform
further clinical trials for new indications if this precluded the development of novel
compounds. The biggest danger of this strategy, which also applies to many other
strategies that aim to limit the impact of generic penetration, is that additional
indications take the place of innovative product development. Whilst new indications
can expand the product lifecycle, they cannot replace the development of products to
replace the sales lost through blockbuster patent expiry, and investment in R&D should
mirror this observation accordingly.

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Patent nesting: AstraZeneca’s Losec

AstraZeneca’s strategy of patent protection for Losec (omeprazole) is an example of

how new indications and formulations can be used to extend market exclusivity. The
patent expiry of Losec, the highest selling blockbuster in 2000, presents a serious
revenue problem for AstraZeneca.

Table 2.7: Selected patents and other legal forms of protection for Losec

Protection type Country Valid until

Substance patent US 2001

Metabolite patent US 2005
Formulation patent US 2007
Formulation patent US 2007
Indication patent (H. Pylori eradication) US 2010
Indication patent (H. Pylori eradication) US 2014
Substance patent Italy 2010
Substance patent Germany 1999
Substance patent* New Zealand 2003

* Following the granting of an eight year extension in December 1996

Source: Datamonitor

Astra’s merger with Zeneca may be seen as a reaction to the potential loss of revenue
from Losec. Previously, Astra has formed a ‘nest’ of different patents and other legal
forms of protection in order to protect Losec for as long as possible. A few of the most
important of these are shown in Table 2.7. This protective nest of patent protection for
Losec has so far had mixed success. Substance patents, which prohibit competitors
from making the product itself, are the most important form of protection for
pharmaceuticals. In the case of Losec, it is protected by substance patents that generally
expire between 2001 and 2004 in major markets.

There has been some controversy surrounding the German patent expiry date. Astra was
granted a Supplementary Protection Certificate (SPC) for Losec for the period from
1999, when the original patent expiry was set, to 2003. SPCs are intended to extend the
patent protection of a product in compensation for a lengthy product development and

79
approval process. However, in June 1997, the SPC was declared void by the German
patent court after a challenge to its validity by a German generics company. Astra is
currently appealing against this decision in the German Supreme Court.

Other types of patent, such those protecting aspects of Losec’s formulation, are less
important. Formulation patents do not prohibit competitors from making a drug, but
rather from using particular processes in doing so. They can therefore make it
expensive or otherwise difficult to manufacture a generic competitor to a patented drug.
There have been instances in the past where a manufacturer has successfully used a
formulation patent to protect its product—Glaxo Wellcome did this in the case of
Zantac—but such cases have generally involved the use of other forms of patent
protection as well. Astra filed lawsuits in 1998 for patent infringement against Andrx
and Genpharm following the filing of Abbreviated New Drug Applications (ANDAs)
for generic versions of omeprazole. Andrx was the first generics company to file an
ANDA with the US FDA, seeking to take advantage of the statutory 180 days of
marketing exclusivity available to the first successful generic applicant.

The use of varying and multitudinous patents to protect Losec past its substance patent
expiries has already involved Astra in numerous court and legal proceedings. It is
expected that the legal battles between Astra, now AstraZeneca, and generics
manufacturers will continue due to the huge revenue opportunities that Losec presents.
Whether the ‘nest’ will protect Losec’s sales sufficiently to warrant such legal
involvement remains to be seen.

Rx-to-OTC switching

The process of switching drugs from prescription only (Rx) to over the counter (OTC)
status may be defined as the evaluation of a drug which is only available on prescription
to determine whether it can be safely purchased OTC and administered without
physician guidance. Should a product be approved for an Rx-to-OTC switch, it can
provide the manufacturer with an opportunity to access a new revenue stream.
Reclassification of a drug can not only create potential new business in the OTC market

80
but can indirectly promote the prescription equivalent, if the product is available on
prescription simultaneously. This is because advertising regulations governing OTC
products are generally more relaxed than for prescription drugs.

‘True’ switches

It is important to make the distinction between ‘true’ switches and those in which
prescription drugs are switched to treat different and often less serious indications. For
example, Pfizer’s OcuHist and Glaxo Wellcome’s Zovirax (acyclovir) represent ‘true’
switches since they were switched with the same name, strength and indication, while
SmithKline Beecham’s Tagamet (cimetidine) and Pfizer’s Diflucan (fluconazole) in the
UK were switched for the treatment of less serious ailments at lower doses. ‘True’
switches represent an opportunity to create new markets, whereas the switching of
prescription drugs to treat less serious conditions often simply displaces existing OTC
remedies that have not previously been switched, due to the switched product’s higher
potency, and does not offer the potential to increase the overall market size.

Limitations to Rx-to-OTC switching

The switching of prescription drugs to OTC status is driven primarily by the

commercial interests of individual pharmaceutical companies and by the desire of
governments to curtail growth of their national drug bills. However, the extent to which
the interests of the pharmaceutical companies are served is very much dependent on the
healthcare system within a market. For example, in the UK, government taxation
finances the NHS, which provides healthcare to the majority of UK citizens. As a
result, the UK has one of the most liberalised environments for Rx-to-OTC switches as
the government recognises self-medication as a valuable form of cost containment.

In contrast, the approvals procedure for Rx-to-OTC switches within the US market is
significantly more stringent. In the US, any drug approved for OTC sale will be freely
available across any retail counter and not just within pharmacies. Therefore, the FDA
tends to be cautious when considering a new drug or indication for switch approval as
every drug that is approved can be obtained without the guidance of a pharmacist.

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Furthermore, healthcare insurers rather than the government provide the majority of
healthcare in the US. This means that there is little incentive, in terms of cost
containment, for the US government to reform the laws that govern OTC drug
classification. It is therefore unlikely that the FDA will become any more lenient
towards Rx-to-OTC switches in the near future.

Since OTC medicines can be obtained without a doctor’s prescription, they must
demonstrate a higher standard of safety than prescription drugs. Therefore, OTC
medicines usually consist of ingredients that have long and established safety records.
In addition, the conditions treated by OTC medicines also require that the OTC
medicine users can recognise their own symptoms (e.g. headache, sore throat) and
gauge the relief of symptoms by the medicines, while self-diagnosis and assessment are
often impossible for ailments treated with prescription drugs (e.g. hypertension,
hyperlipidaemia). As the patients are diagnosing and treating themselves, in contrast to
prescription labelling, OTC labelling must carry all the information the typical
consumer needs for safe and effective use.

Relatively few ingredients or dosage strengths have made the switch from Rx-to-OTC
in the US since the beginning of 1995. This is because of the limitations on which
prescription-only medicines may be switched to OTC status. However, the following
blockbusters are in therapy areas that have had a history of Rx-to-OTC switches
(gastrointestinal, pain and respiratory):

‰ Losec/Prilosec (the Swedish government requested that Astra submitted a

application for switching Losec to OTC);

‰ Zantac (switched at a lower dose for heartburn);

‰ Pepcid (switched at a lower dose for heartburn);

‰ Imigran;

‰ Claritin.

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Benefits of Rx-to-OTC switching

Many pharmaceutical companies have been promoting Rx-to-OTC switching as it

provides an additional source of revenue once a prescription product’s sales begin to
decline. As the OTC market is much more consumer driven and more reliant on the
development of a strong brand image, a switched product may be less affected by
generic competition in the OTC market. By creating a successful image, a company
may generate brand loyalty amongst consumers and thus gain market share from
competitors that are marketing products for the same indication, which may often
contain identical active ingredients. This situation is illustrated graphically in the
following figure.

Figure 2.12: The lifecycle of a pharmaceutical product, with and without an

Rx-to-OTC switch

opportunity for switching

Sales

Time

Product Patent
launch expiry
ethical sales of product

OTC sales of product

Source: Datamonitor

83
Figure 2.12 reveals that switching to OTC is a favoured strategy for those products that
are appropriate for self-medication. However, to optimise the success of a blockbuster
post-switch, the manufacturer should switch the product to OTC status as the product
approaches patent expiry, rather than afterwards. An example of this was the approval
of Glaxo Wellcome’s Zantac 75 for OTC sale by the FDA in December 1995, although
Zantac did not lose patent protection in the US until July 1997. Although this tactic
does mean that the sales potential within the prescription market is decreased for the
period until the patent expiry date, it does ensure that the OTC brand is developed
before any competing OTC products can be launched with the same active ingredient.

Company philosophy: brand reliance or genericise?

Another option open to a pharmaceutical company facing the imminent patent expiry of
a blockbuster is to develop its own generic form. This can be done either by marketing
the same product under a different brand name at a price equivalent to that set by
competing generics manufacturers, or by slashing the price of the original product.
However, research suggests that companies that do not already have a generics division
or subsidiary do not consider this tactic to be a viable option. For example, both Pfizer
and Lilly traditionally considered such a move to be outside their area of business, that
of ethical products. Both have relied on defending their brands rather than diversifying
into what is a lower profit margin industry (this, however, is likely to change following
Pfizer’s merger with Warner-Lambert, a company with a strong OTC portfolio). On the
other hand, for those companies that do have generics divisions, a presence in the
generics market offers a number of benefits:

‰ it allows the company to capture some of the volume ordinarily lost to generics
manufacturers;

‰ it creates an opportunity to bundle a wide variety of products for managed care

networks;

‰ it can add a low cost manufacturing perspective.

84
Implicit in the first of these benefits is the opportunity for ethical manufacturers to
develop and market generic versions of their own branded products. The research-based
ethical company is in the best possible position to develop a generic product prior to
patent expiration since it owns the patent on the branded product. Furthermore, this
generic can readily gain first to market advantage, being launched in advance of other
companies’ generic products that are not permitted to launch products until after patent
expiry. If the ethical product was particularly successful, its originator will benefit from
the transferral of its brand image and credibility from the ethical to the generic product.
Consequently, the drug’s owner will secure the revenues which, in other circumstances,
would accrue to other generics manufacturers, effectively prolonging the economic
viability of the initial patent.

DTC marketing: defending the off-patent branded blockbuster

At present, DTC promotion is rarely employed around the period of patent expiry since
pharmaceutical companies feel that a sufficiently high return on investment will not be
generated. This is particularly true if the product in question has not previously been the
focus of DTC marketing. Furthermore, DTC investment is generally reserved for
innovative, new products with unique selling propositions.

Companies can also elect to withdraw DTC investment from products approaching
patent expiration in therapy areas for which the same company markets another similar,
or more effective, product with a comparatively longer patent life. For example, Merck
& Co. has preferentially promoted the lipid lowering drug, Zocor, over Mevacor
(lovastatin) (which loses patent protection in 2001) because it has a longer patented
shelf-life and benefits from an additional, and unique, indication (the prevention of
myocardial infarction).

Bridging the revenue gap

DTC promotion around patent expiry can prolong the longevity of brands.
Consequently, line and brand extensions will become more important over the short
term, driven largely by the ability of DTC marketing to engender loyalty to companies

85
and brand names. Thus, DTC marketing may be appropriate towards the end of the
product lifecycle when:

‰ a company has a new, superior product coming to market in the short term which
effectively replaces a product losing patent protection. In such circumstances, it
may be important to maintain the image of a company’s therapy area franchise to
ensure demand for the new product;

‰ a product remains an effective treatment option (potentially due to a lack of

competition) despite its loss of patent protection;

‰ a company is preparing to launch its own generic version of a branded drug since it
continues to be a viable treatment alternative with high volume sales;

‰ a new formulation, additional indication, or OTC version of the same product will
be launched imminently and it is important to maintain loyalty to the brand.

However, even under these circumstances, companies with strong product portfolios
and phase III pipeline compounds are still more likely to invest in DTC marketing for
newly launched or soon-to-be launched products. In contrast, companies with depleted
pipelines and portfolios may resort to DTC marketing, even around the time of patent
expiry, to bridge the revenue gap until new products are launched.

Supporting OTC switches

Warnings in advertisements have played a very important part in the success of DTC
campaigns. However, the inverse of this is also true, in that product warnings have
contributed to a poor return on investment for companies that have either failed to
convey risks and benefits effectively or are faced with promoting products with
complicated dosage regimens and side effect profiles. Thus, if products are suitable
candidates for OTC switching at the end of their patented lives, it is recommended that
marketers exploit the opportunities afforded by OTC consumer marketing.

86
In DTC marketing, virtually all side effects associated with a particular product must be
mentioned in the summary information, whilst OTC marketing does not have to refer to
any side effects at all. Furthermore, the claims that can be made for OTC products are
far more extensive than those for ethical products, leading to what some refer to as an
‘OTC exaggeration effect’, arising because the FTC, the regulator of OTC advertising,
rarely brings any cases against OTC advertisements. In fact, this feature of OTC drugs
also extends to other non-drug consumables which can profess to offer health benefits;
for example, the American Cancer Society can give its support to the association
between orange juice and protection against cancer, whilst Quaker Oats can claim to
encourage a healthier heart. One relatively unsurprising outcome of this situation is that
patients believe that OTC products are actually more effective or safer than ethical
drugs, since they are unaware that very different regulatory environments shape the
promotion of each.

Impact of a blockbuster’s patent expiry on other blockbusters

The introduction of cheap generic versions of a blockbuster, the patent on which has
expired, could cause problems for other products that competed with the original
blockbuster. Healthcare payers are likely to promote the use of these cheap generics
over branded drugs with similar clinical profiles. To date, this issue has not
significantly impacted blockbusters that remain patent protected. Although blockbuster
hypertension therapies such as Adalat (omeprazole) have lost patent protection, current
anti-hypertensive blockbusters have been able to differentiate themselves on the basis
of increased efficacy. Adalat also managed to differentiate itself from its own generic
versions through the use of new drug delivery technology (see Adalat section).
Likewise, Losec and Pepcid achieved blockbuster sales despite competition from both
branded and generic versions of Zantac, the patent on which expired in 1997.

However, once the patent expires on highly efficacious products, generic competition to
current blockbusters will increase. For example, generic versions of Losec are likely to
impact sales of Pepcid since Losec is currently the gold standard treatment for

87
gastroduodenal ulcers. Likewise, the patent expiry of Mevacor posed significant threats
to other hyperlipidaemia treatments that have similar lipid-lowering capabilities.

The optimum strategy for a company defending the sales of a blockbuster against
generic versions of a different blockbuster appears to be to ensure differentiation of the
company’s product. In the cases of Adalat and Zantac, differentiation was achieved
through the superior efficacy profiles of newer blockbusters. Where this is not possible,
it is important that companies focus their marketing efforts on highlighting the other
benefits of their product over the genericised blockbuster, as competition from cheap
efficacious generics may be greater than from other branded products. In addition,
increased branding of a blockbuster can protect it against generic versions of off-patent
blockbusters, since generic drugs will not have a brand image nor be backed by DTC
marketing.

Surviving a blockbuster’s patent expiry

The effectiveness with which a pharmaceutical company extends the sales of a

blockbuster by extending patent protection and maintaining sales after patent expiry
cannot remove the final problem: how to replace the revenues that will be lost when a
blockbuster’s patent expires.

The blockbuster exception to this problem is AHP’s (marketed by Wyeth) Premarin

(conjugated oestrogen). Premarin itself was first launched in 1942, and has therefore
been without patent protection for a considerable amount of time. However, in May
1997, the FDA ruled that no synthetic product could be biologically equivalent, and
therefore AHP considers that Premarin is safe from generic competition in the short
term. Sales of Premarin are forecast to continue to increase from $1,870m in 2000,
reaching $2,400m by 2005.

88
Primary research identified three possible strategic alternatives for companies
experiencing the patent expiry of a blockbuster drug. The following strategies are listed
in the order of preference expressed by interviewees during primary research:

‰ reinvestment of revenues from the original blockbuster into internal R&D in order
to develop replacement products;

‰ in-licensing new products;

‰ M&A activity.

Each of these strategies is discussed below.

Internal development of replacement products

Developing new products to replace the sales lost following the patent expiry of a
blockbuster was agreed to be the most preferable strategy by 85% of executives
interviewed. This reflects the view that internal development of replacement products
provides the greatest return on investment. However, the difficulty with this strategy is
the increasing time required to develop new products. To launch a product to replace a
blockbuster’s sales at the correct time, the danger presented by the blockbuster’s patent
expiry must be realised and acted upon very early on in the blockbuster’s lifecycle.
Early identification of when the sales of a blockbuster are likely to fall most rapidly can
enable a company to time the launch of new products optimally to maintain a strong
revenue stream.

For companies with strong R&D capacities, this strategy is the easiest, since they will
have a high number of new products in late stage development. However, for
companies with few drugs in late stage development, the need to rush new products to
market to replace the falling sales of a blockbuster can lead to a new problem: an
unbalanced R&D portfolio. Lilly’s approach to the patent expiry of Prozac, examined
below, is an example of a company coping with such a problem.

89
The additional question remains as to in which therapy area to invest to develop
products to replace blockbusters. The general opinion is that pharmaceutical companies
should re-invest in the therapy area in which they had developed the original product.
The advantages of this include expertise in the therapy area at all levels of the company,
from R&D to sales and marketing, and a considerable amount of relevant technology.
However, if the company focus is on developing a new blockbuster to replace the old,
the emphasis on remaining within the same therapy area could also have drawbacks.
Since the therapy area market will include generic forms of the company’s original
blockbuster, it will have become increasingly competitive, and a new product will need
to show considerable clinical improvements to become a new blockbuster. Therefore,
research suggests that the development of a number of lower selling products in the
therapy area of a company’s expertise should be discounted as a viable option,
especially if niche markets are available. The likelihood of new blockbuster drugs being
created in therapy areas that currently include blockbusters is examined in Chapter 3.

Internal development of new products to replace blockbuster sales is usually the most
preferable strategy for an R&D-focused pharmaceutical company. However, this
strategy either requires significant prior planning, or successful protection of
blockbuster sales after initial patent expiry in order to win the company sufficient time
to bring new products to market. In addition, the emphasis on developing a new
blockbuster to replace the old may unbalance R&D portfolios. Lower-profile and less
risky R&D should be maintained to balance the risk of rushing potential blockbusters to
the market.

Leaving pipeline gaps: Lilly

As recently as 1999, Lilly had a weak late stage pipeline as a consequence of R&D
activities that had been primarily concerned with the development of five key products,
which were subsequently launched. To a certain extent, these products were rushed to
market to make up for expected future sales shortfalls following the patent expiry of
Prozac, which still accounted for 25% of Lilly’s ethical sales in 2000. As a
consequence, less funding was allocated to R&D projects other than those in late stage

90
development. Lilly stated that it had increased the speed with which its other
developmental products would reach the market. Together with a strong early stage
clinical portfolio, this served to both increase the volume of drugs brought into clinical
development and to bridge the gap which existed in Lilly’s late stage R&D pipeline.

The US patent loss of Prozac in 2001 will significantly impact the product’s sales, with
generic competition expected from August 2001, and Lilly’s ethical product sales
growth in 2001 and 2002 is likely to be limited to 4-5%.

However, with several potential blockbusters now in the development pipeline, Lilly’s
long-term growth potential is good with total ethical sales estimated to reach
approximately $17,300m by 2006.

Protecting blockbuster sales until replaced by new product sales: Pfizer’s

Procardia and Norvasc

As was discussed, the reformulation of Procardia to produce Procardia XL significantly

extended the total sales that Pfizer derived from that generic compound. The additional
sales gained through the launch of a new DDM for nifedipine maintained Pfizer’s
cardiovascular sales until Norvasc (amlodipine) achieved blockbuster status, as shown
in the following figure and table.

91
 Figure 2.13: Sales of Pfizer’s Procardia, Procardia XL and Norvasc, 1990–
2000

4,000
Procardia Procardia XL Norvasc
3,500

3,000
Global sales ($bn)

2,500

2,000

1,500

1,000

500

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: Datamonitor

Table 2.8: Sales of Pfizer’s Procardia, Procardia XL and Norvasc, 1990–

2000

Sales ($m) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Procardia 323 108 56 34 15 - 6 - - - -

Procardia XL 404 788 1,062 1,175 1,177 1,134 1,005 822 714 510 311
Norvasc 10 78 190 416 768 1,265 1,795 2,217 2,575 2,991 3,362

Source: Datamonitor

Although Procardia XL’s sales have steadily fallen below the blockbuster $1bn level, it
maintained Pfizer’s cardiovascular franchise until the launch of Norvasc, which reached
blockbuster sales in 1995. Norvasc has for some time been cannibalising Procardia
XL’s market share, due to Pfizer promoting Norvasc in preference to Procardia XL.

92
Pfizer successfully exploited both Procardia’s generic compound (nifedipine) and its
brand, while developing a new product in the same therapy area to replace Procardia as
a source of blockbuster sales. Sales of Procardia XL were sustained sufficiently until
Norvasc reached blockbuster status in 1995, since when Procardia’s sales have been
eroded more rapidly.

Promoting other ethical products in the company pipeline or portfolio as an alternative

to the blockbuster product coming off patent, can successfully inhibit generic
competition. However, it is critical that the substitution process is initiated at the
correct point in the declining sales curve of the product nearing patent expiry, to ensure
that the new product does not cannibalise the existing product’s market share before
maximum returns on investment have been attained.

In-licensing replacement products

Of the executives interviewed, 15% believe that in-licensing is as equally appealing as

internal development as a strategy for replacing blockbusters, while 65% believe that
in-licensing is the second choice if a company’s internal R&D is not capable of
producing a replacement for a blockbuster sufficiently quickly. The advantages of in-
licensing a late development stage or approved drug include:

‰ the speed at which a new product can be found to fill the revenue gap caused by the
patent expiry of a blockbuster;

‰ a reduction in the risk of drug development.

As previously pointed out, the patent expiry of a blockbuster means that the company
often needs a replacement source of revenue as soon as possible. Successful protection
of a blockbuster’s sales can provide the company with more time in which to find a
replacement, but if the R&D pipeline is weak, in-licensing a late stage development
product or even an approved drug can provide a more timely solution.

93
Traditionally, certain companies, such as Pfizer, have been more inclined to in-license
products, rather than focusing on internal R&D. Pfizer has been particularly successful
at in-licensing largely because of its attractiveness to out-licensing companies. This
attractiveness and the success it enjoys from in-licensed products stems from a number
of reasons:

‰ considerable marketing ability and reputation;

‰ in-house attitude of acceptance of in-licensing;

‰ willingness and positive internal approach to co-promotion.

Pfizer is widely recognised as one of the most successful pharmaceutical companies in

terms of marketing; this ability increases the success that it derives from marketing in-
licensed products and makes it an attractive partner for other companies. Pfizer is
particularly attractive as a marketing partner because it is willing to co-promote as well
as to co-market products. Pfizer, therefore, considers the in-licensing of products or
marketing rights a highly viable strategy for replacing the revenues lost due to the
falling sales of a blockbuster.

M&A

80% of interviewees consider M&A activity to be a last resort for dealing with sales
losses due to a blockbuster’s patent expiry. However, there are situations in which such
activity may be the best option. For example, the acquisition of a small company with
appropriate products in R&D may help replace lost blockbuster sales. However, while
the acquisition of an R&D pipeline can potentially lead to a company bringing new
products to market quicker than bringing a drug all the way through development, new
revenues are unlikely to be forthcoming immediately. Therefore, this strategy is
considered to be only appropriate for a company with sufficient time before the expiry
of its blockbuster’s patent. For example, Amgen is interested in investing the revenues
from its two blockbusters in acquiring a company or product in order to strengthen and

94
broaden its R&D portfolio. Amgen has sufficient time to conduct such M&A activity as
Neupogen is patent protected until 2010.

Merger with, or acquisition of, a similar-sized company is an appropriate strategy for

dealing with imminent revenue loss due to a blockbuster’s patent expiry if other
strategies are not viable, or if there are other drivers of merger activity for that
company. An example of M&A activity driven by a blockbuster’s patent expiry was the
acquisition of Wellcome by Glaxo. Although there were other drivers behind this
acquisition, it also enabled Glaxo to gain sufficient mass to survive the patent expiry
and subsequent fall in sales of Zantac. The merger between Glaxo Wellcome and
SmithKline Beecham can also be seen as, at least in part, a reaction to the 1997 loss of
patent protection and falling sales of Zovirax (acyclovir), which recorded blockbuster
sales until 1997.

Another example of M&A activity driven by patent expiry of a blockbuster is that of

Astra and Zeneca. Although Astra’s Losec is protected by a number of formulation and
indication patents, its sales will start to decrease in the future. Prior to the merger, this
product accounted for 56% of Astra’s sales in 1998, a time when there were no
products in Astra’s late stage R&D pipeline likely to generate such large revenues.
Astra’s lack of a broad enough product portfolio to cope with the loss of revenue
associated with the expiry of Losec’s patent was one of the drivers for Astra to enter
into the merger with Zeneca. By merging, the new company had increased critical mass
and a stronger R&D portfolio and is better positioned to cope with the Losec patent
expiry. Without the merger, it is likely that Astra would have been vulnerable to a
takeover bid.

The continued success of Losec can be attributed to its large share of the US
prescription market and also to a decline in the market for competing H2 blockers and
the patent expiry of the H2 blocker rantidine in some markets. However, Losec is
unlikely to be able to maintain this upward trend of sales, given that the US patent of
the substance expires in 2001. Generic competition of Losec itself is expected to cause

95
sharp declines in sales, but will not occur in any major market until after 2001. A key
strategy pursued by AstraZeneca to protect the market position of Losec and ward off
generic competition has been the use of a multitude of different patents and other legal
forms of protection

96
Chapter 3 The current blockbuster
market

Key findings

This chapter examines various aspects of the blockbuster market, including trends in its
growth, the segmentation by individual blockbuster product sales and comparisons to
the total pharmaceutical market. In addition, Chapter 3 examines the dependency of
individual pharmaceutical companies on the sales of blockbuster drugs, focusing on the
proportion of total ethical sales that each company derives from its blockbusters and the
patent expiry dates of those blockbuster products. Key findings in Chapter 3 are as
follows:

‰ the total sales of blockbuster drugs reached $84.7bn in 2000, representing

approximately 26% of the global ethical pharmaceutical market;

‰ the highest selling drug in the years 1994-96 was Glaxo Wellcome’s Zantac. Its
successor in gastroduodenal ulcer treatment, Losec, exceeded $6bn in sales in 2000
as the top selling drug globally;

‰ the US accounts for approximately 60% of the blockbuster market but only
approximately 28% of total ethical pharmaceutical market, largely due to the
marketing focus of many pharmaceutical companies, higher drug prices and the
legality of direct-to-consumer marketing in that country;

‰ dependence upon the US will increase the impact of a blockbuster’s patent expiry
due to the high level of generic competition in that market;

‰ Novo Nordisk is heavily reliant on a single blockbuster, with Novolin accounting

for 62% of its total ethical sales;

‰ Pfizer currently has seven blockbusters, which it relies upon for 65% of its total
ethical sales, allowing the company to enjoy the high revenues from its blockbuster

97
 products without becoming overly, and potentially dangerously, dependent upon
those products;

‰ the patent on Merck’s leading blockbuster, Vasotec, expired in 2000, potentially

leading to a substantial loss of short term revenues for Merck. However, Merck’s
vulnerability to patent expiry is reduced by its remaining five blockbusters;

‰ the merger of Astra with Zeneca can be seen as an attempt by Astra to better
position itself to survive the patent expiry of Losec;

Growth of the blockbuster market

The graph and table below show the size of the global ethical pharmaceutical market,
the total sales of blockbuster drugs and the proportion of the total pharmaceutical
market that is made up of sales of blockbuster products.

98
 Figure 3.14: Blockbusters as a proportion of the total ethical pharmaceutical
market, 1996-2000

350 30%

300
25%

% of total ethical pharma market

250
20%

200
Sales ($bn)

15%
150

10%
100

5%
50

0 0%
1996 1997 1998 1999 2000

Total ethical pharma market sales

Blockbuster drug sales
Blockbusters as a % of total market

Source: Datamonitor

Table 3.9: Blockbusters as a proportion of the total ethical pharmaceutical

market, 1996-2000

Year Total pharmaceutical Total sales of Blockbuster sales as % of

market ($bn) blockbusters ($bn) total market

1996 240e 38 16
1997 260e 41 16
1998 281e 58 21
1999 303e 73 24
2000 328e 85 26

e denotes Datamonitor estimate

Source: Datamonitor

99
In the absence of concrete data concerning the size of the total global ethical
pharmaceutical market, Datamonitor has created an estimate based on the sales data in
its SPRINT database and an additional amount to account for those low selling
products that are not included on the database. Estimates for years prior to 2000 are
based on steady annual growth of 8%.

The proportion of the global pharmaceutical market that is derived from sales of
blockbuster products has risen steadily since 1994, reaching 19% in 1998. This
indicates that the growth of the total pharmaceutical market is being driven to some
extent by the increasing number and sales of blockbuster products. The graph below
illustrates the growth of the blockbuster market.

Figure 3.15: Growth of the blockbuster and total ethical pharmaceutical

markets, 1996-2000

70

60
Year-on-year growth (%)

50

40

30

20

10

0
1995–6 1996–7 1997–8 1998-9 1999-2000

Growth of total ethical market market Growth of blockbuster market

Source: Datamonitor

100
 Table 3.10: Growth of the blockbuster and total ethical pharmaceutical
markets, 1996-2000

Year Growth of pharmaceutical Growth of blockbuster

market (%) market (%)

1995–6 8e 58
1996–7 8e 8
1997–8 8e 41
1998-9 8e 26
1999-2000 8e 16

CAGR 8 22

e denotes Datamonitor estimate

Source: Datamonitor

The blockbuster market has grown at a highly variable, inconsistent rate. Much of the
growth of this group of products primarily reflects the number of products with sales of
over $1bn rather than the volume sales of individual blockbuster per se. There was
relatively little growth of the blockbuster market between 1996 and 1997, for example,
because the number of blockbuster products remained the same. However, overall the
blockbuster market has grown considerably faster than the global ethical
pharmaceutical market, having a CAGR of 22% compared to 8%.

Blockbuster drugs, 1998–2000

Table 3.11 details the 43 drugs that achieved blockbuster sales in 2000.

101
 Table 3.11: Global sales of blockbuster drugs, 2000

Marketing Co. Brand Generic Indication Global sales

($m)

AstraZeneca Losec omeprazole Ulcers 6,260

Merck & Co. Zocor simvastatin Hyperlipidemia 5,280

Pfizer Inc. Lipitor atorvastatin Hyperlipidemia 5,031

Pfizer Inc. Norvasc amlodipine Hypertension 3,362

S-P Claritin family loratadine Rhinitis 3,011

J&J Procrit EPO, Eprex erythropoietin Anemia of chronic 2,709

renal failure

Pharmacia Celebrex celecoxib Arthritis 2,614

Lilly Prozac fluoxetine Depression 2,559

Takeda Prevacid lansoprazole Ulcers 2,500

Lilly Zyprexa olanzapine Psychoses 2,349

GSK Seroxat, Paxil, Deroxat paroxetine Depression 2,345

Merck & Co. Vioxx rofecoxib Arthritis 2,160

Pfizer Inc. Zoloft sertraline HCl Depression 2,140

Amgen Epogen erythropoietin Anemia 1,962

Wyeth-Ayerst Premarin family conjugated estrogens Menopausal disorders 1,870

GSK Augmentin co-amoxiclav Bacterial infections 1,845

BMS Pravachol pravastatin Hyperlipidemia 1,817

Merck & Co. Vasotec enalapril Hypertension 1,790

BMS Glucophage metformin HCl Diabetes 1,732

Merck & Co. Cozaar losartan Hypertension 1,715

Bayer Ciprobay, Ciproxin ciprofloxacin Bacterial infections 1,645

BMS = Bristol-Myers Squibb GSK = Glaxo SmithKline J&J = Johnson & Johnson S-P = Schering-Plough

Source: Datamonitor

102
 Table 3.11 (cont.): Global sales of blockbuster drugs, 2000

Marketing Co. Brand Generic Indication Global sales

($m)

Janssen Risperdal risperidone Schizophrenia 1,603

BMS Taxol paclitaxel Malignant neoplasms 1,592

Novo Nordisk Novolin insulin Diabetes 1,591

Sankyo Mevalotin pravastatin Hyperlipidemia 1,510

Pfizer Inc. Zithromax azithromycin Bacterial infections 1,382

S-P Intron A with Rebetol interferon alpha-2b Cancer (leukemia) 1,360

+ ribavirin

Pfizer Inc. Viagra sildenafil Erectile dysfunction 1,344

Wyeth-Ayerst Effexor venlafaxine Depression 1,336

Pfizer Inc. Neurontin gabapentin Epilepsy 1,334

GSK Flixotide fluticasone propionate Asthma 1,332

Merck & Co. Fosamax alendronate sodium Osteoporosis 1,275

Abbott Biaxin/Klaricid clarithromycin Bacterial infections 1,241

Amgen Neupogen filgrastim Neutropenia 1,220

Novartis Sandimmun/Neoral cyclosporin Transplant rejection 1,215

AstraZeneca Zestril lisinopril Hypertension 1,188

Lilly Humulin insulin Diabetes 1,115

Aventis Allegra/Telfast fexofenadine Seasonal rhinitis 1,075

Merck & Co. Prinivil lisinopril Hypertension 1,075

GSK Imigran sumatriptan Migraine 1,067

Bayer Adalat family nifedipine Hypertension 1,065

Pfizer Inc. Diflucan fluconazole Fungal infections 1,014

Roche Rocephin ceftriaxone Bacterial infections 1,013

BMS = Bristol-Myers Squibb GSK = Glaxo SmithKline S-P = Schering-Plough

Source: Datamonitor

103
The highest selling drug in the years 1994–6 was Glaxo Wellcome’s Zantac
(ranitidine), an H2 antagonist that is used in conventional maintenance therapy for the
treatment of gastroduodenal ulcers. Subsequently, sales of Zantac have fallen sharply.
The initial decrease in sales was due to competition from a new class of gastroduodenal
ulcer treatments, proton pump inhibitors (PPI), particularly Losec. The impact of Losec
on Zantac’s sales illustrates the competitive threat posed by a new product offering a
significant improvement in clinical efficacy. Zantac and other H2 antagonists built their
huge sales on partially filling an area of unmet need in ulcer treatment that was
subsequently been better filled by a new class of product.

104
 Table 3.12: Sales of blockbusters, 1998–2000

Marketing co. Brand 1998 1999 2000

AstraZeneca Losec 4,799 5,909 6,260

Merck & Co. Zocor 3,945 4,495 5,280
Pfizer Inc. Lipitor 2,185 3,732 5,031
Pfizer Inc. Norvasc 2,575 3,030 3,362
Schering-Plough Claritin family 1,611 2,673 3,011
Johnson & Johnson Procrit EPO, Eprex 1,400 1,988 2,709
Pharmacia Celebrex 0 1,507 2,614
Lilly Prozac 2,812 2,602 2,559
Takeda Prevacid 1,300 2,147 2,500
Lilly Zyprexa 1,443 1,868 2,349
GSK Seroxat, Paxil, Deroxat 1,714 2,105 2,345
Merck & Co. Vioxx 0 472 2,160
Pfizer Inc. Zoloft 1,836 2,034 2,140
Amgen Epogen 1,382 1,759 1,962
Wyeth-Ayerst Premarin family 1,647 1,776 1,870
GSK Augmentin 1,559 1,816 1,845
Bristol-Myers Squibb Pravachol 1,643 1,704 1,817
Merck & Co. Vasotec 2,400 2,305 1,790
Bristol-Myers Squibb Glucophage 861 1,317 1,732
Merck & Co. Cozaar 1,060 1,385 1,715
Bayer Ciprobay, Ciproxin 1,185 1,423 1,645
Janssen Risperdal 1,036 1,368 1,603
Bristol-Myers Squibb Taxol 1,206 1,481 1,592
Novo Nordisk Novolin 1,334 1,601 1,591
Sankyo Mevalotin 1,626 1,725 1,510
Pfizer Inc. Zithromax 1,041 1,333 1,382
Schering-Plough Intron A with Rebetol 714 1,119 1,360
Pfizer Inc. Viagra 788 1,033 1,344
Wyeth-Ayerst Effexor 529 781 1,336
Pfizer Inc. Neurontin 514 913 1,334
GSK Flixotide 805 1,079 1,332
Merck & Co. Fosamax 775 1,045 1,275
Abbott Biaxin/Klaricid 1,254 1,259 1,241
Amgen Neupogen 1,117 1,257 1,220
Novartis Sandimmun/Neoral 1,230 1,335 1,215
AstraZeneca Zestril 1,126 1,221 1,188
Lilly Humulin 959 1,065 1,115
Aventis Allegra/Telfast 409 684 1,075
Merck & Co. Prinivil 690 815 1,075
GSK Imigran 1,129 1,056 1,067
Bayer Adalat family 883 958 1,065
Pfizer Inc. Diflucan 916 1002 1,014
Roche Rocephin 1,083 1,170 1,013

58,521 73,347 84,699

Source: Datamonitor

There are two main reasons why products generally maintain their blockbuster status
for more than one year:

105
‰ blockbuster status is usually achieved at a sales plateau, when sales have
temporarily stabilised;

‰ when they initially achieve blockbuster status, products have penetrated their
markets to such an extent that their sales are assured for at least another year.

Geographic source of total blockbuster sales

The graph below illustrates the author’s estimate of the geographical division of
blockbuster sales in 2000. As can be seen, the US accounts for 60% of total blockbuster
sales.

Figure 3.16: Estimated geographical division of blockbuster sales, 2000

Germany Italy
3% 2%
Spain
1%
France
UK
3%
5%

Japan
6%

RoW/unallocated US
sales 60%
20%

Source: Datamonitor

106
 Table 3.13: Estimated geographical division of blockbuster sales, 2000

Market Sales ($m) Proportion of total

blockbuster sales (%)

US 50,820 60
RoW/unallocated sales 16,940 20
Japan 5,082 6
UK 4,235 5
France 2,541 3
Germany 2,541 3
Italy 1,694 2
Spain 847 1

Total 84,699 100

RoW = Rest of the world

Source: Datamonitor

US dependence of blockbuster sales

Using the data detailed above, the graph below compares the proportion of the
blockbuster market that is derived from the US to the proportion of the total ethical
pharmaceutical market that is derived from that country.

Figure 3.17: Contribution of the US to the blockbuster and total ethical

pharmaceutical markets

70%

60%

50%

40%

30%

20%

10%

0%
Total ethical pharmaceutical market Total blockbuster market

Source: Datamonitor

107
 Table 3.14: Contribution of the US to the blockbuster and total
pharmaceutical markets

Market Proportion derived from

the US (%)

Total ethical pharmaceutical market 28e

Total blockbuster market 60e

e denotes Datamonitor estimate

Source: Datamonitor

As can be seen in Figure 3.17, the US is proportionally more important in the

blockbuster market than in the total pharmaceutical market. In fact, the US accounts for
over twice as much of the blockbuster market as it does for the total ethical
pharmaceutical market, being asn estimated 60% of the former but only approximately
28% of the latter. There are a number of potential reasons why the blockbuster market
is so much more US focused that the total pharmaceutical market:

‰ since historically the US has proven to provide the largest part of the sales of a
blockbuster, critical marketing and drug development decisions are generally based
upon what is best for the US market;

‰ a number of the diseases addressed by blockbusters have a higher level of public

and physician awareness in the US, and therefore a higher level of diagnosis and
treatment (e.g. depression);

‰ a number of major drugs which were developed in the US and Europe are not
launched in Japan (e.g. Neupogen, Premarin and Prozac);

‰ the use of direct-to-consumer (DTC) marketing for ethical products is legal in the
US but not allowed in the major markets outside the US;

‰ increased patient power in the US has led to pressure from patients on physicians to
prescribe well-known drugs;

108
‰ the initial launches of a number of blockbusters were US based, allowing more time
to develop sales in that market;

‰ the free market based pricing system in the US supports higher prices than in other
major national markets.

Higher levels of diagnosis and treatment in the US

A number of medical conditions, while not necessarily actually more prevalent in the
US, are more likely to be diagnosed and drug treated in that country than elsewhere.
Examples of such diseases are depression and gastroduodenal ulcers. While the
prevalence of these two conditions may be higher or lower in other countries, in the US,
public awareness and drug treatment is higher than in other major pharmaceutical
markets. This means that blockbusters that are indicated for these conditions will often
have US focused sales, as is the case with the geographical split of sales of Pepcid and
Prozac.

Non-launch of blockbusters in Japan

Many blockbuster drugs are not available in the second largest individual
pharmaceutical market, Japan. Examples include Neupogen, Pepcid, Premarin, Procrit
and Prozac. The reason for this is that, while Japan accounts for approximately 15% of
global pharmaceutical sales, Japanese pharmaceutical sales are traditionally made up of
sales of Japanese developed products often only sold in Japan. The Japanese market is
opening, so that a number of products developed in the West are now being launched in
Japan, and vice versa, but often products are licensed to US and European companies
for sale outside Japan. The blockbuster example of this is Sankyo’s Mevalotin
(pravastatin), which is sold by BMS outside Japan as Pravachol.

DTC marketing driving blockbuster sales in the US

The use of DTC marketing in the US has been identified as a driver of blockbuster
sales. Since pharmaceutical companies are able to advertise their drugs directly to the
public, they are able to develop brand and disease awareness. Increased public

109
awareness of a disease increases the proportion of sufferers that present to their
physicians and therefore increases that patient population. In addition, increased patient
awareness of the products and brands that are available for the treatment of a disease
can lead to patient pressure on physicians to prescribe a particular product. In this way,
DTC marketing can drive the sales of a product that has sufficient potential for the
marketing companies to be prepared to invest considerably in advertising.

US focus of companies and marketing strategies

An important reason for the US focus of many blockbusters’ sales is the focus of the
marketing company. The products that are very US focused are generally marketed by a
US based company.

Perhaps more important than the marketing company’s geographic focus, however, is
the fact that the needs of the US market will often govern important drug development
and marketing issues. In general, the marketing of a drug is dealt with by country-
specific offices or subsidiaries of the marketing company. However, research indicates
that for the management of blockbusters a more global view is also often taken. This
global governance means that, since the largest market for a blockbuster will usually be
the US, the overall drug development and marketing strategy will be US focused. For
example, while a local subsidiary of the marketing company may be able to conduct
clinical trials to obtain additional indications, formulations or clinical data for
marketing purposes, greater investment is likely to be put behind such trials by the
company as a whole if the results, indications or formulations are going to be beneficial
to the US sales of the drug. Despite the fact that blockbuster products are generally
global brands, the US marketing and development departments often call the shots,
leading to a global market strategy that optimises US sales.

Early launch of blockbusters in US

Since the US is likely to be the source of a large part of a blockbuster’s sales, it is

important to launch as early as possible in that market to maximise the product’s period
of patent protected market exclusivity. If the product generates annual sales of over a

110
billion dollars in the US, as Claritin, Lipitor, Prilosec and others have, each month
before sales are hit by generic competition can effectively provide over $90m in sales
revenues. This means that high selling products’ US launches have been prioritised and
so often occur before launch in Europe. Since the sales of many blockbusters have
increased over a number of years, US sales will have increased further than sales in
countries where the product was launched subsequently.

Higher prices for blockbusters in US

The various government cost containment measures implemented in countries outside

the US, and the free pricing policy adopted by the US, mean that US ethical drug prices
are higher than those in Europe. In the European markets, the price of both innovative
products and ‘me-too’ drugs is limited by either direct government control or the
reimbursement price given to a drug by pricing authorities. In the US, where healthcare
is largely privately funded, pharmaceutical companies can set their drug prices in
response to market forces without intervention by the government. MCOs and HMOs
are able to exert some influence on the price of the products they buy through
purchasing power derived from the drug volumes that they purchase and through the
use of dug formularies. However, the free pricing system in the US has led to most
drugs being sold at a higher price than elsewhere.

Implications of US focus of blockbuster sales

Although the US may provide the greatest opportunity for a drug to gain blockbuster
sales, dependence upon this market can also increase the impact of a blockbuster’s
patent expiry upon a pharmaceutical company. The US is one of the most competitive
generics markets, due to a combination of government incentives for generics
manufacturers and the high prices commanded by pharmaceuticals making the market
an attractive target for generic competitors. Under legislation introduced at the end of
1997, the first generics manufacturer to submit an abbreviated new drug application
(ANDA) challenging the patent of a branded product, and to successfully defend a suit
for patent infringement, gains 180 days of market exclusivity. This period of market
exclusivity is a powerful incentive for generics manufacturers to be the first to produce

111
a generic form of branded products, especially generic forms of blockbusters for which
180 days of market exclusivity represents considerable revenue possibilities.

However, while the price of branded products in the US is steadily rising, the price of
generics has fallen over the last few years due to price wars resulting from too many
generics manufacturers chasing too few drugs. The fact that here are many generics
manufacturers waiting for patent expiries in the US means that very cheap generic
equivalents are available soon after a blockbuster’s US patent expires. MCOs and
HMOs, as part of their cost containment, generally seize the opportunity to substitute
generics for the original, more expensive, branded products. Therefore, the highly
competitive generics market in the US means that patent expiry in this market
potentially has a very great effect on branded product sales. The US focus of most
blockbusters means that those products, and therefore the companies relying on those
blockbuster sales, will be hit harder than if the product derived more of its sales from
outside the US.

However, DTC marketing regulations in the US also provide an opportunity for

companies to defend against generics. Through DTC marketing, the original product’s
brand can be built up and strengthened in an attempt to persuade patients to demand the
branded product instead of a generic substitute, potentially having to pay the difference
in cost themselves. The possibilities and limitations of this strategy for dealing with
patent expiry have been examined earlier in this report.

112
Blockbuster market by therapy area

The graph and table below show the growth in sales of the different therapy areas of the
blockbuster market between 1994 and 1998.

Figure 3.18: Growth of blockbuster sales by therapy area, 1996–2000

30,000

25,000

20,000

15,000

10,000

5,000

0
1996 1997 1998 1999 2000

Car diovascular CNS

Gast r oint est inal Ant i- inf ect ives
Endocrine Haemat ological
Cancer Respir at ory
Immunological Musculoskelet al disor der s and pain

Source: Datamonitor

113
 Table 3.15: Blockbuster sales by therapy area, 1996–2000

($m) 1996 1997 1998 1999 2000

Cardiovascular 13,756 14,299 18,921 22,403 25,177

CNS 4,916 6,686 11,013 12,727 14,733
Gastrointestinal 7,476 7,341 6,099 8,056 8,760
Anti-infectives 5,111 4,263 7,038 8,003 8,199
Endocrine 2,080 2,514 5,576 6,804 7,583
Haematological 1,072 2,322 2,782 3,747 4,669
Cancer 1,016 1,060 3,037 3,857 4,172
Respiratory 1,518 1,726 2,825 4,436 5,418
Immunological 1,047 1,196 1,230 1,335 1,215
Musculoskeletal 0 0 0 1,979 4,774
disorders and pain

Total 37,992 41,407 58,521 73,347 84,700

Source: Datamonitor

Cardiovascular disease has been the largest source of blockbuster sales since 1996,
which is unsurprising given the number of blockbusters in that therapy area (11 in
2000). The main reason for this is the sheer size of the cardiovascular market,
particularly the market for drugs to treat hypertension and hyperlipidaemia. Excluding
Viagra, all cardiovascular blockbusters since 1996 have been for the treatment of one of
these two conditions. However, whether the hyperlipidaemia market will continue to
provide blockbusters is in doubt. This is because there is a limited amount of unmet
need remaining in the hyperlipidaemia market and that which does exist is for
treatments for specific patient subgroups, such as those who have diabetes comorbid
with hyperlipidaemia. Such niche markets are too small to maintain a blockbuster drug.

While the current hypertension and hyperlipidaemia treatments maintain their premium
prices, there may be scope for new products to gain blockbuster status through the
cannibalisation of the sales of other blockbusters. However, current blockbuster drugs
for the treatment of hypertension and hyperlipidaemia will soon reach patent expiry (for
example, Vasotec’s US patent expired in 2000 and Mevacor’s is due to expire in 2001),
and generic versions can be expected to rapidly appear with far lower prices. Once this
happens, the sales of those cardiovascular blockbusters that have not reached patent

114
expiry can expect to be hit by the presence of a cheap alternative with similar levels of
efficacy.

Such is the efficacy of current hyperlipidaemia treatments that there is little scope for a
new product, or class of products, to gain blockbuster sales through meeting unmet
clinical need, short of actually providing a cure. This is primarily because of the
excellent clinical profile of Lipitor, sales of which are expected to grow through the
cannibalisation of the sales of other statins. While some improvement in efficacy, ease
of administration or reduced side effects may allow a new product to gain market share
in the treatment of hyperlipidaemia, it is unlikely that a new product will reach
blockbuster status, especially once the current treatments are available in a cheap
generic form. There may be limited opportunities for future blockbusters in the
treatment of hyperlipidaemia.

Blockbuster sales in CNS have risen rapidly since 1996. Such sales have been driven
by, for example, Lilly’s Zyprexa, GSK’s Imigran and J&J’s Risperdal. The source of
CNS blockbusters has traditionally been the treatment of depression, the mainstay of
which has been Prozac, the first CNS blockbuster. Datamonitor believes that there is
still scope for new blockbusters in the depression market despite competition from
generic versions of Prozac after its US patent expiry in 2001.

Blockbusters in gastrointestinal therapy have all been for the treatment of

gastroduodenal ulcers, and have included two of the most successful drugs ever in
terms of sales, Zantac and Losec. However, the rate of sales decline of Zantac following
competition from Losec and its subsequent patent expiry is a harsh warning for those
companies whose blockbuster patents are about to expire.

115
Companies with blockbuster drugs

Table 3.16 lists the companies that had blockbuster ethical products within their
portfolios in 2000. Products such as J&J’s analgesic Tylenol (paracetamol), which
generates revenues in excess of $1bn annually, are not included in this report as they
are OTC medicines.

Table 3.16: Companies with blockbuster drugs, 2000

Company Number of blockbusters Sales of blockbusters

($m)

Pfizer 7 15,607
Merck & Co. 6 13,295
GSK 4 6,588
Lilly 3 6,023
Bristol-Myers Squibb 3 5,141
American Home Products 2 3,206
Schering-Plough 2 4,371
Amgen 2 3,180
AstraZeneca 2 7,488
Bayer 2 2,710
Johnson & Johnson 2 4,312
Pharmacia 1 2,614
Novo Nordisk 1 1,591
Abbott 1 1,241
Sankyo 1 1,510
Novartis 1 1,215
Roche 1 1,013
Aventis 1 1,075
Takeda 1 2,500

Source: Datamonitor

Pfizer has the greatest number of blockbuster sales drugs within its current portfolio,
followed by Merck.

Sales of Losec alone in 2000 ($6260m) were higher than the total blockbuster sales of
many of companies that have two or three blockbuster products. While the phenomenal
success of this product drove Astra’s revenues and growth for a number of years, this
reliance on a single blockbuster product made the company vulnerable to the product’s
patent expiry and was a driver behind the merger with Zeneca.

116
The dependence of companies upon their blockbusters is analysed in the following
section.

Company dependence on blockbusters

The graph below shows the proportion of companies’ ethical sales derived from
blockbusters in 2000.

Figure 3.19: Proportion of companies’ ethical sales derived from blockbusters,

2000

Aventis 7.2%

Roche 9.7%

Novartis 11.6%

Pharmacia 20.7%

Abbott 23.9%

GSK 28.2%

American Home Products 29.7%

Bristol-Myers Squibb 35.4%

Johnson & Johnson 35.9%

Takeda 37.0%

AstraZeneca 47.7%

Bayer 47.9%

Schering-Plough 52.4%

Sankyo 54.9%

Lilly 59.1%

Novo Nordisk 61.8%

Pfizer 65.0%

Merck & Co. 65.7%

Amgen 99.3%

0% 20% 40% 60% 80% 100%

Bl o ckb us t er s a s a p r o p o r t i o n o f t o t a l et hi ca l s a l es

Source: Datamonitor

117
As is immediately apparent, Amgen is in the unique position if being almost entirely
reliant upon two blockbusters for all of its ethical revenues. Sales from Epogen and
Neupogen have increased sharply since their launch and currently generate combined
sales of over $3bn annually. The company has maintained its focus on the development
of recombinant protein products and has started to apply its research knowledge to a
wider variety of therapy areas. In an effort to maximise sales from Epogen, Amgen has
developed an alternative form of this product that has a serum half life approximately
three fold greater than Epogen. This will help Amgen to maintain its strong position
within the haematological market. In addition, Neupogen is patent protected until 2010
throughout the world, and so will continue to drive revenue for the immediate future.

Since Amgen is not immediately threatened by blockbuster patent expiries, it has

sufficient time to develop or acquire replacement revenue sources. Amgen, as a
biotechnology company, has maintained a strong focus on innovative research and has a
large cash and short-term reserve. Coupled with a relatively weak late stage R&D
pipeline, this means that Amgen has the opportunity to improve its position by
acquiring a smaller biotechnology company. Such an acquisition could enable Amgen
to strengthen its R&D pipeline and potentially enter new therapeutic areas, spreading its
R&D risk.

118
 Table 3.17: Proportion of company revenues derived from blockbusters, 2000

Company Sales of blockbusters Ethical sales Proportion of ethical sales

2000 ($m) 2000 ($m) derived from blockbusters
(%)

Amgen 3,180 3,202 99.3%

Merck & Co. 13,295 20,223 65.7%
Pfizer 15,607 24,027 65.0%
Novo Nordisk 1,591 2,573 61.8%
Lilly 6,023 10,194 59.1%
Sankyo 1,510 2,750e 54.9%
Schering-Plough 4,371 8,346 52.4%
Bayer 2,710 5,659 47.9%
AstraZeneca 7,488 15,698 47.7%
Takeda 2,500 6,750e 37.0%
Johnson & Johnson 4,312 12,000 35.9%
Bristol-Myers Squibb 5,141 14,541 35.4%
American Home Products 3,206 10,798 29.7%
GSK 6,588 23,347 28.2%
Abbott 1,241 5,195 23.9%
Pharmacia 2,614 12,645 20.7%
Novartis 1,215 10,430 11.6%
Roche 1,013 10,475 9.7%
Aventis 1,075 14,931 7.2%

e denotes Datamonitor estimate

Source: Datamonitor

Of the companies included in this analysis, Novo Nordisk is the most reliant on a single
blockbuster, with Novolin accounting for 61.8% of its total ethical sales. However, the
Novolin blockbuster really encompasses a family of insulin products, and it can
therefore be argued that its dependence upon a single product is less. Novolin’s sales
are based on maintaining a large share of the insulin market through the use of patented
delivery systems, thereby diluting the impact of blockbuster patent expiry as these
patents will not all expire at once. However, Novo Nordisk’s dependence upon its
insulin products makes it vulnerable to competition in the diabetes market. Lilly’s
insulin products, particularly the faster-acting Humalog, whose sales are currently small
but are growing rapidly, and the new and rapidly growing classes of oral antidiabetics,
such as the glitazones and the alpha glucosidase inhibitors, all pose significant threats,
not just to the sales of Novo Nordisk’s products, but to Novo Nordisk as a whole.

119
Novartis, Roche and Aventis are the least dependent upon the sales of their blockbuster
products, and as a result these companies have less to fear from the patent expiry of
their blockbusters. Likewise, despite having the second highest level of ethical sales in
2000, the recently merged GSK is not overly dependent upon the sales of its four
blockbusters, which together only accounted for 28.2% of the company’s 2000 ethical
sales.

Most of the pharmaceutical companies studied are reliant on blockbuster drugs for less
than 50% of their total ethical sales, and have only one or two blockbusters within their
portfolios. Although some level of dependence is inherent, these companies are not
overly dependent upon the sales of their blockbusters. While a drop in sales of one of
their blockbusters, either due to patent expiry or increased competition, will have a
noticeable effect on the total ethical sales of these companies, such a shortfall may be
made up elsewhere in their portfolios. Such companies generally have a balanced
portfolio, according them a level of protection from any individual threats to their drug
sales. For example, sales of BMS’ Capoten fell from $1,545m in 1995 to $1,091m in
1996, and ceased to be a blockbuster in 1997, with sales of only $795m. However,
BMS’ total sales, driven by other products in its portfolio, continued to increase over
this period, reaching $9,254m in 1997 to compensate for this.

Although Pfizer has a total of seven blockbusters, the company is reliant on sales of
these for 65% of its total ethical sales, such is the strength of its overall portfolio. This
allows the company to enjoy the high revenues from its blockbuster products without
becoming overly, and potentially dangerously, dependent upon those individual
products.

Amgen, Novo Nordisk, Sankyo and Schering-Plough are dependent upon only one or
two blockbusters to provide over half of their ethical sales – a situation that leaves them
vulnerable to loss of blockbuster sales following patent expiries or due to increased
competition. As explained above, Novo Nordisk is less vulnerable to patent expiry as

120
its blockbuster is actually a family of products, but it is equally vulnerable to increased
competition from existing and new products.

The financial performance of Amgen depends largely on its two top-selling drugs
Epogen and Neupogen. Although Epogen is still expected to be a strong performer,
slowing sales for Neupogen are definitely a concern. As the dialysis market matures,
Epogen is expected to provide double-digit growth based on an increasing patient
population and an open reimbursement environment. However, Neupogen is faring less
well as growth trends have been negatively impacted by changes in oncology care. As a
result, Neupogen sales are likely to post mid single-digit growth for the period 2001-03.

Although Merck has been highly successful in producing a large number of high selling
drugs, it is vulnerable to the patent expiry of those products. Its vulnerability would be
substantially reduced if its blockbusters’ patents were due to expire gradually and not
all at once. However, the patents on two of Merck’s blockbusters, Pepcid and Vasotec,
are expired at the end of 2000. This will threatens a substantial loss of short-term
revenues for Merck. However, the company’s vulnerability to patent expiry is lessened
as its sales will be buoyed by its remaining four blockbusters. In addition, since Merck
has a large number of blockbusters, its total blockbuster sales are less vulnerable to
increased competition in any one therapy area.

Merck’s osteoporosis treatment, Fosamax (alendronate), achieve blockbuster sales for

the first time in 1999. Fosamax’s forecast sales growth will therefore ease the revenue
loss due to the patent expiry of Pepcid and Vasotec. Moreover, Merck’s arthritis
treatment, Vioxx (rofecoxib), is forecast to reach sales of $4,500m in 2005. In addition,
Merck has late stage products in six different therapeutic areas, and, although most of
these are unlikely to achieve blockbuster sales, they will provide Merck with a broader
portfolio. Given this, Merck looks well positioned to cope with the loss of patent
protection for Pepcid and Vasotec.

121
Patent expiries

Table 3.18 lists the patent expiry dates and the markets in which they apply for products
that were blockbusters in 2000.

Table 3.18: Patent expiry dates of products with blockbuster sales in 2000

Product Market Formulation Date

Abbott
Biaxin/Klaricid US Oral/injectable 2005

American Home Products

Effexor/Effexor XR US Oral 2007
Premarin North America Oral expired
Premarin MPA North America Oral 2006

Amgen
Epogen US Intravenous/ 2004
subcutaneous
Neupogen World Intravenous 2010

AstraZeneca
Losec Germany Oral 1999
Losec (as Prilosec) US Oral 2001
Zestril US Oral 2001
Zestril UK Oral 2002

Aventis
Allegra US Inhaled n/a

Bayer
Adalat global Oral expired
Ciprobay/Ciproxin US Oral 2001

Bristol-Myers Squibb
Glucophage US Injectable 2000
Pravachol US Oral October 2005
Taxol US Infusion 2012
Taxol US Intravenous expired
Taxol Europe Intravenous 2003

Glaxo SmithKline
Augmentin US Oral 2002
Augmentin Europe Oral expired
Flixotide US Inhaled 2003
Imigran/Imitrex US/UK Oral/injectable 2006
Paxil US Oral 2006
Seroxat Europe Oral 2005

Source: Datamonitor

122
 Table 3.18 (cont.): Patent expiry dates of products with blockbuster sales in
2000

Johnson & Johnson

Procrit EPO/Eprex n/a Intravenous/ 2004
subcutaneous
Risperdal n/a Oral 2006

Lilly
Humulin US Injectable 2001
Prozac EU Oral 1999
Prozac US Oral 2001
Zyprexa US Oral April 2011

Merck & Co.

Cozaar/Hyzaar US Oral 2009
Fosamax US 2007
Prinivil US 2001
Vasotec US Oral 2000
Vioxx US Oral 2013
Zocor US Oral 2005
Zocor RoW Oral 2001–9

Novartis
Neoral(new formulation) US Intravenous 2010
Sandimmun US Intravenous expired

Novo Nordisk
Novolin US Injectable 2001

Pfizer
Diflucan US 2004
Lipitor US Oral December 2010
Neurontin US 2017
Norvasc France Oral 2007
Norvasc US Oral March 2007
Viagra US Oral 2011
Zithromax France Oral October 2002
Zithromax US Oral November 2005
Zoloft US Oral December 2005

Pharmacia
Celebrex US 2003

Roche
Rocephin RoW Intravenous 2000
Rocephin US Intravenous 2005

Sankyo
Mevalotin Global Oral 2002

Schering-Plough
Claritin World Oral expired
Claritin D US Oral April 2004

Takeda
Takepron/Prevacid Global Oral 2002

Source: Datamonitor

123
The graph below shows the frequency of US patent expiry on current blockbusters.
Until 2005, it can be expected that the US patents of at least two blockbusters will
expire each year. 2005 itself will see a total of eight patent expiries in the US, followed
by four in 2006. The generics industry can expect to gain a large boost from this glut of
patent expiries on high selling drugs, but it poses a serious problem for the drug
development industry which will have to develop replacement revenue drivers.

Figure 3.20: US patent expiries of blockbusters, 1999-2011

7
Number of expiries of blockbusters' US

5
patents

0
1999

2000

2001

2002

2004

2005

2006

2009

2010

2012

2011

Source: Datamonitor

For many of the blockbusters, loss of sales may occur even before their patent expiry,
due to competition from generic versions of other blockbusters or key products that
have the same indication. This is particularly likely to occur in the cardiovascular area,
where all the blockbusters are indicated for the treatment of either hypertension or
hyperlipidaemia. In the hyperlipidaemia market, most of the blockbusters are statins
with similar clinical profiles.

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The first patent expiry of a statin, the previous blockbuster Mevacor, will occur in
2001. Once there are a number of genericised statins available, it is likely that
physicians will come under pressure from healthcare payers to prescribe cheaper off-
patent statins instead of more expensive branded products. In the US, MCOs and
HMOs are expected to replace branded statins on their formularies with statins which
have been genericised in order to contain drug spend. The situation is similar for the
hypertension market. This knock-on effect of a blockbuster’s patent expiry will also
occur in therapy areas other than cardiovascular. For example, the sales of anti-
depressant drugs, including the blockbusters Zoloft and Seroxat, can be expected to be
further hit by cheap versions of Prozac, which lost patent protection in the EU in 1999,
and is scheduled to do so in the US in 2001.

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126
Chapter 4 Profiles of current
blockbuster drugs

Losec/Prilosec (omeprazole)

Losec, marketed as Prilosec in the US, is a PPI approved for the acute and long term
treatment of reflux esophagitis, the treatment of symptomatic gastro-esophageal reflux
disease (GERD), dyspepsia, peptic ulcer disease, non steroidal anti-inflammatory drug
(NSAID)-associated upper gastrointestinal disorders and pediatric reflux esophagitis.
PPIs are a significant advance upon the H2 receptor antagonists such as GSK’s Zantac,
as they block acid production completely, rather than reducing the amount of acid
produced. In addition to its original capsule formulation, Losec is also available as a
tablet, the Multiple Unit Pellet System (MUPS). The new tablets work in the same way
as Losec capsules, and have the same licensed indications and equivalent efficacy and
healing rates. However, the tablets provide greater patient convenience and ease of
administration. The tablets are smaller than the capsules and have been designed to be
easier to swallow. Patients who cannot swallow tablets whole may disperse the tablets
in water or fruit juice or mix them with yogurt. The MUPS formulation will help to
extend the lifecycle of Losec in the short term but will not add substantial sales in the
longer term.

Since its launch by Astra in 1988, Losec has become the number one selling drug in the
world, Initially, however, Losec’s sales did not take off as well as might be expected,
due to a sterling defence by the H2 receptor antagonist manufacturers. Since 1994,
however, sales have rocketed as the superior efficacy and better safety profile of Losec
have been demonstrated and, in conjunction with antibiotics, the drug is now firmly
established as the treatment of choice for gastric ulcers. Astra actively boosted sales of
the drug during this period by broadening the scope of use of Losec. For instance, Astra
devoted a large part of its marketing effort, particularly in the US market, to
encouraging the use of Losec in the treatment of symptoms associated with GERD.
GERD had the advantage for Astra of being an ill-defined disease making it difficult to
diagnose. This increased the possibility that doctors will prescribe Losec on a ‘better

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safe than sorry’ premise. A further area in which Astra concentrated marketing resource
was the use of Losec for the treatment of NSAID-induced ulcers.

The success of Losec has been in part due to a previous joint venture between Astra and
Merck in the US. The two companies founded Astra Merck, which was responsible for
marketing Losec (as Prilosec) in that market. Aggressive and clever marketing
essentially drove explosive growth in the US market, following the granting of FDA
approval for launch. In 1998, Astra assumed full management control of Astra Merck,
renaming it Astra Pharmaceuticals LP, until the merger between Astra AB and the
Zeneca Group PLC in April 1999. Although AstraZeneca is fully responsible for
marketing Prilosec and other Astra Merck products, Merck is entitled will receive a
proportion of revenue gained from such products, whether they be already launched or
in development, for up to 10 years.

AstraZeneca’s sales of Losec reached $6,260m in 2000 driven largely by the product’s
US prescription market share. The continued success of Losec can also be attributed to
a decline in the market for competing H2 blockers and the patent expiry of the H2
blocker rantidine in some markets. However, Losec is unlikely to be able to maintain
this upward trend of sales, given that the US patent of the substance expires in 2001.
Generic competition of Losec itself is expected to cause sharp declines in sales, but will
not occur in any major market until after 2001. A key strategy pursued by AstraZeneca
to protect the market position of Losec and ward off generic competition has been the
use of a multitude of different patents and other legal forms of protection.

Table 4.19: Sales of Losec, 1998–2005

($m) 1998 1999 2000 2005

Sales 4,799 5,909 6,260 2,000

Source: Datamonitor

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In October 2000, AstraZeneca announced that it had failed in a bid to get Prilosec
approved for sale OTC in the US. The FDA had no doubts over the safety and
effectiveness of Prilosec but requested additional data on the drug. Its main concern
was that users might not understand the information on its label. On presentation of
further data, however, the possibility remains that an OTC formulation may yet gain
approval.

Zocor (simvastatin)

Zocor is an HMG CoA reductase inhibitor and was the first ever statin to be indicated
to control what Merck considers to be the three ‘key lipids’ (LDL cholesterol, HDL
cholesterol and triglycerides) and the company is eager to promote this. Zocor was
launched in Europe in 1989 and the US in 1992. After its US launch, it quickly became
the best selling anti-dyslipidemic drug. Sales of Zocor increased by 17.5% to $5,280m
in 2000. However, the introduction of Pfizer’s second generation statin, Lipitor
(atorvastatin), early in 1997, introduced a new dimension into the dyslipidemia market.
Pfizer claims that it is more effective at controlling levels of LDL-cholesterol,
triglyceride and HDL levels than other statins.

Powerful promotional activities ensured that Lipitor gained a significant share of the
market within a year of launch. In an attempt to counter increasing competition, Merck
launched its ‘Get-to-Goal Guarantee’ scheme in November 1998. This promises to
refund patients up to six months worth of their prescription costs if Zocor therapy, in
addition to diet, does not help them achieve their target LDL cholesterol level. Under
the Get-to-Goal scheme, insurers are also eligible for a refund. Additionally, results
from a Merck sponsored study, presented at the American College of Cardiology in
March 2000, suggest that Zocor has benefits over Lipitor in raising levels of high HDL
cholesterol. The study also indicates that the use of Zocor may result in fewer liver-
related side effects than Lipitor at high doses. However, it is not clear whether and to
what extent these study results will effect physicians’ prescribing habits. Given that
Lipitor is more potent than Zocor and, therefore, prescribed at lower doses, it is
unlikely that physicians will opt for Zocor over Lipitor simply because Zocor possesses

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a more favorable HDL cholesterol raising profile at higher doses. In 2000, Lipitor sales
increased by 33% over 1999 to £5,031m.

Aside from Lipitor, AstraZeneca’s Crestor (ZD4522) poses a significant threat to

Zocor. Crestor has been dubbed a ‘super-statin’ with a profile showing outstanding
dose-related reductions in LDL-C, impressive effects across the full lipid profile, no
drug or food interactions, and no safety concerns up to 80mg/day. The drug is
scheduled to be launched in mid-2002. AstraZeneca is currently aggressively expanding
its US sales force in preparation for the launch of this product.

Cost-effectiveness is an increasingly important issue across the pharmaceutical industry

as a whole, and is proving to be an important factor in the competitive positioning of
statins. Whilst Merck’s positioning of Zocor on efficacy grounds has been successful,
the company may need to take more note of economic data which, to date, has shown
that other therapies, namely Lipitor, are more cost-effective. When lovastatin loses
patent protection in 2001, a need for cost-effectiveness and cost-containment may drive
a switch in prescribing patterns back to lovastatin. This would affect all statins to some
extent, but Zocor, perhaps, has far more to lose.

Although Lipitor and Crestor are likely to reduce Zocor’s share of the statin market,
sales of Zocor are still expected to increase in the next few years due to the expansion
of the market for cholesterol reduction, which is currently underpenertrated (only about
40% of Americans with heart disease are currently on effective prescription cholesterol-
lowering agents). Sales could also be boosted if Merck exploits Zocor’s synergies with
other treatments of cardiovascular risk factors, such as hypertension, diabetes and
obesity. Using this strategy, Merck can increase the use of Zocor in patients whose
primary condition is not dyslipidemia and who may not necessarily have been treated
with anti-dyslipidemics in the past.

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In summary, Zocor sales are expected to be impacted by a number of factors over the
next few years, with sales estimated at $5,838m in 2001, $7,107m in 2004 and then
declining to $6,000m in 2005.

Merck is currently in collaboration with Schering-Plough to develop Zocor for use with
ezetimibe, a cholesterol lowering drug that SP has in R&D. Zocor inhibits cholesterol
through the HMG cascade, while ezetimibe acts on a separate mechanism to control
cholesterol by reducing the uptake of dietary cholesterol at the liver.

Table 4.20: Sales of Zocor, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 3,945 4,495 5,280 5,838 7,107 6,000

Source: Datamonitor

Lipitor (atorvastatin)

Lipitor, originally developed by Warner-Lambert, was first launched in the US and the
UK in February 1997. Lipitor is a 3-hydroxy-3-methylglutaryl coenzyme A (HMG
CoA) reductase inhibitor that is used in the treatment of hyperlipidemia. Realizing the
potential of the drug and the benefits that a strong marketing partner with experience in
the cardiovascular field would give it, Warner-Lambert negotiated Pfizer as a marketing
partner. Lipitor is indicated to reduce high total cholesterol, low density lipoprotein
(LDL) cholesterol, triglycerides and apo-B. It is also indicated for a number of the rarer
mixed dyslipidemias. Unlike the other leading statins, Lipitor has not been shown to
reduce cardiovascular morbidity or mortality in large long-term trials. Lipitor’s success
has been a result of its positioning as a simple, effective and potent therapy, with its
short-term effects and benefits being publicized. It has undoubtedly gained from the
assumption that it will have similar long-term benefits to the other statins. Although
this is likely to be a fair assumption, long term trials into the potential primary and
secondary prevention benefits of Lipitor have yet to be completed.

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Lipitor’s performance since launch has been nothing short of exceptional, claiming the
position as the best selling drug in Pfizer’s portfolio. A niche was exploited in what
was thought to be a well satisfied market, allowing the drug to monopolize new
prescriptions and propelling it to second place in the market, behind Merck & Co.’s
Zocor (simvastatin), despite competition from established drugs marketed by the
leading cardiovascular companies.

Lipitor’s success to showed that the combined sales forces of Pfizer and Warner-
Lambert could exert the marketing strength necessary to leverage the massive potential
of the drug. Indeed, the success of this marketing partnership was the catalyst for
Pfizer’s bid to merge with Warner-Lambert and provides evidence of the revenue
generating potential of the new company.

Aside from astute marketing, atorvastatin’s rise to prominence, in what was thought to
be a well served market, has been based on three main factors:

‰ its potency compared to other statins;

‰ the effectiveness of its starting dosage of 10mg in approximately 75% of patients;

‰ its indication as the first statin for triglyceride lowering, which demonstrates its
versatility in treating a wide range of hyperlipidemic patients.

Until its May 2000 launch in Japan, Lipitor was only available in the US and European
markets. Now, however, the threat to Zocor’s leading global position is no longer
isolated to the Western markets. A common unmet need identified by Japanese doctors
has been that the doses at which statins may be reimbursed are too low and, as a
consequence, statins are not administered in high enough concentrations to bring about
effective cholesterol reduction. Therefore, it is likely that, given its increased potency at
lower doses, atorvastatin will achieve a high prescription uptake in Japan, which will
certainly impact on the sales of other statins and also on those of other anti-
hyperlipidemic drug classes.

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Currently, the leading statins in the Japanese market are Sankyo’s Mevalotin, which is
marketed elsewhere by BMS under the brand name Pravastatin and Banyu’s Lipovas
(simvastatin). Although it is improbable that Japanese sales of Lipitor will immediately
approach those of Lipovas, and certainly not those of Mevalotin, Lipitor’s growth rate
in other markets is likely to continue to far exceed that of Zocor. Datamonitor therefore
expects that Zocor will lose its global leading position post-2001 and that Lipitor will
achieve Japanese supremacy during 2001.

Strong marketing is key to Lipitor’s successful launch into new markets, particularly
since it will no longer enjoy the element of surprise enjoyed previously. For example,
Merck has been working to reposition Zocor to compete on initial dosage and potency,
so marketing strength will become more important as the head-to-head battle between
the two drugs takes shape. Another potential threat, although one that will not be
realized until 2001, is competition from cheap generic lovastatin when Merck’s
Mevacor loses patent protection in 2001. This drug is backed by long term
morbidity/mortality data and has a number of additional indications such as use in
patients with normal lipid levels. Consequently, cheap generic lovastatin may prove
desirable to payers in any form of cost-contained market and could significantly impact
the sales of the more potent and patent protected next-generation statins, including
Lipitor.

In its head-to-head battle with Zocor, Lipitor still has the edge in direct comparisons,
even with Zocor’s new higher dosage strengths and its indication for triglyceride
lowering. In addition, it is Datamonitor’s view that the recent clinical trials for Lipitor
play to the drug’s strengths and should reinforce the perception of it as the most potent
lipid lowerer and, by association, as the most beneficial in the long term. For example,
the Atorvastatin Versus Revascularisation Treatments (AVERT) trial showed that 87%
of patients randomized to Lipitor, who were originally candidates for angioplasty, were
able to remain on this medical therapy instead of undergoing surgery for the duration of
the 18 month trial period, without experiencing any additional cardiovascular events.
During the trial, Lipitor had a better effect on clinical event rate than performing

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angioplasty in patients with mild-to-moderate angina, although angioplasty did cause a
greater reduction in symptoms and, therefore, a greater improvement in quality of life.
Whilst such trial data are important in demonstrating morbidity/mortality benefits for
Lipitor and in exposing new patient populations, it is also a powerful reminder of the
drug’s potency, driving home the ‘lower is better’ message.

Early in 1999, Warner-Lambert announced an ambitious series of clinical trials for

Lipitor. The company initiated nearly 200 clinical trials in over 100,000 patients
underway to explore the full therapeutic range of Lipitor. These trials are designed to
prove a number of points, including long term morbidity/mortality benefits. They are
also very clearly designed to drive the market in the direction of Lipitor’s strengths,
namely its potency.

Overall, Lipitor’s future success seems assured. It is unlikely that the belief in a statin
class effect will disappear, enabling the drug to continue to benefit from a free-rider
effect. However, ongoing studies will gradually gain Lipitor evidence of long term
mortality and morbidity benefits and, if successful in proving the expected benefits of
aggressive cholesterol lowering, will shape the market in Lipitor’s own image. Lipitor’s
sales will continue to rise rapidly as it is launched in new markets and also as the statin
market continues to expand, with additional patient populations being shown to derive
benefit from the drugs. As such, Datamonitor forecasts that Lipitor’s global sales could
well exceed $6bn in 2005.

Table 4.21: Sales of Lipitor, 1998–2005

($m) 1998 1999 2000 2005

Sales 2,185 3,732 5,031 6,250

Source: Datamonitor

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Norvasc (amlodipine)

Pfizer’s best selling anti-hypertensive, Norvasc, is an intrinsically long acting CCB

with a slow onset of action. It is marketed worldwide for the treatment of hypertension
and angina. The dosing schedule is either 5mg or 10mg once daily, without the need for
any drug delivery technology since the drug has an ultra-long duration of action (plasma
half-life 36 hours).

Such second generation CCBs are generally characterized by greater vascular selectivity
than first generation CCBs. This reduces the inotropic effects of the drugs, making
them less useful for managing arrhythmias but less likely to be arrhythmogenic and less
likely to have negative effects in patients with impaired cardiac function. Indeed,
amlodipine is the only CCB to be judged safe for use in patients with congestive heart
failure (CHF), as it has a neutral effect on mortality in this patient group.

Norvasc’s sales continued to rise in 2000, posting sales of $3,030m, up by 17.7% on

sales of $2,575m in 1999. Its key strengths are its once daily dosing, its efficacy in a
wide range of hypertensive patients and its low side effect and interaction profile. Once
daily dosing is a key feature for an anti-hypertensive drug. This encourages compliance
with therapy, the importance of which cannot be stressed too highly, and the associated
slow onset or cessation of action contribute to fewer side effects. Norvasc’s ultra-long
plasma half-life also means that blood pressure is controlled even when patients miss
one dose. The drug’s intrinsic long duration of action means that it is not associated
with significant problems due to abrupt cessation of treatment (as is the case with
abrupt beta-blocker cessation).

For the treatment of angina, most patients require a 10mg dose of Norvasc, rather than a
5mg dose. This increases the level of side effects likely to be experienced, but this is
slightly less important in angina than in hypertension, since the condition is not
asymptomatic and the relief provided from anginal pain will therefore outweigh side
effects in many cases.

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Norvasc is effective in treating a broad range of patients with hypertension and in all
grades of hypertension from mild to severe. The successful response rate to
monotherapy with the drug is high, particularly in mild hypertension. Elderly patients
show a slightly greater therapeutic response than younger patients. The drug is therefore
suitable for use in most patients, particularly older patients, who account for the greater
proportion of total patients. Combined with its general efficacy, this means that the
drug is both useable and effective in the majority of hypertensive patients, hence its
success to date and its potential for continued success.

In the Treatment of Mild Hypertension Study (TOHMS), sponsored by the US National

Institute of Health (NIH), 83% of patients remained on Norvasc monotherapy after four
years. The study was a double-blind placebo-controlled study of 902 patients comparing
six treatments for long term therapy: Norvasc, enalapril, doxazosin, chlorthalidone,
acebutolol or placebo. Norvasc had the lowest percentage of patients requiring the
addition of a further anti-hypertensive agent, and nearly all of those remaining on
Norvasc (99%) remained on the 5mg starting dose.

Norvasc has a particularly low side effect and interaction profile. Importantly, the drug
has no effect on the following criteria: heart rate, cardiac conduction, renal function,
digoxin plasma levels, digoxin renal clearance, and plasma protein binding of warfarin.
These mean, amongst other things, that the drug has little potential for negative effects
on the heart or the kidneys. Norvasc has also been distanced from the claims of
increased mortality in post-myocardial infarction patients that arose as a result of trials
with short acting CCBs. The drug has no contraindications except a known sensitivity
to amlodipine (i.e. itself), making it suitable for use in the large number of patients who
will be taking other medication, whether cardiovascular or other.

An important recent finding was that Norvasc has no overall adverse effect on survival
and cardiac morbidity in patients with class III or IV heart failure, a large patient
population. This was demonstrated in the Prospective Randomised Amlodipine
Survival Evaluation (PRAISE) Study, a long term morbidity and mortality trial in 1,153

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patients. Although Norvasc is not actually approved for the treatment of CHF, CHF
patients are often likely to have other co-existent conditions, such as hypertension or
angina, that require additional treatment. With the advantage of its lack of interactions
with any other drugs, Norvasc is an ideal choice for uncontrolled hypertension in CHF
patients.

The main threats to Norvasc come from other second generation CCBs and from cheap
generic competition from once daily first generation CCBs and leading drugs in other
classes. Norvasc has a significant lead on other second generation CCBs, as it does on
all other CCB brands in general (although total global sales of all nifedipine brands are
of a similar magnitude). The other second generation CCBs are not in the same league,
the closest being AstraZeneca’s Plendil (felodipine), which is not intrinsically long
acting and therefore uses drug delivery technology. Norvasc, in fact, is far ahead of any
other CCB in terms of its efficacy and safety and is expected to sustain growth and
market segment leadership in the absence of any new challenger.

The most significant threat to Norvasc’s overall market leadership comes from
angiotensin II receptor antagonists, but these are not expected to have too significant an
effect in direct competition due to the common need for multiple agents. The main
threat to Norvasc’s sales, rather than its market leadership, and to the market as a
whole, comes from the ongoing patent expiry of the leading CCBs and the leading
drugs in other classes, particularly, but not exclusively angiotensin II converting
enzyme (ACE) inhibitors. This will lead to an influx of cheap, once daily treatments,
many of them identical to current leading treatments. This is expected to slow the
growth of Norvasc but not to stop it, since the drug has many unique features.

There are several ongoing opportunities, some of which might also prove to be threats,
although that remains to be seen. Most notable of these opportunities/threats is the
ongoing National Institute of Health (NIH) sponsored Anti-hypertensive and Lipid
Lowering treatment to prevent Heart Attack Trial (ALLHAT). Amlodipine is the CCB
being used in the ALLHAT trial. Assuming that it performs successfully, as might be

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expected given current opinions on its benefits, the data in hard endpoints will put
Norvasc on an unassailable footing. The concomitant threat, of course, is that Norvasc
will not perform quite as well as other treatments, or at least that one of the other
treatment arms will prove more attractive.

Other opportunities are coming from further trials, including Pfizer’s CAMELOT trial,
a two year 3,000 patient trial comparing the effects of amlodipine and enalapril on the
progression of coronary atherosclerosis and cardiac event rates.

Whilst the loss of patent protection on many other leading drugs does pose a tangible
threat, Norvasc is sufficiently well differentiated to survive relatively unscathed, and
positive results from the various ongoing trials will bolster its role as a wide ranging
first line anti-hypertensive. Its sales are, therefore, forecast to grow steadily to just over
$4bn in 2005.

Table 4.22: Sales of Norvasc, 1998–2005

($m) 1998 1999 2000 2005

Sales 2,575 3,030 3,362 4,100

Source: Datamonitor

Claritin/Claritin D (loratadine/loratidine & pseudephedrine)

Claritin is a histamine H1 receptor antagonist indicated for the treatment of rhinitis,

which is a highly competitive market. The once daily, non-sedating compound provides
safe and effective relief from seasonal allergies and offers flexible and convenient
dosing. In 2000, Claritin/Claritin D was the world’s best selling anti-histamine. Growth
of this product line since its launch in April 1993 has been impressive, and continues
through the addition of new indications and formulations.

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In 1995, Claritin was approved by the FDA for the treatment of idiopathic chronic
urticaria (hives), its first additional indication. Clinical trials showed the drug to be
significantly more effective than placebo in relieving symptoms of urticaria, and in
December 1996, Claritin RediTabs (instantly soluble in the mouth) was given clearance
in the US and was subsequently launched in March 1997. Also, in the fourth quarter of
1996, Claritin syrup (loratadine 10mg per 10ml) received FDA marketing clearance,
becoming the first non-drowsy anti-histamine syrup approved for children as young as
six years of age. Other formulations include Claritin-D 24 hour
(loratadine/peudoephedrine sulfate), a once daily version combining the non-sedating
anti-histamine action of loratadine with the decongestant action of pseudoephedrine,
and Claritin-D 12 hour (loratadine/peudoephedrine sulfate), a twice daily version.

All Claritin products are supported by an extensive DTC advertising campaign in the
US targeting over 45m Americans who suffer from seasonal allergies. Even before the
FDA relaxed its DTC marketing guidelines in August 1997, Schering-Plough’s $30m
investment in DTC advertising for Claritin ranked positioned the company as a leader
in terms of DTC expenditure on ethical drugs.

Schering-Plough was aware that consumers were confused as to the actual indication
and beneficial effects of its anti-histamine and thus television advertising provided
patients with more product-specific information and helped them make more informed
choices between anti-allergenic prescription medicines.

Claritin’s immediate growth prospects appear to be assured. However, the drug’s

substance patent expiration in 2002 casts doubt over its mid-term prospects. Other
patents within the Claritin product line should reduce the impact of this date and the
lower risk to the franchise. For example, Claritin D is protected until 2004 in the US
and until 2000 elsewhere. In August 2000, Schering-Plough announced that the FDA
had granted Claritin six months of additional marketing exclusivity, covering all five
formulations of the product, for having conducted pediatric clinical trials. As part of its
patent protection strategy, Schering-Plough is now also attempting to secure a patent

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extension under a bill that still needs to pass the US Congress, which would provide
extended protection for three years beyond 2002, thus securing US exclusivity on the
compound until 2005. The company argues that this would be justified by regulatory
delays due to safety concerns. Other patent expiries within the Claritin product line
include:

‰ the compound patent for desloratadine (the active metabolite of loratadine) expires
in 2004;

‰ a fluoroloratadine patent expires in 2008;

‰ a formulation patent for Claritin-D 24 hour expires in 2012;

‰ the company has also licensed from Sepracornc Inc. patent rights covering certain
uses of desloratadine that expire in 2014.

A new competitor that has recently entered the market is Aventis’ once daily Allegra
(fexofenadine HCL). Allegra is cheaper than Claritin and has benefited from aggressive
marketing by Aventis. The FDA’s approval of the new once-daily version of Allegra in
strengthened Allegra’s position in the market, enabling Aventis to challenge Claritin
and gain market share after its launch in March 2000. On this basis, Datamonitor
forecasts that sales of Claritin/Claritin D are likely to peak in 2000 at $3,011m and
decrease to approximately $2,100m in 2005.

Table 4.23: Sales of Claritin/Claritin D, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,611 2,673 3,011 2,100

Source: Datamonitor

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Procrit (erythropoietin)

Procrit is a recombinant form of erythropoietin (EPO), the principal hormone

responsible for stimulating red blood cell production in the bloodstream. EPO was
initially developed and introduced by an alliance between Amgen, and Kirin, under the
name Epogen, as a treatment for anemia associated with end-stage renal failure. Kirin-
Amgen, formed in 1984, licensed EPO to Amgen and Kirin for the US and Japanese
markets, respectively. EPO has a range of other indications and is used:

‰ for patients with chronic renal failure (prior to dialysis becoming necessary);

‰ for AIDS patients being treated with the drug azidothymidine who experience low
red blood cell counts;

‰ in chemotherapy patients;

‰ as an adjunct or alternative to blood transfusions in preventing anemia associated

with surgery.

In 1985, J&J acquired certain rights to Amgen’s drug through its Ortho Biotech
division. The agreement defined in terms of the indications for which Amgen and J&J
would respectively be permitted to market the drug, rather than strictly along
geographic lines. Amgen retained the rights to market EPO in the US for end-stage
renal failure, whilst J&J was granted most of the worldwide rights to the compound for
other indications and territories. The main exceptions were in diagnostic applications
and in the Japanese market, where Kirin-Sankyo holds the marketing rights for all
indications.

The unusual nature of the licensing agreement between Amgen and J&J has led to
numerous disputes. When a drug is approved for one indication in the US, doctors may
use the product as they see fit. Therefore, use of a drug may not be confined to the
approved indication. Nevertheless, the terms of the agreement confined Amgen and
J&J’s promotional activities for their (identical) EPO products to the specific
indications for which the individual company had the rights. Disputes have arisen as to

141
whether each company has been appropriately compensated for sales into its ‘target
market’ by the other. Arbitration was ongoing since 1989 and in Q2 1998 was resolved
in Amgen’s favor with J&J having to pay Amgen’s costs and expenses, and one half of
Amgen’s audit expenses, which Amgen estimated to be $100m.

In 2000, J&J’s sales of Procrit (sold as Eprex outside of the US) grew by 36% to
$2,709m, a major factor in the growth in both sales and profits of J&J’s pharmaceutical
business. This is due to the high volumes of Procrit sold, along with the relatively
favorable terms on which J&J licensed the rights to EPO (J&J paid a 10% royalty on
net revenues in 1995). The drug is supported by a DTC advertising campaign,
expansion of in the sales force and aggressive marketing to physicians. Moreover, there
is relatively little competition for the product, although Roche markets a form of
recombinant EPO, Recormon, developed by Genetics Institute in some European
markets.

The FDA has approved Procrit for the treatment of anemic patients scheduled to
undergo elective, noncardiac, nonvascular surgery to reduce the need for allogenic
blood transfusions. It is not indicated for anemic patients who are willing to donate
autologous blood. The company expects the product to be used in a variety of elective
surgical procedures that involve blood loss to reduce exposure to blood transfusions.
This new indication is expected to drive continued growth for Procrit. In addition, J&J
is working alongside Alkermes on an injectable sustained release form of Procrit, called
ProLease, although studies are still in phase I development.

Datamonitor believes that there is still scope for further growth in sales of Procrit at
least until 2005. Whilst the markets for AIDS patients and for pre-dialysis are relatively
mature and have been well penetrated, sales gains are expected as EPO becomes more
widely used in cancer indications. Sales of Procrit are predicted to grow in 2000 but
will have decreased by 2005 due to the introduction of a needle free version of Procrit
by J&J, and the launch of NESP (novel erythropoesis stimulating protein) by Amgen,
currently in phase II/III development. Amgen hopes to gain approval for nephrology

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indications (dialysis) in Europe and in the US, for chronic renal failure. Other
indications i.e. oncology, which are licensed to J&J are currently in phase II
development and by nature of the indications will take longer to reach market. The
main advantage of NESP over Procrit is its once weekly dosing as apposed to Procrit’s
thrice weekly dosing. Hence, Datamonitor forecasts sales of Procrit to reach
approximately $2,100m in 2005.

Table 4.24: Sales of Procrit, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,400 1,988 2,709 2,100

Source: Datamonitor

Celebrex (celecoxib)

Celecoxib is a second generation cyclo-oxygenase-2 (COX-2) inhibitor developed

initially by Searle but licensed to Pfizer as part of a co-development and co-promotion
deal established in March 1998. Pfizer has secured the worldwide co-rights to
celecoxib, excluding Japan, where it has been licensed to Yamanouchi. As part of the
licensing agreement with Searle, Pfizer paid $85m as an upfront payment followed by a
further $15m for the worldwide rights.

Celecoxib was approved by the FDA for the treatment of osteoarthritis and rheumatoid
arthritis in December 1998, and was launched in the US in January 1999. It was also
approved in its second market, Brazil, in January 1999. In April 1999, Monsanto’s
COX-2 inhibitor was approved in Switzerland, its first European market, for the
treatment of symptoms associated with osteoarthritis and rheumatoid arthritis.

Unlike traditional NSAIDs, Celebrex inhibits cyclo-oxygenase-2 enzyme, but has

minimal activity against cyclo-oxygenase-1 at therapeutic doses. COX-1 helps to
regulate normal cell function in the stomach and blood, while COX-2 plays a role in
causing arthritis pain and inflammation. Therefore, unlike traditional NSAIDs,

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Celebrex causes a lower incidence in gastrointestinal (GI) ulcers, due to it lower effect
on the COX-1 enzyme.

Clinical trials with Celebrex involved 13,000 patients and healthy volunteers enrolled
in more than 50 different clinical studies. In these comparative clinical trials against the
NSAID naproxen, Celebrex was shown to be as effective in relieving pain associated
with arthritis and osteoarthritis. In addition, Celebrex showed a significantly lower
incidence of upper GI ulcers, than both naproxen and another NSAID, ibuprofen. The
most common side effects of taking Celebrex were dyspepsia, diarrhea and abdominal
pain, although less than 1% of patients suffered from these. In addition to these side
effects, serious gastric tract ulceration was also noted in a low percentage of patients.
As a result of these findings, Celebrex’ labeling includes a warning section that
estimates that approximately 1% of patients treated for three to six months will develop
upper GI ulcers, gross bleeding or perforation. After one year, about 2% to 4% of
patients will.

As a result of this warning on Celebrex’ labeling, Pharmacia plans to conduct a large

scale study to fully characterize the GI effects of Celebrex and have the class warning
removed from the labeling.

Despite the warning label, Celebrex has high sales potential and should drive future
product sales for the company. The product was launched before Merck’s Vioxx, which
is one of its main rivals and was launched in the US in April 1999. This provided
Celebrex with a marketing advantage and helped the company to establish itself in the
arthritis market before approval of its rival. In order to ensure rapid uptake of Celebrex,
Searle originally priced it at a lower level compared to other NSAIDs, which should
help to win prescriptions from physicians and reimbursement from insurers. However,
Celebrex is still priced higher than another COX-2 inhibitor, GSK’s Relafen
(nabumetone), which is seen as a significant competitor. Unless Celebrex’s pricing
strategy is effective at gaining sales from cheaper or more established products then
sales growth may be limited.

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In June 2000, new data derived from a safety study which directly compared Celebrex
with Vioxx, indicated that patients suffering from hypertensive osteoarthritis (OA)
patients and taking Vioxx, experienced statistically significantly more increases in
edema and systolic blood pressure compared with those taking Celebrex. This study
provides evidence that Celebrex and Vioxx affect hypertensive arthritis patients
differently, suggesting that not all COX-2 inhibitors are the same.

In August 2000, Pharmacia announced that its supplemental New Drug Application
(sNDA) for Celebrex, submitted in June, had been accepted for filing by the FDA. The
targeted review period is 10–12 months from time of receipt. The sNDA is based on
data from a long-term safety study involving approximately 8,000 arthritis patients, half
of whom received high doses of Celebrex. The study, designed to obtain a rigorous
assessment of the safety of Celebrex, as demonstrated in all previous studies, compared
four times the recommended osteoarthritis dose of Celebrex to typical daily doses of
two nonsteroidal anti-inflammatory (NSAID) drugs.

Given its wide range of indications and the fact it is one of the first on the market, sales
reached $2,614m in 2000 and are forecast to continue to a level of $4,495 in 2005.

Table 4.25: Sales of Celebrex, 1998–2005

($m) 1999 2000 2005

Sales 1,507 2,614 4,495

Source: Datamonitor

In December 2000, the FDA warned, for the third time in a little over a year, that the
marketing of the arthritis drug Celebrex was false or misleading. As a result, Pfizer and
Pharmacia, the co-marketers of the drug, were told to cut a widely aired TV
commercial.

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Prozac (fluoxetine)

The launch of Prozac (fluoxetine), a serotonin re-uptake inhibitor, in 1987,

revolutionized the depression market. Prozac’s success through its markedly improved
side effect and tolerability profile over the older antidepressants ensured that it swiftly
became the highest selling antidepressant and reached peak sales in 1998 of $2.8bn. In
recent years, Prozac has experienced competition from Pfizer Inc’s Zoloft (sertraline)
and GlaxoSmithKline’s Paxil (paroxetine), and also from new classes such as the
norepinephrine and specific serotonin antidepressants (NaSSAs) and selective
norepinephrine re-uptake inhibitors (SNaRIs). However, over a decade after launch, the
drug is still the number one antidepressant, with sales in 2000 of $2,574m. This
represents a 1.5% decrease from 1999, primarily due to the expiry of its EU patent
(1999) and increasing competition.

The US patent loss in 2001 will seriously damage Prozac’s sales revenue. In August
2000, Lilly lost an appeal tied to extending the patent life of Prozac to the generic
manufacturer Barr Laboratories. The US Court of Appeals deliberating on the case
reversed an earlier ruling, claiming that Lilly’s ‘double patening’ of its Prozac line was
invalid. Lilly had attempted to protect Prozac with two different patents expiring on
two different dates. However, in November 2000, the FDA granted Lilly six months of
market exclusivity for fluoxetine, in order for pediatric trials to be conducted, which
will delay generic entry into the branded Prozac market until August 2001.

Under US legislation, Barr’s successful challenge of Lilly’s Prozac patent entitles the
company to a six month period of exclusivity on fluoxetine, preventing other generic
manufacturers from selling it during this period. Following this, Lilly is likely to
experience further competition from IVAX, Watson/Schein and Teva in 2002.

Prozac received approval for depression in elderly patients in 1999 and, in February
2001, received approval for a once weekly formulation. The weekly dose is patent
protected until 2017, and if Lilly is successful in quickly shifting patients to this

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formulation, it may find them reluctant to switch back to the daily dosing offered by
generic competitors.

Despite these measures, Prozac sales are set to decline significantly, with 2001 sales of
$1,900m, 2004 sales of $700m and 2005 sales of $500m.

Table 4.26: Sales of Prozac, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 2,812 2,613 2,574 1,900 700 500

Source: Datamonitor

Takepron/Prevacid (lansoprazole)

Launched in 1992, Takepron is a proton pump inhibitor (PPI) used in the treatment of
peptic ulcers. The drug is indicated for the short-term treatment of duodenal and gastric
ulcers, and for the long-term treatment of hypersecretory conditions, as well as for the
maintenance treatment of healed erosive esophagitis. Drugs in this class act directly to
inhibit the action of the acid-producing pump within the stomach and are more potent
than the older H2 receptor antagonists. Lansoprazole is a second generation PPI, which
exhibits significant benefits over existing therapies, principally by exerting a more
profound effect on gastric pH. In 1999, Takepron was in development for a number of
indications. In Japan, Takepron was in registration for the treatment of postoperative
invasive stress, gastritis, H.pylori eradication and reflux esophagitis. In the US,
lansoprazole was in registration for the treatment of non-ulcer dyspepsia, and ulcers
resulting from the administration of nonsteroidal anti-inflammatory drugs. In the latter
indication the drug will compete directly with AstraZeneca’s Nexium (esomeprazole).

In June 1999, TAP announced that the FDA had approved new administration options
for Prevacid delayed-release capsules. The approval allows patients suffering from
acid-related disorders, such as gastroesophageal reflux disease (GERD), and who have

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difficulty swallowing capsules, to open the capsules and sprinkle the granules onto soft
foods or into juices.

In April 2000, Takeda won the rights to a Spanish patent relating to the production of
lansoprazole. In an ongoing suit filed by Takeda in 1994 against Boral Quimica SA,
who offered a capsule version of lansoprazole, Takeda claimed that Boral was violating
its Spanish patent 546,152. The Barcelona Provincial Court ordered Boral to refrain
from the possession, manufacture and marketing of lansoprazole.

Lansoprazole was the second PPI to be launched in major markets worldwide after
AstraZeneca’s Losec (omeprazole). Marketed as Takepron in Japan by Takeda,
lansoprazole has been introduced into markets across Europe, South Africa, the UK,
Latin America, Canada, and the US. Takeda’s strategy has been to use local licensees in
most of these countries. The major exception is the US, where the drug is marketed by
TAP, the joint venture with Abbott, under the brand name Prevacid.

Total Takepron sales amounted to an estimated $2,500m in 2000, largely derived from
the US market. This increase can be attributed to the FDA approval of the non-capsular
formulation of Prevacid, expanding the patient population considerably.

While the relatively slow growth of Takepron sales in the Japanese market compared to
the US can be partly attributed to the approval of new capsular administration in the
US, part of it can also be attributed to the popularity of H2 blockers over PPIs in Japan.
Usage of lansoprazole is also more limited in Japan, where Takepron is not approved
for the maintenance therapy of gastritis, which accounts for the majority of the total
ulcer market in Japan.

Lansoprazole is structurally related to AstraZeneca’s Losec, with which it competes

directly. AstraZeneca successfully sued Takeda for patent infringement over the
similarity between the two products, and although lansoprazole is still marketed,
AstraZeneca now receives 10% royalties on total sales of lansoprazole. Additionally,

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Prevacid also faces competition from new entrants: J&J’s and Eisai’s Aciphex
(rabeprazole), which received FDA marketing approval in August 1999, and AHP’s
Protonix (pantoprazole), which received FDA approval in February 2000.

The future performance of Prevacid in the US largely depends on the approval of the
drug for new indications, and increasing intensity of competition, both from novel
drugs and from generics, following Losec’s loss of patent protection in 2001. In Japan,
performance of the drug largely depends on the rate at which physicians will switch
from H2 blockers to PPIs, and also on the approval of Takepron for new indications.
Datamonitor estimates that Takepron and Prevacid generated total sales of $550m and
$2,500m in 2000, respectively. However, contributions made by Takepron and Prevacid
are forecast to decline to $450m and $1,350m, respectively, in 2005.

Table 4.27: Sales of Takepron/Prevacid, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,300 2,147 2,500 1,800

Source: Datamonitor

Zyprexa (olanzapine)

Lilly’s Zyprexa is the leading atypical neuroleptic on the global market with sales in
2000 of $2,349m, a 25% increase on 1999. Launched by Lilly in 1996 it has proved to
be an outstanding success in becoming the market leader at the expense of its great
rival, J&J’s Risperdal. Zyprexa is Lilly’s most important new product, and will make a
major contribution to the company’s revenue flow after Prozac’s patent expiry.

The antipsychotic efficacy of Zyprexa on schizophrenic patients has been well

established and, in March 2000, the drug was approved by the FDA for the treatment of
acute mania associated with bipolar disorder (BD). The treatable population for BD is
large, estimated at approximately three million in the US alone. Lilly will benefit from
J&J’s recent delay in its regulatory filing of Risperdal, for use in the treatment of

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bipolar mania, in order to allow it to perform additional clinical studies for this
indication.

Lilly has been actively pursuing additional innovative drug delivery options in order to
try and improve market share. The company has released trial results that showed an
intra-muscular formulation of olanzapine was more rapid and effective in controlling
acute agitation in schizophrenia patients than IM-haloperidol (the standard conventional
neuroleptic treatment). Moreover, in September 2000, Lilly released a new
disintegrating formulation of Zyprexa onto the US market. This formulation dissolves
in patients’ mouths upon contact with saliva. Zyprexa is the first atypical neuroleptic to
be released in this kind of formulation with Lilly hoping that it proves especially useful
with physicians who have to deal with patients who are in hospital and in long-term
home care settings.

Zyprexa’s phenomenal growth has occurred despite lingering doubts about the drug’s
side effect profile. An article recently published in Clinical Psychiatry News provided a
link between olanzapine (and clozapine) with the onset of diabetes in male patients,
especially African Americans (Sherman, 2000).

However, obesity is the most serious side effect associated with Zyprexa. Weight gain
may seem like an inconsequential side effect when it comes to controlling serious
mental illnesses such as schizophrenia and BD, but there is mounting evidence that the
use of Zyprexa is producing such considerable weight gain that these patients are
becoming obese. For many patients, the weight gain is so intolerable that they
discontinue treatment. Datamonitor’s primary research has discovered that healthcare
professionals treat the problem of obesity associated with Zyprexa with an ever-
increasing amount of importance.

The recent approval of Pfizer’s Zeldox (ziprasidone), a twice-daily administered

antipsychotic that appears to cause less weight gain compared to Zyprexa, is a
significant threat to Lilly. However, it is likely that Lilly will address the cardiovascular

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arrythmia effects that have been associated with the use of Zeldox in an attempt to
contain Pfizer’s market penetration.

Despite the increasing competition, Zyprexa is expected to maintain a significant share

of the antipsychotic market, with sales growth being driven by continued penetration
into the acute mania market, in addition to off-label use in bipolar depression. Sales of
Zyprexa are forecast to reach $2,705m in 2001, $3,550m in 2004 and $3,700m in 2005.

Table 4.28: Sales of Zyprexa, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 1,443 1,885 2,349 2705 3,550 3,700

Source: Datamonitor

Seroxat/Paxil/Deroxat (paroxetine)

Prior to its merger with Glaxo Wellcome, SmithKline Beecham’s best selling product
had been the antidepressant, paroxetine, which is sold under several different brand
names, including Seroxat, Paxil and Deroxat. It was the third SSRI to be launched,
following Lilly’s Prozac and Pfizer’s Zoloft. Seroxat’s sales increased by 11% between
1999 and 2000, to $2,345m. Seroxat is also approved for the treatment of obsessive
compulsive disorder and panic disorder.

The metabolism of paroxetine produces metabolites with negligible clinical effects. The
average half life of the product is about 24 hours, but the range may actually be from 3–
60 hours. Several comparative studies with fluoxetine (Prozac) show a slightly faster
action in paroxetine. One study, for example, demonstrated a faster onset of action in
paroxetine for relief of depression and anxiety symptoms. Adverse effects have also
been reported to be a little higher in fluoxetine than in paroxetine.

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The SSRI market is undergoing terrific expansion. Heavy promotion of the top brands
has fuelled the growth of the products in the US and the major European markets, partly
through the increased provision of disease management services. The market for SSRIs
is expected to continue to grow as there are still a large number of patients being treated
with tricyclics in the US and SSRIs have yet to be widely prescribed in the European
and Japanese markets. In the US, the widespread use of SSRIs and increased
competition in the market will result in increased price pressures.

In October 1998, Seroxat/Paxil was approved in the UK for a new indication, social
anxiety disorder (SAD) or social phobia. The product was already available for this
indication in Portugal and Romania, and SB also submitted approval applications in the
US and most of the EC. Seroxat was the first SSRI to be approved for SAD and panic
disorder.

Given the room for the market to expand in terms of volume, sales of Seroxat should
continue to show strong growth. Applications for the additional indication of obsessive
compulsive disorder have been filed in most of the world’s major markets, and Seroxat
is in registration in the UK and the US as an oral controlled release form. In addition, in
1998, SB filed a new formulation of Seroxat using SkyePharma’s Geomatrix drug
delivery technology. A potential threat to Seroxat will be the launch of generic versions
of Prozac, which lost patent protection in 1999 in the EU.

Seroxat is predicted to reach sales of approximately $3bn by 2005 – likely to be the

peak for the drug, as its patent expires in that year and a drug with such a large market
share will be a prime target for generic competitors.

Table 4.29: Sales of Seroxat/Paxil/Deroxat, 1998–2005

($m) 1998 1999 2000 2005

Sales 805 1,079 1,332 2,100

Source: Datamonitor

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Vioxx (rofecoxib)

Vioxx, approved by the FDA in 1999, is a NSAID used in the treatment of pain. Of the
four main drug classes used to treat pain, NSAIDs, opiods, opiod combination drugs
and ‘other analgesics’, NSAIDs are the market leaders, with approximately 65% market
share.

Traditional NSAIDs act by blocking both COX-I and COX-II, resulting in adverse
gastro-intestinal side effects, through inhibition of the protective effect of COX-I on the
gastro-intestinal mucosa. Vioxx, through its specificity for COX-II, does not exert the
same side effect.

The main competition to Vioxx is Pharmacia’s Celebrex - the first COX-II to market,
receiving FDA approval in December 1998 and achieving sales of $1.5bn in 1999,
compared to $472m for Vioxx, demonstrating how a small gap (only five months)
between launches can significantly affect the potential of the second product. However,
the sales gulf between the two products has now been closed, with sales of Vioxx
reaching $2,160m in 2000 compared to $2,614m for Celebrex.

Growth of the COX-II inhibitors has occurred mainly in the osteoarthritis market,
where nearly 80% of patients experience a gastro-intestinal upset due to prolonged use
of NSAIDs. Vioxx is indicated for the management of acute pain in adults, relief of
signs and symptoms of osteoarthritis and the treatment of primary dysmenorrhea.
Celebrex is indicated for the relief of signs and symptoms of osteoarthritis and
rheumatoid arthritis in adults. Merck is using Vioxx approval for pain and its once daily
dosing as key selling points. Merck claims that Vioxx is the leader in prescriptions for
chronic pain patients “new to market”. Celebrex has both once and twice daily dosing
and has yet to be approved for pain. The key threat to Celebrex and Vioxx, however,
will be the launch of the second generation COX-II inhibitors, including Pharmacia’s
valdecoxib and parecoxib, and Merck’s MK-663, all of which are scheduled to be
launched in 2001.

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Vioxx demonstrates much of the efficacy and improved side effects of Celebrex,
although since April 2000 it has faced increasing scrutiny from the FDA over safety
claims. Indeed, in April 2000, Vioxx was challenged by speculative reports suggesting
that the drug could be linked to unfavorable cardiovascular events, including stroke and
heart attacks. Although Merck has since disclaimed such reports, Celebrex’s promoters,
Pharmacia Corp. and Pfizer Inc., were quicker with clinical trial results demonstrating
Celebrex to have a favorable cardiovascular safety profile. Furthermore, in March
2001,at the American College of Cardiology meeting, the results of a head-to-head trial
were presented that showed Celebrex to have an advantage over Vioxx in terms of
cardiorenal safety profile.

There is considerable room for growth of Vioxx sales, particularly in the EU, where it
beat Celebrex to market. In addition to increasing patient awareness in existing
indications, there is excellent growth potential from the approval of the product for new
indications. In December 1999, Celebrex was approved by the FDA for familial
adenomatous polyposis (FAP) and is currently being investigated as a potential
treatment for cancer (colon, bladder and breast) and Alzheimer’s disease. Datamonitor
expects sales of Vioxx to increase to $2,800m in 2001, $4,100m in 2004 and $4,500m
in 2005.

Table 4.30: Sales of Vioxx, 1999–2005

($m) 1999 2000 2001 2004 2005

Sales 465 2,160 2,800 4,100 4,500

Source: Datamonitor

In April 2001, Merck announced that the FDA had sent it an ‘approvable letter’
regarding relaxation of side-effect warnings for Vioxx.

At the time of going to print, Pharmacia was hoping for a similar FDA move for
Celebrex. Both drugs carry relatively strict warnings of side-effects on their labels. In

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efforts to take a lead over their rival, the two manufacturers have been conducting extra
clinical trials to sway the FDA to relax warnings.

Zoloft (sertraline HCl)

Zoloft is a once daily SSRI in the same class as Prozac. Pfizer’s product, along with the
other SSRIs launched after Prozac, has been unable to achieve the sales of Lilly’s
product, mainly due to a lack of efficacy data that demonstrates significant
improvement over Prozac.

Zoloft was first launched in the UK, as Lustral, in 1990, with rollout in the US
following in 1992. The drug was launched in France and Germany in February 1997. At
that time, the drug was in a fairly early stage of its worldwide rollout, with 80% of sales
generated in the US. Further to this, the drug received approval for a supplemental
indication in the treatment of obsessive compulsive disorder (OCD). By March 1997,
the drug had been launched for this disorder in 18 countries including the US.

Sertraline is approved in the US for the treatment of panic disorder, eating disorders
and post-traumatic stress disorder. In addition, Pfizer Inc. is preparing an application
for the approval of sertraline in Japan for the treatment of depression, panic disorder
and bulimia.

The publicity generated by Prozac has meant that the whole SSRI class has
outperformed even the most optimistic predictions of the industry. In terms of sales,
Pfizer’s product currently lies in third place, after Prozac and GSK’s Seroxat, which
had 2000 sales of $2,559m and $2,345m, respectively. Pfizer continues to market
Zoloft aggressively in an effort to increase its share of this expanding market. Such
activities include ‘Rhythms’, a 28 week direct-to-patient education program designed to
provide patient compliance support and reinforce physicians’ treatment instructions.
Pfizer also underwrote the development of ‘PRIME-MD’, a user-friendly diagnostic
tool designed to improve the diagnosis of depression and other mental health disorders
which can be used by physicians. The company also launched another initiative known

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as ‘Signs, Symptoms & Care’ which is aimed at raising awareness of the condition and
treatments for it in hospitals and other institutions.

Although Pfizer’s heavy investment in the marketing of Zoloft achieved rapid sales
uptake, sales levelled off in 2000 and Datamonitor believes that, due to future launches
of more efficacious products, continued sales growth is not sustainable. Therefore, sales
are expected to decline to $1,700m in 2005.

Table 4.31: Sales of Zoloft, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,836 2,034 2,140 1,700

Source: Datamonitor

Epogen (epoietin alfa)

Epogen (epoietin alfa) is a recombinant version of a erythroprotein hormone that

stimulates erythrocyte (red blood cell) production. Upon kidney failure, production of
erythropoietin ceases, resulting in lower production of red blood cells and the onset of
anemia. Epogen acts by supplementing levels of erythropoietin in the blood following
kidney failure, helping to boost the production of red blood cells.

Epogen is indicated for the treatment of anemia commonly associated with kidney
dialysis. In November 1999, the indication was broadened to allow Epogen to be used
for the treatment of anemia in children suffering from chronic renal failure caused by
kidney dialysis.

Epogen and its out-licensed equivalents, Procrit, Eprex and Espo, effectively dominate
the world market for anemia products. Under a 1985 agreement, Amgen out-licensed
exclusive rights to Johnson & Johnson’s subsidiary, Ortho Biotech, to sell Epogen
(under the brand name Procrit) for non-dialysis indications in the US market, leaving

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Amgen the rights to market Epogen for use in dialysis diagnostics and non-human
applications. Ortho also gained the right to market the product outside the US and in
Japan.

Amgen holds five patents on Epogen, the first of which is set to expire in 2004. In
January 2001, Amgen was victorious in an ongoing patent dispute with Transkaryotic
Therapies (TKT). TKT had claimed that Amgen’s Epogen patents, which prohibit the
production of erythropoietin in all vertebrates, were too broad, and should not extend to
all human cells since naturally occurring products cannot be patented, only methods
relating to their production or use. While Amgen manufactures erythropoietin by
inserting a human gene into hamster cells, TKT has developed a different method of
producing erythropoietin (which carries the brand name Dynepo) that does not depend
on animal cells, but instead stimulates human cells to generate the substance
themselves. The result of the patent dispute will ensure increasing sales of Epogen right
up until patent expiry in 2004. Furthermore, it should also enable the successful launch
of Epogen’s successor, Aranesp, without the concern of Dynepo getting to market first
and taking a significant portion of the market share.

Over recent years, Epogen sales have displayed strong growth primarily due to the
administration of higher doses and to continuing growth in the US dialysis population.
The use of higher doses was a result of dialysis providers managing more patients into
the hemocrit range of 33–36% as recommended by the Dialysis Outcomes Quality
Initiative (DOQI) and by changes in reimbursement announced by the Health Care
Financing Administration (HCFA) in the US. Sales in 2000 reached $1,962m, an
increase of 11.5% from 1999. Going forward, Epogen sales are expected to increase
moderately, since the American market is now largely penetrated. In addition, once
Aranesp is launched, Amgen may divert some marketing resources away from Epogen
to the new product. With Aranesp, Amgen has the opportunity to command the whole
of the US anemia market, including the non-dialysis indications for which Ortho
currently markets Procrit. Datamonitor forecasts revenue of Epogen to be $2,150m in
2001, $2,300m by 2004 and fall to $2,200m by 2005.

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 Table 4.32: Sales of Epogen, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 1,380 1,760 1,962 2,150 2,300 2,200

Source: Datamonitor

Premarin family (conjugated estrogens)

Premarin and its relatives are indicated for the treatment of menopausal disorders and
are derived from a blend of 10 estrogens taken from the urine of pregnant mares.
Premarin itself was first launched in 1942 and has therefore been without patent
protection for a considerable amount of time. However, in May 1997, the FDA ruled
that no synthetic product could be biologically equivalent and therefore AHP considers
that the Premarin family is safe from generic competition in the short term. Premarin is
the top selling hormone replacement therapy (HRT) product in the US.

At present, a number of trials are underway to attempt to resolve questions about the
specific benefits and risks of types of HRT. Advocates of HRT argue that the health
benefits of greatly decreasing the risk of cardiovascular disease and osteoporosis (both
major causes of mortality among older women) outweigh the possibility of an increased
risk of breast cancer. The outcomes of current trials could profoundly affect AHP’s
women’s healthcare franchise. These trials include:

‰ the Heart and Estrogen Replacement Study (HERS). This trial specifically
examined the role of Premarin in the prevention of heart disease in women who had
not had a hysterectomy. The trial completed enrolment in 1994 and consisted of
2,763 postmenopausal women. Results indicated that there was no significant
difference in the overall rate of coronary heart disease events between women
taking HRT and women taking the placebo. In addition, women taking HRT
experienced a higher number of venous thromboembolic events and gall bladder
disease. The study also reported a significant time trend, with women on HRT at an

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 increased risk of primary coronary heart disease in the first year of therapy, but at a
decreased risk in subsequent years.

‰ the Postmenopausal Estrogen/Progestin Interventions (PEPI) study is examining the

cardioprotective effects of HRT and showed a significant improvement in
cardiovascular risk factors. Conclusion of this trial is expected in 2005;

‰ the Women’s Health Initiative, a major US National Institute of Health trial

designed to last 14 years, which will examine the role of HRT as a prophylaxis for a
number of conditions.

Such trials are both lengthy and costly, requiring the enrolment of thousands of women
over a number of years. However, the data generated will be of enormous benefit to
AHP, should they show that the benefits of HRT are greater than currently believed.

In 1996, AHP became involved in an additional trial as part of the Women’s Health
Initiative, testing the benefits of Premarin in Alzheimer’s disease and dementia. The
experiment involves 8,000 elderly women who will take a daily dose of estrogen. The
objective is to determine whether this will prevent or postpone the loss of memory in
Alzheimer’s and dementia. This will be a lengthy trial, but if successful will
considerably broaden the market for Premarin.

Premphase and Prempro (conjugated progestin and estrogen) became available in the
US in January 1996. Both contain the same estrogens as Premarin but are combined
with a progestin. A shift from Premarin towards the combined drugs is likely to occur
as the regime is equivalent to taking the two hormones separately and thus very
appealing to women who currently take both hormones. In many cases, Premphase will
also be more economical than taking the hormones separately. Premphase and Prempro
are therefore likely to gain at the expense of pure Premarin. During 1999, AHP pursued
phase III studies of lower doses of Prempro to determine its benefits in the treatment of
osteoporosis and menopausal symptoms. The patent on Prempro extends until 2006.

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In 1999, the FDA once again confirmed the uniqueness of Premarin, comparing it to
Cenestin (synthetic conjugated estrogen), another drug used for estrogen replacement
therapy in the US. The FDA stated that Cenestin tablet form “…is not the same as
Premarin…”. This, coupled with the fact that the patent on Prempro extends until 2006
and the FDA decision preventing synthetic generic versions of Premarin, means that the
Premarin family is unlikely to suffer any significant generic competition in the near
future. Following sales of $1,870m in 2000, strong sales are predicted to continue to a
level of $2,400m in 2005.

Table 4.33: Sales of the Premarin family of drugs, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,647 1,776 1,870 2,400

Source: Datamonitor

Augmentin (coamoxiclav)

Augmentin is a combination of the penicillin antibiotic, amoxicillin, and the beta-

lactamase inhibitor, clavulanic acid. It was launched in 1981 to combat bacterial
resistance to amoxicillin and has been very successful due to its broad spectrum of
activity and its efficacy against resistant bacteria. It dominated the antibiotic market for
a number of years before being superseded by Bayer’s Cipro in 1994.

Further competition to Augmentin has come from other anti-infectives, such as Pfizer’s
Zithromax which has a high potency, coupled with a good side effect profile. This has
led to significant increases in Zithromax sales, particularly in the US. New indications
and dosage forms have driven, and will continue to drive, sales of this product and
increase the competition to Augmentin. Despite the increasing pressures on Augmentin,
the drug still achieved sales of $1,845m in 2000, a marginal increase on 1999 levels.

In March 1996, a new adult formulation of Augmentin with a twice-daily dosing

regimen was launched in the US, for more severe infections of the respiratory tract. The

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existing formulation can still be prescribed in a twice-daily regimen for less serious
infections. A new pediatric dose was also launched in 1996 with an improved side
effect profile (no diarrhea). The extension of the product’s list of indications has driven
the growth of Augmentin’s market share. The additional indications were also
developed to partially protect the product from generic cannibalization after loss of
patent protection from 2000 outside the US.

The most important development in the product’s lifecycle, however, may have
occurred in February 2000, when Augmentin was granted a new patent in the US,
which should extend protection from generic competition until 2017, 15 years after its
forthcoming original patent expiry date of 2002.

SB was awarded the patent extension on Augmentin, first launched in 1981, after filing
a ‘submarine’ patent. This involved filing an additional patent for elements of the drug
not previously covered, including an acid that stops amoxycillin degrading, before the
original protection on amoxycillin, the active ingredient of Augmentin, expired. The
extended patent date is not expected to have a great impact on sales of the drug,
however, as it has already reached a high proportion of its sales potential. Therefore,
Augmentin is expected to grow steadily over the next five years and is predicted to
achieve sales of $2,150m for GSK in 2005.

Table 4.34: Sales of Augmentin, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,559 1,816 1,845 2,150

Source: Datamonitor

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Pravachol (pravastatin)

Pravachol, an HMG CoA reductase inhibitor for the treatment of hypercholesterolemia,

was first launched in 1990. Pravastatin was originated by Sankyo, which markets the
drug in Japan and the Far East as Mevalotin. BMS has marketing rights in all other
markets worldwide.

The results of the Prospective Pravastatin Pooling project indicated that Pravachol
consistently helped reduce the risk of recurrent coronary events in women, older
patients and patients with diabetes and strengthened the position of Pravachol, which
already had the widest range of indications of any statin. Most of the indications are
based on the landmark West Of Scotland Coronary Prevention Study (WOSCOPS),
from which first results were published in 1995. Pravachol is indicated for the reduction
of elevated total and LDL cholesterol and for reducing the risk of acute coronary events
in patients with hypercholesterolemia and established coronary disease (secondary
prevention). It is also indicated for primary prevention of death and MI in
hypercholesterolemic patients without clinically evident coronary disease. Further
indications include slowing the progression of coronary atherosclerosis and reducing
the risk of acute coronary events. In 1999, Pravachol was also approved by the FDA for
reducing the risk of stroke.

During 1999, BMS announced the launch of the Pravastatin Evaluation and Infection
Therapy trial. This trial was the first to compare the effects of Pravachol to those of of
Lipitor in reducing the risk of heart attacks and other cardiac events.

Compared to the market leader, Merck’s Zocor, Pravachol has a wider range of
prevention indications. However, Merck appears to be making better use of both the
data from its key trials for Zocor, in particular 4S, and in successfully positioning the
drug. Until 1997, Pravachol was the second leading product in the statin market.
However, Pfizer’s Lipitor overtook Pravachol relegating it to third place. Pravachol has
lost out to Lipitor on the basis of short-term lipid lowering efficacy and prescribing

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convenience. Given the above scenario, Lipitor’s fast growth is definitely a cause of
concern for Pravachol.

The major threat to Pravachol over the next two years could come from the loss of
patent protection on Mevacor in 2001. The two drugs have similar lipid lowering
efficacies and both have been shown to reduce long-term cardiovascular morbidity and
mortality. Pravachol has suffered most from cost-effectiveness studies, and it may
therefore find competition from cheap generic lovastatin post-2001.

In 1999, BMS scaled down its DTC advertising efforts due to disappointing results and
redirected its marketing efforts towards physicians. Pravachol’s wide range of
indications makes promotion to physicians a more promising approach, particularly if
BMS is to avoid direct competition with Lipitor or Zocor. As an example of this move,
BMS signed a three year co-promotion agreement with Women First HealthCare, Inc., a
speciality healthcare company dedicated to improving the health of women in midlife,
to market Pravachol to obstetricians/gynecologists (Ob/Gyns). The company stated that
this is an important untapped market, since over 50% of the US women use an Ob/Gyn
as their primary care physician and that these physicians account for less than 1% of all
cholesterol lowering prescriptions.

Pravachol’s positioning on its wide range of indications and potential repositioning to

market through Ob/Gyns are likely to provide the drug’s best route to continued
revenue growth. The main potential problem with this as with any strategy in this
market at the moment, is that the assumption of a class effect may mean that other
statins benefit from a ‘free rider’ effect.

Threats facing Pravachol, then, include the side effect problems common to all the
statins, its relatively poor potency compared to Lipitor, loss of patent protection on
Mevacor, and a relatively poor market positioning compared to the two leading drugs.

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It appears that BMS’ strategy has increasingly focused on avoiding going head to head
with Zocor and Lipitor and instead concentrating on mild to moderate
hypercholesterolaemic patients, thereby demonstrating benefit in specific patient
subsets. This will probably be more successful than trying to match the two leading
drugs. However, demonstration of similar potency or the addition of a triglycerides
indication would nevertheless put the drug on a more sound footing.

This is evident from Pravachol’s declining sales growth. In 2000, Pravachol sales
increased by 6% compared to 1999, totaling to almost $1,817m.

Table 4.35: Sales of Pravachol, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,643 1,704 1,817 2,300

Source: Datamonitor

Datamonitor believes that Pravachol will achieve lower positive growth during the
2000–05 period, with total sales amounting to $2,300m in 2005.

Vasotec (enalapril)

Vasotec is indicated for hypertension and was one of the first ACE inhibitors to market.
It quickly became the gold standard of its class. Although, at the time of launch,
Vasotec was well differentiated from the other ACE inhibitors on the market, a variety
of ‘me too’ additions to the market have left Vasotec largely undifferentiated from
other ACE inhibitors.

Like many of its competitors, Vasotec benefits from several additional indications,
which have increased the patient potential for the drug, including heart failure and
asymptomatic left ventricular dysfunction (LVD). Although not specifically indicated
for diabetic nephropathy, the effects of Vasotec on the progression of the condition
make it particularly suitable for patients with diabetes. However, this benefit is

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common to the class as a whole and since AstraZeneca’s Zestril (lisinopril), the next
biggest ACE inhibitor, is indicated for diabetic nephropathy independent of the
presence of hypertension, Vasotec does not have the advantage in this area.

However, despite the launch of a number of ‘me too’ ACE inhibitors, enalapril remains
the gold standard treatment amongst ACE inhibitors. In a decision analysis performed
by Ramos et al. (1993), captopril, enalapril, and lisinopril were assessed for inclusion
on a formulary based on 13 criteria, including: efficacy, clinical experience, safety,
dosage interval, hepatic bioactivation, interactions, dosage forms and cost. Greatest
emphasis was placed by practitioners on clinical experience and proven efficacy in
treating patients with hypertension or CHF, and the absence of severe side effects. In
the final analysis, enalapril scored the highest out of 100 (68.0) followed by lisinopril
(64.2) and captopril (60.9).

Although Vasotec was the leading ACE inhibitor, the drug was overtaken by Pfizer’s
calcium channel blocker Norvasc (amlodipine) in 1998 and is no longer the highest
selling anti-hypertensive. In 2000, Norvasc achieved sales of $3,362m having grown by
12% over the previous year. Furthermore, Vasotec sales decreased by 22.3% in 2000 to
$1,790m, due to patent expiries on the compound in various markets and active
promotion of Merck’s AIIRB, Cozaar, in favor of Vasotec. However, Vasotec gained
six month pediatric exclusivity in the US, extending the patent from February to August
2000. Therefore, the full impact of patent expiries on the gold standard ACE inhibitor
will not be observed until 2001. With good side effects and efficacy, the low cost of
generic enalapril will make it the ACE inhibitor of choice in a majority of cases,
causing either a fall in the subsequent utilization of other therapies or giving healthcare
payers a much stronger hand with which to bargain for discounts. This patent expiry is,
therefore, a major threat both to sales of Vasotec and to other ACE inhibitors. This is
particularly the case in the US since Vasotec is up to 50% more expensive than other
ACE inhibitors in this market. The effect on the market will be exacerbated by patent
expiries on lisinopril over the period 2001−2002.

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While it is in Merck’s interest to gain the maximum revenue from Vasotec in its
remaining patented period, in the longer term, the more profitable strategy was to
establish Cozaar, which remains patent protected until 2009, in favor of Vasotec.
Therefore, Merck has actively promoted Cozaar to encourage switching of prescriptions
from ACE inhibitors, including Vasotec and Prinivil (lisinopril) to Cozaar (losartan).
However, the product will benefit from ‘bundling’, where Merck promotes and markets
cardiovascular risk factor treatments together. In this way, Merck may be able to fully
exploit the residual brand loyalty to Vasotec. This will particularly be the case in
markets, such as France, where generics are not widely accepted.

Datamonitor expects sales of Vasotec to decrease to increase to $1,800m in 2001 and

be around the $1,500m mark in 2005.

Table 4.36: Sales of Vasotec, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 2,400 2,305 1,790 1,800 1,600 1,500

Source: Datamonitor

Glucophage (metformin HCl)

Glucophage’s active ingredient is metformin, which is believed to work by improving

insulin sensitivity by increasing the peripheral utilization of glucose. It has gained its
significant market share due to the advantages that it holds over sulphonylureas, an
older class of antidiabetic drugs administered orally, and act mainly by augmenting
insulin secretion and are consequently effective only when some residual pancreatic
beta cell activity is present. In 1999, BMS submitted a regulatory application for
Glucophage XR, a once daily formulation of Glucophage. Additionally, BMS also
submitted an NDA for a novel fixed combination drug, combining glyburide.

Although the Hatch-Waxman legislation exclusivity for Glucophage expired in March

2000, BMS was granted an extension on marketing exclusivity of Glucophage until

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September 2000. This was on the basis that BMS could perform clinical studies to
assess the safety, efficacy and pharmacokinetic profile of Glucophage in pediatric
populations.

The drug was approved in the US in 1994, either as first line monotherapy, or for
combination use with existing drugs when they do not reduce glucose levels
sufficiently. The drug was approved in 15 months of review, despite the large number
of oral antidiabetic agents available on the US market.

The advantages of using Glucophage include weight loss rather than the weight gain
seen with sulphonylureas, and associated with this is the benefit of reducing the risk of
cardiovascular disease. Moreover, use of Glucophage is not associated with
hypoglycaemia. Until the launch of Glucophage, the market had been dominated by
sales of sulphonylureas. The convenience of sulphonylureas (they need to be taken less
often) also contributed to their market success. Glucophage, however, has managed to
surprise many with its rapid dominance of the oral therapies market and this looks set to
increase in the short term at least.

Due to its advantages over sulphonylureas, Glucophage has established a stable position
in the oral therapy market. As a class of drugs, metformin products hold the largest
value share of the oral therapies market and, as sulphonylurea sales shift towards lower
priced generics, metformin products will continue to increase its share.

At the end of 1997, BMS added contraindications to the labeling for Glucophage,
warning against use in patients with congestive heart failure because of an increased
risk of lactic acidosis. BMS has stated that congestive heart failure patients are more
susceptible to developing lactic acidosis due to poorly functioning kidneys. Other
groups of people who have potential for renal insufficiency have been added to the
warnings on Glucophage labeling. The company is currently conducting phase IV trials
on Glucophage in order to determine the rate of lactic acidosis in patients being treated
with the antidiabetic agent.

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SKB has a glitazone in development (BRL 49653), although this is not likely to reach
the market until 2002. This could further impact the sales of Glucophage, which will
have lost its patent and may be substituted for a newer compound. Takeda and Lilly’s
glitazone, Actos (pioglitazone), is expected to gain a significant portion of the market
given its low dosing requirements whilst maintaining efficacy compared to troglitazone.

During 2000, sales of Glucophage increased 31.5% to $1,732m. This was due to the
FDA approval of Avandia in combination with Glucophage for the treatment of type 2
diabetes. Avandia, a GSK product and is being co-promoted by BMS in the US. Given
its upcoming patent expiry and increased competition, Datamonitor believes that sales
from all metformin indications will decline to $1,050m in 2000 and to $690m in 2005.

Table 4.37: Sales of Glucophage, 1998–2005

($m) 1998 1999 2000 2005

Sales 861 1,317 1,732 690

Source: Datamonitor

Cozaar (losartan) and Hyzaar (losartan + hydrochlorothiazide)

Merck’s Cozaar (losartan), the first AIIRB to market, was first launched in Sweden in
November 1994, as a once-daily drug for the treatment of hypertension. In 1995, the
companion agent Hyzaar was launched, a combination of Cozaar and the diuretic
hydrochlorothiazide. Sales of Cozaar/Hyzaar increased by 23.8%, to $1,715m in 2000.
AIIRBs are the newest addition to the hypertension market and are positioned on their
placebo-like tolerability. As the only class not facing patent expiries over the period to
2007, AIIRBs will increase their dominance of the market considerably over the
coming years.

Cozaar / Hyzaar are the best performing products in Merck’s line, reaching combined
annual global sales of more than $1bn just four years after launch. Cozaar continues to
benefit from its first to market advantage. The product has also benefited in the US

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from the establishment of a “Get-to-Goal Guarantee”, where patients who fail to
achieve target blood pressure goals set by their physicians are reimbursed by Merck &
Co. for up to six months worth of treatment. Merck & Co.’s cardiovascular marketing
experience has also helped to sustain sales in the face of new competition, with Cozaar
being placed on more than 90% of managed care formularies in the US.

Although Cozaar has rapidly lost market share to newer AIIRBs, which have been
available since 1998, it remains a long way ahead of its closest competitor, Novartis’s
Diovan (valsartan) which achieved sales of $728m in 2000 and continues to benefit
from growth of the AIIRB class as a whole, which has resulted in increasing sales of
Cozaar, despite the drug’s declining market share.

The potential threat of Bristol-Myers Squibb’s Vanlev (omapatrilat), a vaso-

endopeptidase (VEP) inhibitor to future Cozaar sales has recently been significantly
reduced due to its withdrawal from the FDA approval process early in 2000. Cozaar is
therefore much more likely to be affected by the launch of newer AIIRBs such as
Avapro (iresartan) and Blopress/Atacand (candesartan). Whilst some studies have
shown these compounds to be more effective than Cozaar, opinion regarding the
relative effectiveness of drugs in the class remains divided. Until substantial data
regarding the improved effectivness of these newer compounds becomes available,
Cozaar looks set to continue to lead the AIIRB market, albeit by a decreasing margin,
until 2006.

Further competition will come from the patent expiries on other ACE inhibitors, in
particular Zestril/Prinivil (lisinopril) which achieved sales of $1,188m in 2000, over the
period 2001−2003. However, whilst the availability of generic ACE inhibitors is likely
to result in an increase in prescriptions of ACE inhibitors, probably at the expense of
the older classes of anti-hypertensives. The AIIRBs are differentiated from the ACE
inhibitors on the basis of their superior side effect profile and, therefore, will be less
affected by these patent expiries than other compounds, in particular, other ACE
inhibitors. Furthermore, since in many market AIIRBs are prescribed only once ACE

169
inhibitors have not been well tolerated, increases in ACE inhibitor prescriptions will
result in increasing numbers of patients with the ‘ACE inhibitor cough’, which will
then be prescribed an AIIRB. Since Cozaar leads the AIIRB market, it is likely to
benefit considerably from an increase in the use of the class. Furthermore in preparation
for the patent expiries on Vasotec and Prinivil, Merck has been actively promoting
Cozaar in order to minimize the impact of these patent expiries on revenue streams.

In addition to continued organic growth/uptake of the drug, Cozaar’s growth will be

driven by the trials being undertaken with the drug, both producing further evidence of
its efficacy in hypertension and also in other indications. Datamonitor expects sales of
Cozaar/Hyzaar to continue to increase to $2,025m in 2001 and $3,000m in 2005.
However, 2000/2001 will see the beginning of the Cozaar/Hyzaar 50% profit sharing
agreement between Merck and DuPont, which will reduce the income generated from
Merck’s Cozaar sales. The agreement was formed after DuPont’s mid-1998 acquisition
of Merck’s 50% interest in the DuPont Merck Pharmaceutical Company.

Table 4.38: Sales of Cozaar/Hyzaar, 1998–2005

($m) 1998 1999 2000 2001 2005

Sales 1,060 1,385 1,715 2,025 3,000

Source: Datamonitor

Cipro (ciprofloxacin)

In 2000, Cipro was the second most successful anti–bacterial product behind what was
GSK’s Augmentin, achieving sales of $1,645m. Although launched in 1987, Cipro’s
continued popularity is a facet of its efficacy, ease of treatment, breadth of indications
and close to immaculate safety record. Cipro is heavily prescribed for infections of the
urinary tract, commonly caused by gram–negative bacteria.

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The product has an extremely strong presence in the US, all EU countries except
France. It does, however, achieve negligible sales in Japan, the world’s second largest
anti–infectives market.

Cipro’s main competitors in the fluoroquinalone market are Daiichi’s Cravit

(levofloxacin) and J&J’s Levaquin (levofloxacin). J&J license levofloxacin from
Daiichi, and market the product primarily in the US, whilst Aventis markets
levofloxacin under license in the EU. Daiichi markets Cravit predominantly in East
Asia.

Levaquin represents a substantial threat to Cipro in the US, where 80% of hospitals
have reported Cipro resistant strains of bacteria. An additional threat to Cipro’s
sustained growth is the loss of patent protection in the autumn of 2000. The product is
facing generic competition from companies such as Bentley Pharmaceuticals, which has
already secured several approvals for the marketing of a generic equivalent.

Datamonitor forecasts Cipro’s growth to slow substantially until 2002, under generic
competition and the loss of market share to Daiichi’s, J&J’s and Aventis’ levofloxacin
products. Other competition will be encountered from Daiichi’s Tarivid (olfloxacin),
licensed to J&J as Floxin. Sales of olfloxacin products are forecast to be $394m in 2000
and sales of levofloxacin products are forecast to reach $622m in 2000. Both these
products compete comparably with Cipro in terms of efficacy, although they lag in
terms of indications. Of the two compounds, levofloxacin is best placed to take
advantage of Cipro’s loss of patent protection. Levofloxacin products are protected by
patents until 2008 and are positioned to become the dominant branded products in the
quinolone market, providing new indications can be gained quickly.

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 Table 4.39: Historical and forecast sales of Cipro, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,185 1,423 1,645 900

Source: Datamonitor

Risperdal (risperidone)

Schizophrenia is a mental disorder characterized by ‘positive’ symptoms that include

delusions and hallucinations, as well as ‘negative’ symptoms that include apathy and
listlessness.

Risperdal was approved by the FDA in September 1993 and launched in the US in
February 1994. It was the first serotonin-dopamine antagonist available for first-line use
in the treatment of schizophrenia and was regarded by some as a breakthrough product.
The drug has important advantages over established therapies such as Clozaril
(clozapine), since it has a much better side effect profile and hence its use does not
necessitate expensive patient monitoring. J&J had hoped to promote Risperdal as
significantly more effective than its other antipsychotic, Haldol (haloperidol), but this
claim appears unlikely to be permitted by the FDA. Nevertheless, Risperdal has
advantages over the older product. It has demonstrated a significant reduction in
extrapyramidal symptoms (EPS) such as muscle spasms and involuntary facial
movements.

The drugs most frequently used in the treatment of schizophrenia have a number of
significant drawbacks. J&J’s Haldol (haloperidol), which is also available generically,
is the most frequently prescribed drug for schizophrenia. It is an antipsychotic with side
effects similar to the symptoms of Parkinson’s disease. Another widely used therapy is
Novartis’ Leponex/Clozaril (clozapine). This drug causes potentially fatal damage to

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white blood cells and thus necessitates close patient monitoring, therefore reducing the
number of patients that it can treat.

Risperdal’s advantages over pre-existing treatments have allowed the drug to realize
strong sales, with growth of 17% in 2000 to $1,603m, making it the second highest in
its class after Lilly’s Zyprexa (olanzapine). However, sales are likely to begin to decline
over the next two years, as newly launched products compete for market share. In
particular, Zyprexa is believed to have shown greater efficacy than haloperidol in
treating the negative symptoms of schizophrenia, giving it a strong selling point.
Moreover, unlike Risperdal, which has to be administered twice daily, Zyprexa only
requires once daily dosing, a key consideration given the patient group for whom the
drug is indicated. In addition, final results of the first head-to-head study of Lilly’s
Zyprexa versus J&J’s Risperdal confirmed a benefit for Zyprexa. However, J&J has
claimed that the study does not portray its drug at its best and announced that it will
sponsor another trial.

The antipsychotic market is the focus of great interest at present and much research is
being carried out in this area. Many antidepressants are undergoing trials for additional
indications, including schizophrenia, which means that the market is likely to become
more crowded. The increasing competition in this segment is expected to affect future
sales of Risperdal, although its patent does not expire until 2009, and it will not face
generic competition until this time. In addition, an NDA has been filed for Medisorb
Risperdal, which would make J&J the first to market with a depot formula of the newer
antipsychotics. Such a formulation offers significant compliance benefits as
administration is every other week.

Datamonitor expects sales will continue to grow in light of its success to date, its recent
new approval, the positive reports regarding its oral administration and its potential in
the treatment of bipolar disorder. Sales reached $1,603m in 2000 and Datamonitor
forecasts sales of $2,350m in 2005.

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 Table 4.40: Sales of Risperdal, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,036 1,368 1,603 2,350

Source: Datamonitor

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Taxol (paclitaxel)

Taxol is indicated for a number of tumor types including metastatic breast and ovarian
cancer, as a monotherapy or in combination with other products. It is also approved in
Europe as a first line treatment of ovarian cancer. In August 1997, Taxol was approved
as a second-line therapy for the treatment of AIDS-related Karposi’s sarcoma in the US,
where it has been granted orphan drug status in that indication until 2004. In 1998, it
also received clearance from the Japanese Ministry of Health and Welfare for the
treatment for breast and non-small cell lung cancers.

In 1999, the FDA approved Taxol in combination with cisplatin, for the first-line
treatment of non-small cell lung cancer in patients who are not candidates for
potentially curative surgery and/or radiation therapy. In the same year, the FDA also
approved Taxol for the adjuvant treatment of node-positive breast cancer.

In 1998, results from the phase III EORTC (European Organization for Research and
Treatment of Cancer) trial showed that 40.0% of patients receiving a Taxol and
cisplatin combination experienced a 50.0% or greater reduction in tumor size compared
to 28.0% in patients receiving teniposide and cisplatin. There was, however, no
significant difference in survival. As a result of these trials, Taxol was approved, in
1998, as a first line treatment for advanced ovarian cancer in the US in combination
with cisplatin

In May 1998, Taxol received positive press when a landmark trial, headed by the US
Cancer and Leukemia Group B, stated that the drug, in addition to the current standard
chemotherapy regimen, represented a new standard of care in the treatment of early
stage breast cancer. The standard chemotherapy regimen at the time was the
anthracycline, Pharmacia & Upjohn’s Adriamycin (doxorubicin), plus ASTA Medica’s
Endoxan (cyclophosphamide).

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In a new study conducted in 2000, results from the Cancer and Leukemia Group B trial
demonstrated the cost-effectiveness of Taxol as the standard chemotherapy treatment in
breast cancer. The trial demonstrated that the use of less active, older treatments for
breast cancer, though cheaper in absolute terms, may be far more expensive than newer
drugs when cost is related to effectiveness. According to the trial, the extra cost of
Taxol is partially offset by reduced expenditure in diagnosing and treating recurrent
disease, since Taxol helps avoid recurrences of the disease, and treating recurrence is
very expensive.

Since its launch in 1993, Taxol has consistently been a key revenue generator for BMS.
Compared to 1999, Taxol sales increased by 7.5% in 2000 amounting to $1,592m. The
growth in its sales, despite patent expiry, can be attributed to the FDA’s decision, which
does not grant marketing clearance to any generic manufacturer for any use of the
generic form of Taxol. However, BMS is involved in a patent infringement action
against five drug companies over the validity of Taxol’s three-hour infusion
administration in the treatment of ovarian cancer.

Comparing its growth with that of its direct competitor, Aventis’ Taxotere (docetaxel),
it appears that Taxol may face more intense competition over the coming years. Both
absolute and relative sales growth of the drug has been high since its launch in 1995.

Bearing in mind the expired patent and growing sales of Taxotere, Datamonitor
forecasts that Taxol sales will see a decline in the coming years. Taxol sales reached
$1,592m in 2000, and are forecast to decline to $1,000m in 2005.

Table 4.41: Sales of Taxol, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,206 1,481 1,592 1,000

Source: Datamonitor

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Novolin, Insulatard, Actrapid (insulin)

Insulin therapy involves the subcutaneous injection of insulin to improve control over
blood glucose and hence avoid hyperglycaemia. Oral administration of insulin is not
possible: insulin is a protein and as such would be digested if taken orally.
Subcutaneous injection of insulin is thus necessary. The provision of delivery systems
in conjunction with insulin products is therefore an important feature of this market.
Insulin is available in rapid-, short-, intermediate-, and long-acting forms that may be
injected separately or mixed in the same syringe.

Therapeutic differentiation between products in this market is based very much on the
convenience of the delivery system to the patient. Novo Nordisk has benefited from the
use of its patented delivery systems, such as the NovoLet pen injection system, in
conjunction with its range of insulins. There are two leading companies in the field of
insulin therapy: Lilly and Novo Nordisk. In the 1980s, Novo Nordisk was the more
innovative, introducing a more convenient delivery system for insulin in the form of the
NovoPen. NovoPen, introduced in 1985, consists of pre-mixed insulin in a pen-shaped
device with a very short, fine needle. The insulin pens were a significant advance in
convenience for diabetics who had previously had to carry bottles and syringes, and
sterilize these items before use. In addition, many diabetics who had problems with self
administering insulin using the bottle and syringe technique, for example children,
found that the pens were more straightforward to use.

Novolin continues to dominate the diabetes market in terms of global sales at present.
This is due to the uptake of its pen injection system and its strong presence in Japan,
where it commands a 80% share of the insulin market despite the termination of Novo
Nordisk’s joint marketing agreement with Yamanouchi in 1996.

In July 1999, Novo Nordisk introduced a new delivery system, Innovo, complementing
its existing range of administration devices. Innovo’s most unique feature is its in-built
memory. The insulin doser has an easy to read display that helps patients in keeping a
track of their dose intake, thereby aiding compliance and increasing patient confidence.

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This can explain the increased sales of its Penfill 3ml and Novolet 3ml catridges in
1999. In April 2000, Novo Nordisk expanded its range of NovoFine needles, shortly
after the diabetes pens and needles were made available on prescription in the UK. It
launched NovoFine (31G) 6mm needle with an aim to expand patient’s choice of
needles to suit their preferences. The thinner walls of the new Novofine needle gives it
an advantage of having a wider bore than standard needles, reducing resistance to the
flow of insulin. This means less force required when injecting. Additionally, being
shorter than the standard needles, it avoids the risk of accidental inramuscular injection.

The world diabetes care market is expected to continue to grow due to demographic
trends and increased incidence and prevalence of the disease. According to Novo
Nordisk, much of this growth is derived from developing nations where the company is
well established.

Novo Nordisk also hopes to capitalize on two major trends. Firstly, the number of
people with type II diabetes who require insulin is growing. Secondly, more and more
insulin users in the developed world are switching to multiple daily insulin injections in
order to obtain better blood sugar control. However, Datamonitor believes that Novolin
will face intense competition in the coming years, especially post 2001, when Novolin
looses its patent protection. Competition from Lilly’s Humulin and Humalog in the US
market is eroding the company’s overall share of the insulin market.

While Humulin recorded static sales in the $1,600m region over 1999–2000, Humalog
achieved a growth of 56% during 2000, to achieve sales of $350m. Also, there is
increasing emphasis, particularly in the US, on the disease management concept, where
Lilly may hold the advantage with its Humulin and Humalog package and delivery
devices. Additionally, Novo Nordisk’s own products NovoRapid and Novomix are
expected to cannibalize Novolin’s sales.

In addition, Novolin also faces increased competition from new and rapidly growing
classes of oral antidiabetics, such as the glitazones and the alpha glucosidase inhibitors.

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Given the above factors, Datamonitor believes Novolin’s sales will decline to $900m in
2005.

Table 4.42: Sales of Novolin, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,334 1,601 1,591 900

Source: Datamonitor

Mevalotin (pravastatin)

Mevalotin is an HMG-CoA reductase inhibitor, or statin, indicated for the treatment of

hyperlipidaemia. Statins represent a major advance in the treatment of hyperlipidaemia
and have been the primary contributing factor to the expansion of this sector.
Mevalotin, launched in October 1989, was one of the first statins to reach the market. It
has subsequently become Sankyo’s best selling drug, with FY2000 sales of $1,510m, of
which roughly 70% is derived from domestic Japanese sales. However, this represents a
slight decline on FY1999 sales of $1,725m. With patent expiry in 2002 in Japan and
increasing competitive pressures, Mevalotin’s sales have now peaked and are likely to
decline further. Pravastatin is also licensed out BMS, who market it as Pravachol in 66
countries, including the US and the major European countries. As stated previosuly,
Pravachol generated sales of $1,817m in 2000.

In February 1999, Sankyo announced that it had enrolled 5,000 patients in its
hyperlipidaemia Mega study in Japan. The study will analyse the primary preventative
effects of anti-hyperlipidaemia therapy on ischaemic heart disease. Sankyo plans to
conclude the study in March 2004 and hopes that the results will serve to help
differentiate Mevalotin from the competition and revive sales. However, Datamonitor
believes that this study is too late to help Mevalotin significantly. Acceptance of
pharmacological intervention for hyperlipidemia in Japan is growing among physicians,
and the launch of Lipitor will be able to take advantage of this growth.

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Sankyo currently dominates the Japanese hyperlipidemia market with its closest
competitor being Banyu’s Lipovas (simvastatin), in-licensed from Merck who market it
as Zocor. Lipovas has much lower sales than Mevalotin and is not expected to gain
much ground on Mevalotin due to a lack of differentiation between the two products.
Bayer’s Baycol has now been launched in Japan and is selling well due to having
efficacy at low doses. This is essential in the Japanese market because statin drugs are
only reimbursed if they are low dose formulations. However, Lipitor was launched in
Japan by Yamanouchi in May 2000 and is likely to compete more effectively than
Mevalotin, Lipovas and Baycol because it has very high efficacy at low doses.

On the basis of the points raised above, Datamonitor forecasts Mevalotin sales are to be
$880m in 2005.

Table 4.43: Sales of Mevalotin, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,626 1,725 1,510 880

Source: Datamonitor

Zithromax (azithromycin)

Launched in September 1991, Zithromax is a broad spectrum macrolide antibiotic that

belongs to the azolide class. The drug has a beneficial interaction with white blood cells
that concentrates the drug at the site of infection, thereby increasing its potency. This
allows the drug to provide highly effective therapy at lower than usual doses, and also
facilitates shorter courses of treatment.

The high potency of Zithromax, coupled with the drug’s good side effect profile
relative to competitors (such as Abbott’s Biaxin and Lilly’s Ceclor), continues to
sustain blockbuster sales, which amounted to $1,382m in 200. Pfizer claims Zithromax
is the most-prescribed brand-name oral antibiotic in the US.

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New indications and dosage forms have been, and will continue to be, a key source of
sales growth for Zithromax. A new suspension dosage form for treating children’s
middle ear and streptococcal throat infections was launched in the US in November
1995 and became the second-leading brand in this category. New uses approved in the
US in 1996 and 1997 include prevention of Mycobacterium avium complex, one of the
most common types of infection in AIDS patients, and treatment of gonorrhea and
lower respiratory tract infections in children. The product’s convenient once daily
dosing regime is a particular asset when treating children.

In December 1998, the FDA approved the Trovan/Zithromax Compliance Pac, a tablet
containing the generic ingredients of both products for the treatment of sexually
transmitted diseases. Zithromax has also been approved in a single one gram dose for
the treatment of chlamydia, a common sexually transmitted disease. Chlamydia can
cause some extremely unpleasant side effects if left untreated, such as pelvic
inflammatory disease, infertility and ectopic pregnancy (Pfizer estimates that the cost of
these complications to exceed $2bn each year). The disease is often badly diagnosed
and treated with multiple-dose regimes, making it difficult to control the condition.

The Zithromax ‘Z Pack’ contains six tablets in a blister pack for once daily treatment
for most approved infections. Treatment with Zithromax improves compliance, due to
the short duration of the course and the single daily dose, a considerable market
advantage for Pfizer’s drug. A patient information leaflet accompanies the pack and this
is expected to improve the utilization of the drug, in addition to providing further
product differentiation.

Pfizer’s handling of Zithromax exemplifies the approach which the company took to a
number of highly successful products it launched in the 1990s; they have been
aggressively and innovatively marketed, and approvals for supplemental indications
have been pursued wherever possible to drive sales growth.

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Despite its success to date, Zithromax faces tough competition in the antibacterial
market. Whilst it is likely to retain a considerable share of the antibiotics market, it
seems unlikely that Zithromax will be able to reach sales equivalent to those of
Augmentin, which posted sales of $1,845m in 2000.

GSK’s product has been available since 1981 and has established itself as an effective
treatment with a broad spectrum of antibacterial activity, making it widely accepted as a
first line therapy. Furthermore, the first patent on Augmentin expired in 1998 and, in
2002, its patent will expire in the US, leading to significant generic competition which
will provide physicians with a cheaper alternative to an efficacious product. This will
therefore reduce the available market for products such as Zithromax.

Sales of Zithromax levelled off at $1,382m in 2000. Beyond then, sales will gradually
decline, with Augmentin’s patent expiry in the US in 2002, followed by Zithromax’s
patent expiry in the US in 2005 likely to affect sales adversely.

Table 4.44: Sales of Zithromax, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,041 1,333 1,382 1,000

Source: Datamonitor

Intron A (interferon alpha-2b) and Rebetron (revarin)

Intron A (interferon alpha-2b) is an interferon that Schering-Plough has licensed from

Biogen for development and marketing in the US. It is already available in the US for
the treatment of hairy cell leukemia, its initial indication. It has also been launched in
the US for the treatment of hepatitis C and B. Schering-Plough’s sales of Intron A grew
rapidly post-launch, over two decades ago, as new indications were approved. The
product currently has 16 indications for viral infections, including the treatment of
hepatitis, and a wide variety of different types of cancer. The Committee for Proprietary

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Medicinal Products of the European Union authorized unified labeling that will
eventually allow Intron A to be marketed for nine indications in all 15 EU states.

Schering-Plough has continued to develop Intron A, undertaking trials for new

indications. In 1998, the company received marketing clearance by the FDA for its
product, Rebetron, indicated for chronic hepatitis C. Rebetron is a combination of
Intron A and Rebetol (rivarin) and has been a huge success in the US, capturing almost
80% of all interferon units as of December 1999. Rebetron has also been launched in
France, Germany, Italy, Spain and the UK.

Schering-Plough is hoping to further extend the Intron A product with the introduction
of PEG-Intron A, a long acting form of interferon alpha-2b for the treatment of chronic
hepatitis C infection and various cancers. PEG-Intron A has been filed in the US and
EU as a monotherapy for the treatment of hepatitis C.

Sales of Intron A, the monotherapy, may decline with the introduction of the longer
acting PEG-Intron A, while sales of Rebetorn should continue to increase, resulting in
the Intron franchise experiencing overall growth. Sales of the franchise amounted to
$1,360 in 2000, driven by Intron A and Rebetron, and are forecast to be in the region of
$2,500m in 2005, driven by Rebetron and Peg-Intron A.

Table 4.45: Sales of Intron A and Rebetron, 1998–2005

($m) 1998 1999 2000 2005

Sales 714 1,119 1,360 2,500

Source: Datamonitor

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Viagra (sildenafil)

Viagra is a vasodilator launched for the treatment of erectile dysfunction in 1998. It is

an orally active, selective inhibitor of type-V phosphodiesterase, the predominant
isoenzyme causing the inactivation of cyclic guanosine monophosphate (cGMP) in the
human corpus cavernosum. Researchers have learned that nitric oxide (NO) is the
principal neurotransmitter in the penis. NO is influenced by testosterone and androgens,
and penile erection is mediated by NO via cGMP. Sildenafil produces its pro-erectile
effect through increasing cGMP levels. Approval applications for Viagra were
submitted in the US and Europe in October 1997, and the product was granted FDA
approval in March 1998.

Erectile dysfunction is a serious disorder that is vastly undertreated. Until the launch of
Viagra, only a small percentage of sufferers with some degree of erectile dysfunction,
estimated by Pfizer to be 150 million men worldwide, sought treatment. Pfizer
estimates that some 20 million men in the US suffer from impotence, making this a
significant market.

Viagra’s main differentiating property is that it is the first treatment to be administered

orally. Pfizer’s drug would appear to be efficacious; a study showed that seven days of
treatment with Viagra at a dose of 25mg led to a marked increase in the number of
spontaneous or stimulated erections as compared with placebo in organic, psychogenic
and mixed erectile dysfunction. The product works only in response to sexual
stimulation and restores natural function.

Viagra reached the US market in March 1998 in a swirl of media attention. It became
one of the most successful product launches ever, surpassing Lipitor as the drug
recording the highest number of new prescriptions in its first week. However, there was
much concern regarding the reimbursement of the product, with its high cost causing
concern for healthcare providers globally.

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In May 1998, stories linking Viagra to a number of deaths were published, resulting in
Pfizer issuing a ‘Dear Doctor’ letter through the FDA website. Pfizer reiterated a point
made in a previous, routine Dear Doctor letter, the fact that when Viagra is
administered with organic nitrates it can result in large and sudden drops in blood
pressure. This is of particular importance in men who receive emergency nitrate
treatment as a result of an angina attack who are also taking Viagra.

Further safety issues have come to light since Viagra’s launch, including that excessive
use of Viagra may cause permanent vision loss in patients with retinal dysfunction. The
American College of Cardiology and the American Heart Association have both issued
recommendations for the management of patients taking Viagra who experience acute
coronary events and, in August 1998, the head of the US consumer advocacy group,
Public Citizen Health Research Group, Dr Sidney Wolfe, urged the FDA to incorporate
other concerns for patients taking Viagra on the labeling of the product. These concerns
included pregnant women, who may take the drug off label, who are risking damage to
their fetus.

The success of Viagra is expected to increase the number of reported cases of male
erectile dysfunction, since the subject has become less taboo and therefore people are
more likely to try to address the problem by visiting their doctor. This, in turn, is
expected to increase the market for the older injectable and transurethral treatments,
due to Viagra’s high cost and lack of reimbursement in some markets, combined with
the fact that some of the older therapies produce much faster results; the drugs can take
effect within 15 minutes, whilst Viagra needs to be taken one hour before intercourse.

Table 4.46: Sales of Viagra, 1998–2005

($m) 1998 1999 2000 2005

Sales 788 1,033 1,344 2,150

Source: Datamonitor

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In November 2000, Pfizer announced the results of three 12-month open-label, non-
comparative, flexible-dose Viagra (25-100mg) studies of men with erectile dysfunction
(ED) taking Viagra (sildenafil citrate) for 2-3 years. The data collected showed that
96% of them remain satisfied with the effect of treatment. The study of 2,618 men,
which is the longest post approval satisfaction study of Viagra reported to date,
reviewed data from three separate studies of patients from the US, Europe, Canada, and
Australia. The men in the study had ED of at least 6 month's duration and the average
time since first diagnosis was 4.9 years. Their average age was 56 years (ranging from
20 to 91 years). The study results also showed that Viagra was well tolerated with a low
incidence of discontinuations (2.1%), while a few patients (3.1%) had their dose
reduced or temporarily discontinued treatment due to adverse events. The most
common adverse events were headache, flushing and indigestion.

Effexor/Effexor XL (venlafaxine)

Effexor is a second generation SSRI antidepressant which is perceived to demonstrate

increased efficacy and an improved side effect profile over first generation products. It
was launched in 1995 and a once a day formulation, Effexor XR, was launched in 1997.

In March 1999, AHP announced that the FDA had approved Effexor XR for the short
term treatment of GAD. This was followed by a July 2000 announcement that the FDA
had also approved Effexor for the long term treatment of GAD. Effexor XR is the first
and only antidepressant proven effective in relieving GAD. GAD is one of the most
prevalent anxiety disorders, estimated to affect approximately 5% of people, nearly
two-thirds of whom are women. Symptoms of GAD include excessive anxiety and
worry about everyday routine life events, feeling restless and on edge, easily tired,
trouble concentrating, irritability, muscle tension and sleep disturbance. These
persistent symptoms last for at least six months and are difficult to control. As a result
of this additional indication, AHP saw a rapid growth of 71% over 1999 sales, to a
figure of $1,336m in 2000.

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Venlafaxine’s primary mechanism of action is increasing the levels of serotonin and
norepinephrine in the synaptic cleft through the inhibition of their uptake. The drug is
rapidly absorbed following oral administration and extensively metabolized in the liver.
The half-life of venlafaxine is four hours and that of its primary metabolite is 10 hours.
This gives venlafaxine an advantage over fluoxetine (Lilly’s Prozac) that has a longer
half life of three to seven days, because if treatment has to be discontinued, a gap of
only a week must be left before treatment with a monoamine oxidase inhibitor, an older
class of antidepressant, can begin. In contrast, with fluoxetine, the gap is five weeks.

In comparative studies, Effexor has shown consistent superiority over fluoxetine in the
treatment of depression and, at the higher doses of its therapeutic range, it shows
superior efficacy over both the tricyclic antidepressants (TCAs) and the SSRIs, with a
considerably higher proportion of patients responding to treatment. Effexor has a rapid
onset of action, four days in some patients, which is an absolute necessity in a disease
where suicide is a risk.

Effexor faces increasing competition from Akzo Nobel’s Remeron (mirtazapine), the
only other product in the global NaSSA (noradrenergic and specific serotonergic
antidepressant) market.

The approval of Effexor XR for the treatment of GAD, and its potential approval for
other CNS disorders, indicates the gap will close between the top four antidepressants
over the next three to four years. Datamonitor forecasts that sales of Effexor will reach
approximately $1,750m in 2005.

Table 4.47: Sales of Effexor, 1998–2005

($m) 1998 1999 2000 2005

Sales 529 781 1,336 1,750

Source: Datamonitor

187
Neurontin (gabapentin)

Gabapentin is a lipophilic molecule that crosses the blood-brain barrier. It is a structural

analogue of GABA (gamma amino butyric acid), indicated for the treatment of
epilepsy. However, its anticonvulsant activities appear to be independent of its GABA-
related properties and its exact mechanism of action remains to be determined. It
mediates its effects in a novel manner dissimilar to other anti-epileptic drugs (AEDs).

Gabapentin has a similar efficacy to carbamazepine (Novartis’ Tegretol). It does not,

however, exhibit a similar side effect profile. Adverse effects are mild and transient and
predominately include CNS disorders, but unlike the majority of other AEDs including
lamotrigine (GSK’s Lamictal), phenytoin (Pfizer’s Dilantin) and carbamazepine
(Tegretol), gabapentin does not induce hypersensitivity reactions. In pre-marketing
trials, 7% of patients withdrew due to the incidence of adverse side effects.

The majority of trials have shown gabapentin to be effective at controlling seizure

activity. In non-comparative trials, long term gabapentin treatment induced an
improvement in 70% of patients. A reduction in seizure frequency of more than 50%
was experienced by 25–50% of patients, 20–30% remained unchanged or worsened. An
open-label multicenter study showed that all types of partial seizures responded well to
gabapentin therapy. Particular improvements were noted in patients with secondarily
generalized seizures. These data have been confirmed in an open-label, long-term study
of gabapentin therapy. Efficacy was maintained for up to two years, 39–40% of patients
with partial seizures experienced a reduction in seizure frequency of more than 50%,
and 30% of patients with generalized seizures responded.

Neurontin was launched in 1993 in the UK and 1994 in the US as an adjunct to existing
epilepsy therapies. In its first full year on the market, Neurontin achieved sales of
$45m, a similar level to Lamictal, which was launched three years earlier. In the US,
Pfizer is promoting the drug directly to the consumer with full-page advertisements in
major newspapers. In 2000, Neurontin achieved sales of $1,334m, a substantial increase

188
of 46% on sales in the previous year. Sales of Neurontin are expected to be at a level of
$1,550m by 2005.

Table 4.48: Sales of Neurontin, 1998–2005

($m) 1998 1999 2000 2005

Sales 514 913 1,334 1,550

Source: Datamonitor

Neurontin has benefited from the problems encountered by Felbatol (felbamate), a rival
anti-epileptic compound launched in 1993 by Carter-Wallace. Felbatol was expected to
out-perform Neurontin as it had a broader indication, but following reports linking the
drug to aplastic anemia the FDA asked doctors to stop Felbatol therapy, causing its
sales to plummet.

Pfizer estimates that around 25% of the use of Neurontin is for indications other than
epilepsy. The product has recently been launched for use in neuropathic pain, bipolar
depression, migraine, psychosis, panic disorder and diabetic neuropathy.

Approval of Neurontin for these additional indications will continue to drive its sales.
Neurontin looks set to become one of the top-selling AEDs in the future due to its
vastly improved side effect profile. It has a distinct advantage over both Lamictal and
traditional AEDs like phenytoin and carbamazepine, as it does not induce
hypersensitivity reactions and is, therefore, well tolerated. However, it is not as
efficacious as Lamictal.

Flixotide/Flovent (fluticonase propionate)

Under the name of Flixotide/Flovent, GSK launched two formulations of the

corticosteroid antiasthma drug, fluticasone propionate, in 1993, for the maintenance
therapy of asthma patients above the age of 12 years. 1999 saw this drug become the

189
world’s leading asthma product, performing remarkably well and achieving sales of
$1,077m, an increase of 34% over 1998. Fluticasone propionate was already used in the
US as a dermatological drug (Cutivate) and as an antiallergy nasal spray (Flonase).

The main advantage of corticosteroids is that they reduce tissue inflammation and limit
the long-term damage caused to the lungs by asthma. The oral corticosteroids,
particularly prednisolone, are very effective in rescue therapy. The significant advance
in asthma therapy which inhaled corticosteroids represent is largely due to the
decreased likelihood of adverse systemic effects at high doses. A sizeable body of
opinion exists supporting the use of corticosteroids as standard first line asthma drugs,
to be used at practically all stages of the disease. However, serious side effects affecting
bone growth may result from prolonged treatment with high doses of anti-inflammatory
steroids, particularly in children.

GSK’s new formulations are a metered-dose inhaler (Flovent inhalation aerosol) and a
dry powder (Flovent Inhalation Rotadisks), which are intended to counteract the recent
success of AstraZeneca’s Pulmicort, marketed with the Turbuhaler device.

GSK’s two previous dry powder devices, the Rotohaler and the Diskhaler, did not offer
serious competition to the Turbuhaler. The Rotohaler does not offer the same
convenience of use for the patient. The mechanism uses capsules of drugs that have to
be ground into powder four times a day before the inhaler can be used. The delivery
mechanism of the Diskhaler has also had limited success, as it contains a similarly
inconvenient mechanism. GSK made a breakthrough with the introduction of a new
delivery device, the Accuhaler, which has considerable advantages over both previous
GSK designs and AstraZeneca’s Turbuhaler. However, GSK is not the only company to
introduce a rival delivery mechanism to challenge AstraZeneca’s ascendancy. Both
companies will face increasing competition from other major players who are working
on dry powder inhalers. These include Forest Laboratories, Schering-Plough and
Aventis.

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GSK announced in October 1999 that it had received approval to market the inhaled
corticosteroid, Flixotide (fluticasone propionate), for the treatment of COPD in
Germany. This is the first approval from a series of applications that were submitted by
GW to regulatory agencies in over 30 countries internationally. Datamonitor forecasts
that sales of Flixotide will reach $2,100m in 2005.

Table 4.49: Sales of Flixotide/Flovent, 1998–2005

($m) 1998 1999 2000 2005

Sales 805 1,079 1,332 2,100

Source: Datamonitor

Biaxin (clarithromycin)

Biaxin is a macrolide antibiotic and is Abbott’s best selling product. Biaxin is a direct
development from Abbott’s earlier commercially successful macrolide antibiotic,
erythromycin, although the Japanese company, Taisho, developed it. Abbott was
granted marketing rights to Biaxin for most of the world under the terms of an
agreement with Taisho.

Biaxin, with worldwide sales of $1,241m in 2000, is approved for a range of

indications:

‰ upper and lower respiratory tract infections;

‰ skin and skin structure infections;

‰ treatment and prevention of mycobacterium avium complex (MAC), an

opportunistic infection that is common in AIDS patients;

‰ eradication of the ulcer causing bacterium, Helicobacter pylori.

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Sales of the product grew rapidly post-launch, although they have now slowed
significantly. Although the drug is a leading treatment for respiratory tract infections in
the US market, it is the latter two indications above for which Abbott is developing
sales most actively. Approval of the drug for the prevention as well as the treatment of
MAC dramatically increased the potential for the product’s use amongst AIDS patients.
In the anti-ulcer market, Abbott is well positioned, as Biaxin was the first antibiotic to
be specifically indicated for the eradication of H. pylori.

In June 1997, TAP Holdings received FDA marketing clearance for Prevacid
(lansoprazole), a proton pump inhibitor, in combination with clarithromycin and
amoxicillin as triple therapy for the eradication of H. pylori in patients with active or
recurrent duodenal ulcers. These additional indications have not resulted in the boost to
sales the company expected, in part due to increasing competition in the anti-infective
market.

The macrolide class is dominated by competition between Biaxin and Pfizer’s

Zithromax (azithromycin). Sales of Zithromax surpassed sales of Biaxin in 1999 and
again in 2000. Hence Biaxin no longer leads the market.

Abbott launched an extended release tablet called Biaxin XL in 1998 in Europe, which
suspended the decline in sales because it allowed once-daily administration and
competition against Zithromax’s once-daily administration. The use of an extended
release tablet improved compliance in comparison to the previous twice daily dosing. In
addition, fewer treatment interruptions due to gastrointestinal events or abnormal taste
occurred in patients taking Biaxin XL tablets. Biaxin XL was launched in the US in
April 2000.

In October 2000, Abbott submitted a supplemental new drug application to the FDA
seeking approval of a new seven-day indication for Biaxin XL for the treatment of mild
to moderate community-acquired pneumonia (CAP). The submission was scheduled to
take place with the original submission for Biaxin XL in April 1999. The clinical

192
studies required for this submission began in December 1998 and were prematurely
discontinued in June 1999, after the use of the comparator quinolone, Trovan
(trovafloxacin mesylate), was restricted to certain patient populations due to safety
issues. Despite the launch of Biaxin XL in the US during 2000, sales in the domestic
market declined by 1% to $579m while international sales declined by 4% to $662m.

The principal threats to Biaxin’s position and Abbott’s sales are the launch of generics
with the loss of patent protection in 2005, and the spread of erythromycin cross-
resistance. Entrance of cheaper generics would either decrease the volume of sales or
drive down the price of Biaxin. Developing bacterial drug-resistance will encourage
physicians to switch prescriptions away from Biaxin towards new fluoroquinolones and
emerging new classes of drugs.

Datamonitor predicts sales of Biaxin to increase to $1,300m in 2001, $1,430m in 2004

and then decline as generic competition increases to $1,200m in 2005.

Table 4.50: Sales of Biaxin, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 1,254 1,275 1,241 1,300 1,430 1,200

Source: Datamonitor

Fosamax (alendronate sodium)

Fosamax, a bisphosphonate, was Merck’s breakthrough non-hormonal medicine for the

treatment of postmenopausal osteoporosis. Fosamax helps to improve bone density
without exposing patients to the side-effects associated with estrogen therapy. The drug
was discovered by Merck’s Instituto Gentili and was launched in 1995. In 2000, sales
of this alternative to hormone replacement therapy increased by 22.0% compared to
1999 to $1,275m. Fosamax’s US patent expires in 2003.

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Osteoporosis has a high incidence in the developed world and one in three women over
the age of 50 years will fracture a bone due to osteoporosis. It is also a serious condition
as the most common fracture is the hip fracture, which requires hospitalization and
often leads to disability and, sometimes, premature death. In a Vertebral Fracture Study,
Fosamax was shown to reduce the risk of hip and vertebral fractures by 50.0% and to
reduce the number of hospitalizations among postmenopausal women with osteoporosis
who had previous vertebral fractures by 20.0%. A follow-up study showed that
Fosamax can prevent bone loss and, in April 1997, the FDA approved Fosamax for
fracture prevention in post-menopausal women.

With only a fraction of osteoporosis patients receiving treatment from a prescribed

drug, the osteoporosis market is one with considerable room for growth. Fosamax is
now facing competition from a new class of drugs, oral selective estrogen receptor
modulators (SERMs). Lilly was the first to reach the market with Evista (raloxifene),
which was launched in 1998 for the prevention of osteoporosis. SERMs have a superior
clinical profile, offering a high level of efficacy with an impressive side effect profile
and a good level of patient convenience relative to both well established forms of
osteoporosis therapy (such as calcitonin treatment) and also the bisphosphonates,
including Fosamax.

Merck is working to expand its range of therapeutic indications along with its market
share. The recent FDA approval of Fosamax for use in men with osteoporosis will help
drive growth with an estimated two million men in the US suffering with this disorder.
In addition, Fosamax is in phase III development for periodontal disorders. Merck
submitted an application to the FDA for approval of a new once weekly formulation of
Fosamax in 1999, which was approved in October 2000. The once-weekly dose has
been shown to be as effective as the once daily dose in treating post-menopausal
osteoporosis and is the only oral medication to receive FDA approval for a once-weekly
dosage to treat such a disorder. A new patent for the once-weekly dose lasts until 2017.
Since Fosamax must be taken on an empty stomach and patients must remain upright
for one hour afterwards, Merck expects the once daily formulation to be very popular.

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The strong growth in sales of Fosamax is also largely attributable to the increasing
recognition of its efficacy as an adjunct therapy in the treatment of tumor-induced
hypercalcaemia or Paget’s disease of the bone. In 1999, the bisphosphonates were the
fastest growing class of adjunct therapies. Given that Fosamax is being increasingly
prescribed off-label for such indications, it is difficult to ascertain to what extent its
increasing use in cancer has contributed to its growth. Within the adjunct therapy
market, Fosamax faces stiff competition from Novartis’s Aredia (palmidronate), which
had sales of $664m in 2000. Both drugs drive growth in the adjunct therapy segment.
Fosamax has a clear advantage over Aredia in that it involves oral administration, either
once daily or once weekly, which is in contrast to Aredia, which requires a two-hour
infusion. The launch of Novartis’s Zometa (zoledronic acid) will serve to further
intensify competition in this field.

Datamonitor expects sales of Fosamax to increase to $1,580m in 2001, $2,400m in

2004 and $2,600m in 2005.

Table 4.51: Sales of Fosamax, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 775 1,045 1,275 1,580 2,400 2,600

Source: Datamonitor

Neupogen (filgrastim)

Neupogen is a colony stimulating factor that stimulates bone marrow cell

differentiation in white blood cells. As with Epogen, Neupogen is marketed worldwide
under a series of licensing agreements. Until the second quarter of 1998, Neupogen was
jointly marketed in the EU with Roche, while Amgen marketed it in the US. However,
Amgen has now regained the rights to market Neupogen within the EU. In Japan, it is
marketed by Kirin and Sankyo under the brand name Gran.

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Neupogen is used for a variety of indications in which the immune system is
compromised. In 1991, Neupogen was approved for use as an adjunct to chemotherapy.
Since then it has been approved for other indications including use in bone marrow
transplants, the treatment of severe chronic neutropenia and peripheral blood progenitor
cell transplantations. More recently, Neupogen was approved in the US for a fifth
indication, to reduce the time to neutrophil recovery and the duration of fever following
chemotherapy treatment in patients with acute myelogenous leukemia. Amgen is now
developing the product to treat bacterial infections, and in the third quarter of 2000, the
FDA approved ‘Neupogen SingleJect’, a pre-filled syringe containing a more
concentrated version of Neupogen.

Over the last few years, Neupogen’s sales have increased sharply, primarily due to the
rising demand within the cancer chemotherapy markets and the effect of higher unit
prices in the US. However, sales decreased by 2.6% in 2000 to $1,224m, partly due to
low stock holding at major wholesalers. Going forward, sales of Neupogen should
continue to grow in the curative treatment sector, for instance, in those patients who are
diagnosed early with cancer. These patients, who have a higher likelihood of survival
undergo intensive myelosuppressive chemotherapy and therefore depend upon
Neupogen treatment. However, decreasing sales in the non-curative market are
expected, since the treatment for these patients has been moving towards more
frequent, lower doses of chemotherapy. This is not as myelosuppressive and therefore
does not require as much Neupogen treatment.

The main competition for Neupogen will come from other granulocyte macrophage
colony stimulating factor (GM-CSF) products, such as Aventis’s Granocyte
(lenograstim) in the EU. Competition in the US is also intensifying as Immunex’s
Leukine (sargramostim) is being marketed at a discount price. However, none of these
products have achieved revenue anywhere approaching those of Neupogen, and are not
expected to significantly impact future sales. Datamonitor expects sales of Neupogen to
be $1,320m in 2001, $1,350m in 2004 and $1,150m in 2005.

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 Table 4.52: Sales of Neupogen, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 1,120 1,257 1,224 1,320 1,350 1,150

Source: Datamonitor

Combined sales of Neupogen, and its successor, SD-01 are expected to reach $1,700m
by 2004 and $2,200 by 2005.

Sandimmun/Neoral (cyclosporin)

Sandimmun dominates the market for immunosuppression in organ transplants and is

generally the drug of choice in transplantation surgery. Patients with
immunosuppressive diseases are likely to receive a cocktail of drugs. For example,
cyclosporin is usually combined with a glucocorticoid, a cytotoxic drug or an
antilymphocyte immunoglobulin. No single product is, as yet, a genuine substitute for
any other. Competition in the market is thus still limited. Total Sandimmun/Neoral
sales were $1.2bn in 2000, a growth of 2.1% over 1999. The US market was worth
about $500m in 1999 with the capsule formulation accounting for 95.5% and the liquid
oral accountable for 4.5%.

Neoral is a microemulsion form of cyclosporin, which is patent protected until 2010.

Dramatic cost savings associated with the use of Neoral due to the reduction in
hospitalization time have meant that the drug has been approved in 66 countries and has
enjoyed conversion rates of between 80–100% within 18 months of launch. As Neoral
allows more consistent absorption of cyclosporin, it does not demand such a strict
adherence to a controlled diet as Sandimmun. In 1997, Neoral gained approval for the
additional indication of severe rheumatoid arthritis in the US, as well as for the
treatment of severe, recalcitrant psoriasis, which increased market penetration and
should help sustain sales of the product.

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Sandimmun was launched in 1982 and remains Novartis’s best selling drug. The fact
that the drug has enjoyed good growth rates for so long can be attributed to two factors.
Firstly, growth has come from extended indications to treat auto-immune disorders
such as rheumatoid arthritis and psoriasis. Secondly, the product’s efficacy has enabled
the transplant market to expand, as there is less risk of organ rejection.
Sandimmun/Neoral have been the main beneficiaries of this expansion.

Although Sandimmun lost patent protection in the US in September 1995, there is little
immediate evidence of the affects of generic competition, despite the launch of
SangCya in 1998, a liquid cyclosporin marketed by SangStat, a Californian company
specializing in transplant products. In May 2000, Abbott and SangStat announced the
approval by the FDA to market Abbott's Gengraf capsules (cyclosporin capsules).
Gengraf is a new cyclosporin capsule that is bioequivalent to, and interchangeable with,
Neoral capsules (cyclosporin capsules) but priced lower than Neoral capsules. In
addition, Gengraf has been granted an AB rating by the FDA - designating that the
product is therapeutically equivalent to, or interchangeable with, the reference drug.

Roche’s CellCept (mycophenolate mofetil) is one of Sandimmun/Neoral’s competitors.

Launched in 1995, CellCept is an immunosuppressant with a novel mode of action that
helps to prevent the body’s natural rejection of transplanted kidneys. CellCept
generated sales of $372m in 1999 and an estimated $550m in 2000. Sandimmun/Neoral
has also been losing market share to Fujisawa’s Prograf (tacrolimus), which achieved
sales of $366m in 1999. Two other main competitors are GSK’s Imuran (azathioprine)
and Cilag/J&J’s Orthoclone OKT3 (muromonab-CD3).

Despite the increasing availability of generic cylcosporins, existing patients are

extremely reluctant to alternate therapy once stabilized and the FDA recommends that
patients only switch under the supervision of their doctor. Hence it is likely that the
market for generic cyclosporin will be restricted to new patients. Datamonitor forecasts
sales of $1,203m in 2001, $1,105m in 2004 and $980m in 2005.

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 Table 4.53: Sales of Sandimmun, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 1,217 1,190 1,215 1,203 1,105 980

Source: Datamonitor

Zestril (lisinopril)

Zestril is an angiotensin converting enzyme (ACE) inhibitor used for the treatment of
hypertension, angina and congestive heart failure (CHF). It is also commonly available
in conjunction with a diuretic (chlorthalidone) under the brand name, Zestoretic. The
active ingredient, lisinopril, has been licensed from Merck which also markets a
formulation of the drug under the brand name Prinivil. Zestril was launched in 1988 for
the treatment of hypertension. Lisinopril’s key strengths lie in its anti-hypertensive
efficacy, equivalent to that of other leading products, its once-daily dosing, now a
prerequisite for any leading drug, and its low incidence of major side effects. The most
significant side effect of ACE inhibitors is a dry cough, caused by the build up of
bradykinin.

In 1998, Zestril became the first ACE inhibitor to be indicated for use as a life saving
therapy in the time period 24 hours post myocardial infarction. Diabetes is a common
co-morbidity of hypertension and, in early 1998, Zestril was approved in the UK for the
treatment of renal and retinal complications in non-insulin dependent diabetics. Zestril
was also the first ACE inhibitor licensed for the daily treatment of CHF, all indications
of hypertension and acute myocardial infarction.

In 1999, Zestril recorded sales of $1,221m, up by 8.4% over 1998, making it

AstraZeneca’s second highest selling product. However, although Zestril is currently a
blockbuster product with continuing growth, there are a number of factors which may
limit Zestril’s long term growth and as a result the market potential of AstraZeneca’s
entire cardiovascular portfolio. The major threats to Zestril come from patent expiries,

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both on competing ACE inhibitors, namely Vasotec (enalapril), competing drugs from
other classes, such as the leading once-daily calcium channel blockers (CCBs), and its
own patent expiry, in the US in December 2001. AstraZeneca is optimistic that the
FDA will grant a six-month patent extension in the US if data from ongoing pediatric
trials are accepted.

Stiff competition will also come from generic versions of enalapril when the US patent
expires in August 2000. Since enalapril is the gold standard ACE inhibitor, cheap
generic versions will be a major competitor to all other drugs in the class. Further
pressure will come from cheap generic versions of once daily CCBs, currently losing
patent protection in various major markets. Whilst the effects of these will be less
strong on other drug classes, they will still have an effect. Patents for enalapril have
already expired in several countries, including Germany, Japan and Finland in late
1999. However, protection for enalapril in major markets such as the UK, France and
Italy, has been extended through SPCs with expiry dates between October 2002 in the
UK and August 2009 in Italy.

A strategy pursued by AstraZeneca to extend the lifecycle of Zestril is to gain approval

for additional indications. One of these is high dose usage in CHF. Data reported in
1999 from the Assessment of Treatment with Lisinopril and Survival (ATLAS) trial in
3,164 patients confirmed the benefits of the drug and also highlighted the importance of
high doses of ACE inhibitors in heart failure, rather than the low doses often utilized.
The 3,164 heart failure patients, with systolic ejection fractions of 30% or less, were
split into two groups, the first being a high dose group, where patients were given 32.5–
35mg once a day and a low dose group given 2.5–5mg once a day. Using the primary
endpoint of mortality, it was found that those patients receiving the higher doses
received an 8% risk reduction in total mortality, and a 10% risk reduction in mortality
due to cardiovascular disease. Adverse reactions, including hypotension, dizziness and
deterioration of renal function, were present in the high dose group, although they were
all mild. ACE inhibitors are generally underused in the treatment of CHF and doses are
often suboptimal where prescribed at all, since doctors tend to use the lower anti-

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hypertensive dosage ranges. Based on the results of the ATLAS trial, AstraZeneca has
gained regulatory approval for label amendments in several major markets, which may
serve to minimize damage to sales from generic competition in the US. The additional
indication of CHF could therefore generate new growth for lisinopril.

Sales of ACE inhibitors more broadly are likely to suffer due to the introduction of
AIIAs the first of which, Merck’s Cozaar (losartan), was launched in April 1995. AIIAs
have similar efficacy to ACE inhibitors, but a better side effect profile; in particular
they do not cause the dry cough experienced by many ACE inhibitor patients.

Sales of Zestril were $1,188m in 2000, but are likely to decline sharply over the coming
yearsa, to $740m by 2005. The decrease will largely result from the loss of patent
protection in 2001 and the subsequent competition from generic versions of Zestril, but
also competition from generic enalapril and gold standard drugs from other classes.

Table 4.54: Sales of Zestril, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,126 1,221 1,188 740

Source: Datamonitor

Humulin (insulin)

There are six main classes of drug available for the treatment of diabetes - the insulins,
the biguanides, the sulphonylureas, the glitazones, the alpha glucosidase inhibitors and
the prandial glucose regulators (PGRs). The number one product is the biguanide
Glucophage (metformin) which is marketed in the EU by Merck KGaA and in the US
by BMS (with sales of $1.7bn in 2000). The second and third highest selling drugs are
insulin products, Novolin (insulin) and Humulin (insulin) marketed by Novo Nordisk
and Lilly respectively. Together the sales of these products account for approximately
one third of the total diabetes market. Total sales of Humulin reached $1,115m in 2000,
an increase of 4.7% from $1,065m in 1999.

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Humulin is a recombinant insulin originally developed by Genentech. It was launched
in 1982 and remains Lilly’s leading insulin brand range. The brand includes several
formulations of recombinant human insulin (with different durations of action and
onset times) available in different delivery formats. Products within the range include:
Humulin L, Humulin R, Humulin U, Humulin 50/50 and Humulin 70/30. Humulin is
available within pen delivery systems.

Humulin has been losing market share due to the success of Lilly’s Humalog that is
cannibalizing Humulin sales. In addition to this, future revenue from Humulin is likely
to decrease due to patent expiry this year. Datamonitor forecasts sales of $1,240m in
2001, falling to $1,050m in 2004 and $960m in 2005.

Table 4.55: Sales of Humulin, 1998–2005

($m) 1998 1999 2000 2001 2004 2005

Sales 959 1,065 1,115 1,240 1,050 960

Source: Datamonitor

Allegra/Telfast (fexofenadine)

Allegra is a highly promising treatment for seasonal allergic rhinitis. Fexofenadine is

the active metabolite of terfenadine, the active ingredient in HMR’s anti-histamine,
Seldane. It is available in two formulations, the twice-daily Allegra, or the once-daily
Telfast. It is non-sedative and does not have the cardiac or liver problems associated
with Seldane. HMR first developed Allegra as a replacement for Seldane. Fexofenadine
was therefore developed very quickly (three years) as a safer alternative product to treat
a wider range of patients. It was first launched in the US in August 1996, and then in
the UK in February 1997.

Seldane was formerly HMR’s (Aventis) most successful anti-histamine. However, in

1997, following the discovery of problematic interactions with other drugs, leading to
potentially dangerous arrhythmias, the FDA began a process to remove the NDA from

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Seldane. Following approval of Allegra, Aventis (former HMR) voluntarily withdrew
Seldane in most markets, but will continue to oppose its removal from other markets
until Allegra is approved. Allegra has been aggressively marketed, including pricing at
18% lower than the market leader, Schering-Plough′s Claritin, and Aventis appears to
have been successful in encouraging patients to switch from Seldane to Allegra rather
than one of the alternative drugs.

In 2000, Allegra’s sales rose by 57%, to $1,075m, putting it in the blockbuster bracket
for the first time. Allegra should benefit from recent publications that tend to
differentiate it positively from Claritine and Zyrtec. A once –a−day formulation has just
been registered in the US, as well as pediatric indications. Since July 1999, Allegra has
been being in registration in Japan, which is the second largest anti-allergy market
globally. Allegra’s launch there could take place in 2002. Datamonitor forecasts that
Allegra will continue to enjoy sales growth, reaching a value of $1,450m in 2005.

Table 4.56: Sales of Allegra, 1998–2005

($m) 1998 1999 2000 2005

Sales 409 684 1,075 1,450

Source: Datamonitor

Prinivil/Prinizide (lisinopril/lisinopril + hydrochlorothiazide)

Prinivil is an ACE inhibitor indicated for the treatment of hypertension, heart failure
and myocardial infarction. Prinizide is a combination of Prinivil and a diuretic,
hydrochlorothiazide. Combined sales of the two products generated $1,075m in 2000.

Lisinopril was developed by Merck, which out-licensed the product to the former
Zeneca for co-marketing in the US. Merck’s Prinivil now faces competition in the US
from AstraZeneca, which markets lisinopril as Zestril. Both companies have invested
significant amounts of money in advertising and promoting their products, but the

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competition between the two has eroded prices, affecting the revenues generated both
by Prinivil and the remainder of Merck’s hypertension portfolio.

Prinivil is protected from direct generic competition until 2001 and AstraZeneca and
Merck are also hoping to obtain a six-month extension of US marketing exclusivity for
lisinopril, by performing pediatric studies with the product. This would extend US
market protection until the end of June 2002. The studies are expected to take two
years.

Sales in 2000 of $1,075 were up 32% on 1999 levels. However, given the drug’s
imminent patent expiry, by 2005, sales are likely to have fallen to about $500m.

Table 4.57: Sales of Prinivil, 1998–2005

($m) 1998 1999 2000 2005

Sales 690 815 1,075 500

Source: Datamonitor

Imigran/Imitrex (sumatriptan)

GSK’s major migraine treatment, Imigran, known as Imitrex in the US, experienced
rapid growth in the years post-launch in the early 1990s in a number of countries.
Imigran’s main advantage over older migraine treatments is that it can be successfully
administered at any time during an attack. Newer migraine treatments such as Imigran
had significant barriers to overcome, but access to the potentially large market was the
key goal. Some migraine sufferers abandon use of older migraine drugs because of their
inefficiency and only a small proportion of potential users of the newer drugs seeks
medical advice.

During 2000, Imigran’s sales were static compared to 1999, reaching $1,067m. This
may be explained by the introduction of Naramig/Amerge, another medicine by GSK
for the treatment of migraine but a more potent receptor antagonist than Imigran. Due

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to the cannabilization of Imigran sales by Naramig, Datamonitor forecasts that sales of
Imigran will decline to $790m in 2005.

Table 4.58: Sales of Imigran, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,129 1,056 1,067 790

Source: Datamonitor

Adalat (nifedipine)

Adalat, indicated for the treatment of hypertension, was approved in 1975, and rapidly
attained blockbuster status, with 1983 sales of over $400m. Bayer has gained maximum
profitability from Adalat, sustaining sales growth through various means despite
significant generic competition.

Bayer’s marketing strategy involved taking responsibility for marketing throughout

Europe, whilst licensing out Adalat in the US to Pfizer – a decision based upon Bayer’s
limited experience in the US pharmaceutical marketplace. In 1993, Bayer made a
departure from this arrangement, through the US launch of an independent Adalat
product, competing against Pfizer’s Procardia at that time. The break from a non–
competitive marketing arrangement arose because of a need to extend Adalat’s lifespan
in the face of strong generic competition.

Bayer’s generic defence strategy for Adalat was demonstrated with the release of novel
products that out–competed generic equivalents on the grounds of drug delivery and
ease of treatment. Bayer’s newer Adalat products: Adalat OROS and Adalat Coat Core
(CC) have both succeeded in arresting the decline of Adalat’s sales since patent expiry.

Adalat OROS, which is based on technology licensed from Alza, is an orally

administered sustained release product. Alza’s OROS technology is one of the most
common oral sustained-release systems on the market. It can deliver one or more drugs

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simultaneously or at different rates, depending on the initial configuration of the
system. The release rate is constant, irrespective of the patient’s eating habits. However,
if taken with a meal the OROS system will tend to release more of its contents in the
upper GI tract.

In the case of Adalat OROS, Pfizer co-licensed the technology from Alza for 10% of
product sales, in order to ensure that its licensed branded product would continue to
compete favorably with generic competition.

The high degree of patient loyalty to the Adalat brand is a major factor in the continued
good performance of the product in the competitive calcium antagonist market,
characterised increasingly by generic competition. Combined nifedipine sales are worth
almost $2bn annually, making the generic drug the most significant player in the global
market.

For Bayer, Adalat has long been a product of great importance, despite slowly declining
sales since 1992. Although Bayer’s failure to develop a follow–up product represents a
lost opportunity to regain sales in Adalat, Bayer’s continuing strategy of introducing
new Adalat based products has been successful. Currently, the company is continuing
this strategy through the development of the GTIS system that improves the efficacy of
Adalat CC. The success of this product will depend on its efficacy as compared with
Adalat CC based generic equivalents, such as those marketed by Elan and Biovail. The
market penetration of generic Adalat CC will serve to reduce sales of Adalat at a higher
rate than so far experienced.

Table 4.59: Sales of Adalat, 1998–2005

($m) 1998 1999 2000 2005

Sales 883 958 1,065 650

Source: Datamonitor

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Diflucan (fluconazole)

Diflucan is an antifungal agent indicated for use in a wide range of fungal infections,
including opportunistic infections affecting AIDS and immunosuppressed cancer
patients. In 2000, Diflucan had sales of $1,014m, little different to the £1,002 reported
in 1999.

Diflucan is considerably more potent than the majority of currently available

antifungals, is active when taken orally and has an excellent side effect profile. These
characteristics differentiate Pfizer’s drug from competing antifungal therapies, making
it an extremely valuable product. Fluconazole is also at an advantage over other
products because of its availability in a variety of formulations, including oral tablet,
oral suspension and intravenous infusion. Practitioners in hospitals generally favor
products with a variety of delivery methods because they can address the needs of a
variety of patients.

The high cost of fluconazole is offset by the fact that it needs be taken only once a day
due to its high bioavailability. Ketaconazole, another azole used in hospital treatments,
generally needs to be taken twice daily.

The most common side effects of fluconazole occur in the gastrointestinal tract. The
most frequent complaints are abdominal pain, nausea (accompanied by vomiting),
diarrhea and flatulence. In addition, skin rashes, headaches and elevated liver function
enzymes have been seen. However, the incidence of these side effects is relatively low.

The high efficacy of fluconazole against various candidal infections has been another
important factor in its success to date. HIV infected patients, who are particularly likely
to contract a candidal infection, have, in the past, commonly been treated with
fluconazole. However, the success of protease inhibitors in the treatment of AIDS
patients, resulting in a significant decline in the use of Diflucan for these patients, could
have a negative impact on Diflucan’s sales performance.

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In 1994, Diflucan received FDA approval for the additional indication of vaginal
candidiasis, making it the first orally administered product to be approved for the
treatment of these infections. Pfizer estimates that some 75% of women in the US will
suffer from a yeast infection, and many will have recurrent infections. The convenience
which Diflucan’s oral formulation offers to these patients, which enhances compliance,
has helped Pfizer’s product to become the drug of choice for this indication.

Additional indications are always an effective way of extending a product’s life without
incurring further expensive trial expenses, and Pfizer has managed to do this
successfully for Diflucan. This should serve to sustain sales and lessen the impact of
any sales lost to protease inhibitors for the treatment of HIV patients. Furthermore,
Diflucan has been granted over-the-counter status in the UK, where it is marketed under
the brand name, Diflucan One. This will generate revenues for Pfizer’s Consumer
Health Care division, and boost the overall brand imaging of the product.

Pfizer’s main competitor in the antifungals market is J&J. There is, however, an
important difference between Pfizer’s Diflucan and J&J’s Sporanox (itraconazole).
Whereas fluconazole does not bind strongly to proteins, itraconazole binds to proteins
very strongly. This affects the distribution of the two drugs in the body, and makes
Diflucan applicable to a wider range of infections. Nevertheless, the two products
compete directly in a number of indications, notably in the treatment of vulvovaginal
infections.

Another leading product in the antifungal market is Novartis’ Limas (terbinafine), an

allylamine derivative, which is used in the treatment of superficial infections.
Terbinafine inhibits a key enzyme in fungi called squalene epoxidase resulting in fungal
cell death. Though fungicidal against most dermatophyte species, terbinafine is only
fungistatic against candida. It has been found to be less effective in treating systemic
infections, and therefore is less likely to be used in hospital treatments. However, it has
been found to be highly concentrated in keratinous tissue, which includes the skin and
nails, which explains terbinafine’s efficacy in treating superficial infections. Due to the

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nature of Lamisil’s spectrum of activity, it does not compete directly with Pfizer’s
Diflucan and therefore does not represent a significant threat to its sales.

Fluconazole is considered to be safer than other oral drugs. It has a wider spectrum of
use, and profits from the marketing investment placed in it by Pfizer, as Diflucan. In
Germany and the US, however, use of fluconazole is beginning to decline as
fluconazole resistant strains become more common. Second line treatment is becoming
more of a necessity and, as Diflucan is considerably more expensive than the
alternatives, physicians are less willing to use it as a first line treatment. Therefore,
Datamonitor expects Diflucan’s sales to decrease after 2000, to $300m in 2005.

Table 4.60: Sales of Diflucan, 1998–2005

($m) 1998 1999 2000 2005

Sales 916 1,002 1,014 300

Source: Datamonitor

Rocephin (ceftriaxone)

Rocephin is indicated to treat infections due to sensitive gram-positive and gram-

negative bacteria, including lower respiratory tract infections, skin and skin structure
infections, urinary tract infections, uncomplicated gonorrhea and acute otitis media.
Rocephin is also approved for use as a surgical prophylaxis agent. The wide use of the
drug has the drawback of increasing the chances of resistant strains of bacteria
evolving. However, since the drug is only used for short time spans the chances of this
are relatively low. One of the key features of the product is that it has a long life in
plasma and does not, therefore, need to be injected more than once daily. Its use has
been increasing in hospitals, especially in the US where it has been recommended by
the US Center for Disease Control and Prevention for use in acute otitis media sufferers
not responding to treatment with amoxicillin after three days.

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Rocephin is Roche’s biggest selling product. In 2000, its sales reached $1,013m,
showing a slight decline on 1999 levels.

Rocephin is a third generation broad-spectrum cephalosporin giving it a wider range of

applications and spectrum of activity than first and second-generation cephalosporins.

Rocephin faces competition from a number of quinolones currently on the market,

including Bayer’s Cipro and generic versions of ceftriaxoneas. Furthermore, increased
pressure to reduce the number of prescriptions of antibiotics, the emergence of strains
of bacteria resistant to treatment with Rocephin and the product’s loss of patent in 2000
will increase competition in the market and limit long term growth. Unlike patent losses
in developing therapeutic areas with new and innovative products in the pipeline,
Datamonitor predicts that the sales of Rocephin will experience a slow decline to sales
of $700m in 2005.

Roche has helped protect Rocephin against patent loss by launching One-Shot
Rocephin for otitis media in the US. This will be followed by the launch of a once-daily
broad spectrum, injectable/oral quinolone antibiotic and branded direct-to-consumer
promotion in the US. Therefore, Rocephin will remain a leading drug in the
cephalosporin class, challenged only by the continued growth of GSK’s Zinnat which is
patent protected until 2003.

Table 4.61: Sales of Rocephin, 1998–2005

($m) 1998 1999 2000 2005

Sales 1,083 1,170 1,013 800e

Source: Datamonitor

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211
Chapter 5 Blockbusters of the future

Key findings

This chapter begins by investigating the types of unmet need that provide the
opportunity for a drug to achieve blockbuster sales, both by looking at the nature of
unmet needs themselves and by focusing on the unmet needs not previously addressed
by blockbuster drugs. The chapter focuses on the drugs identified as having blockbuster
potential. Finally, special considerations pertaining to blockbuster lifestyle drugs and
the future drivers and resistors of blockbuster sales are analysed. The major finding in
Chapter 5 include:

‰ there is insufficient remaining unmet need in the treatment of bacterial infections to

provide significant opportunity for new blockbusters before 2005;

‰ the launch of Lipitor has pushed the anti-hyperlipidaemia market further towards
saturation, removing the opportunity for future blockbuster statins;

‰ Lipitor is forecast to become the highest selling drug ever, with annual sales of
$7,500m in 2005;

‰ two new arthritis treatments launched in 1998, Celebrex and Vioxx, have both
rapidly risen to blockbuster status, with 2000 sales of $2,500m and $2,300m,
respectively;

‰ the treatment of asthma, which currently include a single blockbuster drug, is

expected to provide the opportunity for other drugs to exceed $1bn in annual sales;

‰ despite competition from generic forms of Prozac after its patent expiry in 2001, the
depression therapy area is likely to encompass new blockbusters by 2005;

‰ in addition to Viagra, Xenical is another lifestyle drugs forecast to generate

blockbuster sales;

212
‰ although there are likely to be new blockbusters before 2005, there will be fewer
than have emerged between 1996 and 2000, due to increasingly unfavourable
market resistors.

Unmet need: opportunities for future blockbusters

Primary research shows that a blockbuster cannot be built only on the basis of effective
marketing, but that high selling drugs also constitute significant developments in
pharmacotherapy. For a new product to become a blockbuster, therefore, there must be
a sufficient degree of unmet need in that product’s therapy area. Unmet need can be
broken down into three areas:

‰ patient population;

‰ purchaser/payer unmet need;

‰ therapeutic unmet need.

Patient population

A disease area with a growing patient population represents the best opportunity for
new blockbuster drugs for three reasons:

‰ growth of value of a therapeutic market increases the total sales potential;

‰ there is less need to cannibalise sales of other drugs;

‰ becoming a physician’s first choice treatment for a new patient is easier than
persuading physicians to change patients’ prescriptions.

However, a patient population has to be sufficiently large in the first place to provide
the opportunity for a drug to become a blockbuster. The exception to this would be a
severe disease with a small population that was sufficiently under served for a new drug
to be able to command a very high price and not suffer from any competition. This does
not apply, however, to orphan diseases and drugs.

213
A growing patient population presents the opportunity for a new drug to be prescribed
to new patients when they first present to their physicians. Experience with
interviewing physicians indicates that they are far more likely to prescribe a new drug
to a new patient than to a patient who is already on a course of pharmaceutical
treatment. This is particularly true of diseases such as hyperlipidaemia, where the
condition is not immediately apparent and therefore the effectiveness of a patient’s
therapy is also often not obvious. For the same reason, conditions that are chronic,
although potentially slowing new drug uptake since most patients are already being
treated, provide the opportunity to drive blockbuster sales once market share has been
captured.

An untreated population offers considerable opportunities for new blockbusters, largely

because there is little or no competition for other therapies. In addition, an untreated
population does not have to be as large as a treated population in order to offer
blockbuster opportunities because the first pharmacotherapy for the condition can be
sold at a very high price. The danger in basing sales on a small untreated patient
population is that competition is likely to increase significantly as soon as a competing
drug is launched. The launch of a new product with some benefits over the previous
one could lead to a rapid shift in treatment practices.

Payer/purchaser unmet need

Payer/purchaser unmet need that can be addressed by a new drug is based on the
following requirements:

‰ affordable drug costs;

‰ cost-effective drugs;

‰ patient compliance.

214
Cost and cost-effectiveness

The aggressive pricing strategy which is required in order to gain share of a reasonably
saturated market is a viable option for a company marketing a potential blockbuster
with only a marginally improved clinical profile to previous blockbuster therapies. This
will be most effective in the US, where HMOs and MCOs are limiting the drugs on
their reimbursement formularies to reduce costs, and will include a cheaper drug if
possible. Filling unmet need in terms of cost-effectiveness is currently more difficult.
Johnson & Johnson’s attempt to influence HMOs’ and MCOs’ reimbursement choices
with pharmacoeconomic data showed most US healthcare payers to be unresponsive to
this approach (see chapter 3 for more details on the application of pharmacoeconomics
to promote the use of blockbusters). However, pharmacoeconomic requirements have
been introduced in the UK, The Netherlands and Finland, in addition to Canada and
Australia. In these countries the governments are usually the healthcare provider and
therefore are beginning to use pharmacoeconomics as a criterion for the use of a drug.
For example, the UK’s National Institute for Clinical Excellence (NICE) recommended
that Glaxo Wellcome’s influenza treatment, Relenza (zanamivir), should not be
available through the NHS.

It is believed that the influence of pharmacoeconomics will increase . However, 60% of

blockbuster sales are derived from the US where the influence of pharmacoeconomics
is expected to remain minimal for the next five years. It is, therefore, unlikely that a
drug will be able to achieve blockbuster sales through filling unmet pharmacoeconomic
need in the near future.

Patient compliance

Patient compliance is an important issue for healthcare payers and providers in all
disease areas. The seriousness of patient compliance is illustrated by the following
facts:

‰ FDA and National Pharmaceutical Council studies have revealed that between 30%
and 50% of patients taking medication do not follow instructions;

215
‰ non-compliance in the US may be responsible for as much as 10% of all hospital
admissions and expenditure of $100bn per year for services such as increased
additional physician visits, emergency room treatment, hospital and nursing home
admissions, lost productivity, and premature deaths.

Examples of aspects of drug therapy that affect patient compliance can be anything
from the effects of the drug to the taste of tablets. Serious factors affecting compliance
include:

‰ good side effect profile;

‰ convenience of dosing frequency;

‰ convenience of drug delivery.

Patient compliance is dependent upon different criteria in different therapy areas. For
example, ease of administration in cancer therapy has far less effect upon compliance
than the side effects associated with many of the drugs. In contrast, hypertensive
patients are more likely to cease medication if therapy is at all awkward, since the
beneficial effects of therapy are not immediately apparent. Chronic diseases where the
benefits of pharmacotherapy are not immediately apparent to the patient, such as
hypertension, hyperlipidaemia and diabetes, have notoriously bad patient compliance
rates.

Therapeutic unmet need

Therapeutic unmet need is the basis on which many of the current blockbusters have
achieved their penetration of high value therapeutic markets to accomplish sales of over
$1bn annually. Although not directly quantifiable, therapeutic unmet need can be
broken down into the failure of current treatments to satisfy the following requirements:

‰ efficacy;

‰ low resistance profile;

216
‰ ease of administration;

‰ good side effect profile.

Efficacy

Unmet need in terms of efficacy in a sufficiently large therapeutic area is the greatest
opportunity for the development of a blockbuster drug. Improvements in efficacy over
previous treatments should lead to higher sales if a new drug has a reasonable side
effect profile and route of administration, and is marketed effectively. However, the
improvement in terms of efficacy must be sufficient to induce physicians to change
their prescribing habits, or must be supported with considerable and effective marketing
and branding in order to capture market share of well established treatments. Lipitor is
an example of a drug that has achieved blockbuster sales through improvements in
efficacy.

Low resistance profile

Closely linked to unmet need in terms of efficacy, the lack of a therapy that will
continue to be efficacious over a prolonged period of time or through frequent use is a
serious concern in some therapy areas. Low resistance profile is especially important
for new products entering the anti-infectives market, where bacterial resistance to many
traditional therapies has built up significantly. Augmentin is an example of an anti-
infective than has achieved blockbuster sales at least in part due to its low resistance
profile.

Ease of administration

Ease of administration is linked to patient compliance, as explained above. However, a

drug’s relative ease of administration can also affect the physician, clinic or hospital
administering that drug. For example, drugs that are only available as an injection, such
as Roche’s Rocephin, are often not used outside hospitals for that reason. Ease of
administration is based on:

‰ dosage regimen;

217
‰ drug delivery system.

Good side effect profile

The side effect profile of a drug affects patient compliance but can also determine
whether the benefits of treatment with a drug are worth the negative impacts, such as
renal or liver damage. In therapy areas where current therapies have severe side effects,
a good side effect profile can drive blockbuster sales (e.g. Prozac).

Unmet need addressed by current blockbusters

The following figure shows the areas of former unmet need that were addressed by
drugs that have subsequently achieved blockbuster sales. As the figure shows, most
blockbusters have been so successful in terms of sales by treating a large population
and demonstrating significant improvements in efficacy over previous treatments for
the same condition. The fact that blockbuster sales are driven by the size of a patient
population is the main reason that 11 out of the 43 blockbusters in 2000 were for the
treatment of cardiovascular disease. Ten of this group are, more specifically, indicated
either for the treatment of hypertension or hyperlipidaemia, both of which are chronic
and have very large patient populations.

The following figure also suggests the anti-hypertensive blockbusters addressed

untreated populations. This is because many patients do not respond to treatment with a
number of anti-hypertensive therapies, therefore presenting opportunities for new drugs.
Datamonitor believes that this opportunity still remains, although the number of
patients that are not responding to current therapies will continue to decrease as more
anti-hypertensives become available.

Roughly 75% of the drugs that had blockbuster status in 2000 are considered to have
demonstrated improvements in efficacy over the other treatments available at the time
of their launch. Those that did not succeed on the basis of efficacy are differentiated in
different ways. For example, while Cipro’s efficacy is comparable to other
antibacterials, it reached blockbuster sales through treating a wide range of indications

218
(and, therefore, a large patient population) and through being available in both oral and
intravenous formulations. Cipro’s dual formulations mean that it addresses an
administration unmet need, being suitable for use in both community and hospital
environments. Another antibacterial blockbuster, Roche’s Rocephin, also addressed
administration unmet need rather than efficacy unmet need. It is the only once daily
intravenous broad-spectrum antibiotic, and therefore is appropriate for patients for
whom there is no adequate alternative.

Similarly, the main unmet need addressed by Novo Nordisk’s Novolin is not efficacy,
since its ingredient, insulin, is naturally produced in the body and is also manufactured
by a number of pharmaceutical companies, including Lilly. However, the Novolin
family of insulin products includes an increasing number of different formulations to
ease patient administration, thereby increasing patient compliance.

In the treatment of depression, neither Prozac, Seroxat nor Zoloft were significantly
more efficacious than previous depression treatments when they were launched.
However, each showed improvements in side effect profile for some patients over
previous therapies, which induced higher levels of patient compliance.

Augmentin is the only drug to have attained blockbuster sales through addressing a
resistance unmet need. This is because the resistance profile of drugs is a particular
problem for anti-infective products, due to the development of drug resistant bacteria.
Although Augmentin has addressed this unmet need, it is expected that bacterial
resistance to Augmentin will eventually increase, re-establishing the unmet need and
providing the opportunities for a new blockbuster antibacterial agent.

Within the hyperlipidaemia market, Lipitor has managed to capture a large share of the
market largely on the basis of improved efficacy over other statins that previously
gained high sales through demonstrating improvements in efficacy. However, unmet
need that has been addressed by a blockbuster is likely to therefore be considerably
reduced. The exceptions to this are discussed below.

219
Blockbusters have addressed all therapeutic and patient population unmet needs in the
treatment of bacterial infections. It is believed that the resistance profile of the current
drugs will eventually become a consideration upon which new products will be able to
compete and potentially gain blockbuster sales. However, this is unlikely to happen
until widespread bacterial resistance to Augmentin develops. While no previous
blockbusters have addressed affordability, cost-effectiveness and patient compliance,
Datamonitor does not believe these constitute sufficient unmet need in the
antibacterials market, and therefore do not represent opportunities for new
blockbusters.

Previous and current cancer blockbusters have addressed large and growing
populations, patient compliance, and efficacy and side effect unmet needs. However,
due to the high level of mortality in this disease area, it is suggested that all types of
therapeutic unmet need still remain in cancer, particularly in terms of efficacy and side
effects. Therefore, there is scope for new blockbusters in the treatment of cancer.

Depression blockbusters have not addressed efficacy unmet need. This is because they
have not represented significant improvements in efficacy when compared to previous
treatments, which had reasonably high efficacy levels. However, vital improvements in
side effects have encouraged increased use and patient compliance. Therefore, there is
still relatively little efficacy unmet need in the treatment of depression.

The diabetes blockbuster, Novolin, has also not addressed an efficacy unmet need. This
is because generic versions of Novolin’s active ingredient, insulin, are available.
However, there is still unmet need in the drug treatment of non-insulin dependent
diabetes, both in terms of efficacy and side effects, as discussed further in this section.

220
Unmet need: opportunities and forecast blockbuster
disease areas

The following diseases can be identified as providing opportunities for future

blockbusters:

‰ arthritis;

‰ asthma;

‰ cancer;

‰ depression;

‰ diabetes;

‰ hyperlipidaemia;

‰ hypertension;

‰ HIV;

‰ other diseases (e.g. osteoporosis, fungal infections and ‘lifestyle conditions’).

The opportunities for future blockbusters in the treatment of each of the above
conditions are detailed below. An analysis of the opportunities for future blockbusters
in the treatment of hyperlipidaemia is also included, due to the historical importance of
this disease in driving blockbuster sales. SWOT analyses of drugs for which
Datamonitor has forecast blockbuster sales are included in the analysis of each disease,
while the market dynamics affecting current blockbusters are examined in Chapter 4.
The methodology governing the forecasts in this chapter is explained in the Appendix.

221
Arthritis

Future trends in the prevalence of arthritis

The following figure show the future trends in the prevalence of osteoarthritis (OA).
The prevalence of rheumatoid arthritis (RA) is not given, since it is far smaller than that
of OA (in the five major markets listed below, total prevalence of rheumatoid arthritis
is estimated to be approximately 7% of the prevalence of OA).

Figure 5.21: Forecast total prevalence of osteoarthritis in seven major

markets* to 2005

91 90.3
90
89
Prevalence (million)

88

87
86
84.9
85

84
83

82
2000 2005

Seven major markets = US, Japan, Germany, France, Italy, Spain, UK

Source: Datamonitor

The prevalent OA population is set to increase slightly in all major markets, as the
population ages. The change is most noticeable in the US, especially from 2000 to
2005. The growth in prevalence in some countries, such as Italy and the UK, is lower.
However, the rate of growth of diagnosed patients and patients receiving drugs could be
much greater. The launch of new arthritis drugs in 1998 and 1999 has helped to drive
an increase in awareness that could push up diagnosis and treatment rates, expanding
the target population for drug manufacturers. This provides opportunities for new
blockbuster drugs for the treatment of OA.

222
Therapeutic and payer/provider unmet need in the treatment of arthritis

The gastrointestinal side effects of NSAIDs, widely used to treat symptoms of arthritis,
are sufficiently severe to prohibit use in some patients. The lack of therapies with good
side effect profiles has provided the second-generation COX 2 inhibitors with the
opportunity to penetrate the arthritis market by being prescribed for untreated patients.

Blockbusters forecast for the treatment of arthritis

Table 5.62 shows the forecast blockbuster sales in the arthritis market to 2005.

Table 5.62: Global sales forecasts for arthritis blockbusters, 2000–5

Company Brand Generic 2000 2005

($m) ($m)

Searle/Pfizer Celebrex celecoxib 2,614 4,495

Merck Vioxx rofecoxib 2,160 4,500

Source: Datamonitor

223
Asthma

Future trends in the prevalence of asthma

Figure 5.22 details the patient population for asthma in the seven major markets for the
years 2000 and 2005.

Figure 5.22: Forecast total prevalence of asthma in seven major markets* to

2005

70 65.5

60
51.9
50
Prevalence (million)

40

30

20

10

0
2000 2005

Seven major markets = US, Japan, Germany, France, Italy, Spain, UK

Source: Datamonitor

According to the WHO, over 100 million people in the world have asthma, of which
over 29 million are in the US. The prevalence of asthma peaks in children and the
elderly. However, there appear to be few long-term adverse effects on children’s
intellect or other forms of development due directly to asthma.

In the US, the overall prevalence rate is 10.8%. The prevalence of asthma in Europe
varies by market but is generally considerably lower than in the US. According to
research, the prevalence rate is lowest in France, Germany and the UK, at 3.5%, 3.0%
and 4.8%, respectively. The prevalence rate in Italy is higher, at 5.8%, and particularly

224
high in Spain, at 10.8%. Japan has the lowest prevalence rate of the seven major
markets, at 2.3%.

Prevalence rates of paediatric asthma have risen particularly quickly. For example, the
National Asthma Campaign in the UK claims that asthma and wheezing in young
children has almost doubled in less than a decade. The causes of this rise are as yet
unclear but may include increased exposure to air pollution from ultra-fine particles
produced by diesel engines. The disease causes about 2,000 deaths a year in the UK.

Growth in the forecast prevalent population for asthma is likely to vary from country to
country and to be approximately 5% per year. The size and rapid growth of the
prevalence of this disease, especially in the US, provides some opportunity for new
blockbusters.

Therapeutic and payer/provider unmet need in the treatment of asthma

In addition to the rapidly growing patient population, there are two other areas of unmet
need in the treatment of asthma: administration and side effects. Treatment of asthma
has traditionally involved the use of a preventative drug and a bronchodilator to be used
during an asthma attack. At present, many patients have to take medication up to four
times per day, and therefore a once daily product would address an administration
unmet need. Many of the drugs used as preventative therapy for asthma are steroids
with relatively poor side effect profiles. Asthma products with improved side effect
profiles will, therefore, have the opportunity to achieve blockbuster sales.

225
Blockbusters forecast for the treatment of asthma

Table 5.63 shows the forecast blockbuster sales in the asthma market to 2005. It is
expected that four asthma drugs, GSK’s Serevent (salmeterol) and Flixotide
(fluticasone), Merck’s Singulair and Boehringer Ingelheim’s Atrovent will all exceed
$1bn in sales in 2005.

Table 5.63: Global sales forecasts for asthma blockbusters, 2000–5

Company Brand Generic 2000 2005

($m) ($m)

Glaxo SmithKline Flixotide fluticasone 1,332 2,100

Glaxo SmithKline Serevent salmeterol 622 1,695
Merck & Co Singulair montelukast 860 1,450
Boehringer Ingelheim Atrovent ipratropium bromide 725e 1,137

Source: Datamonitor

Cancer

The prevalence of cancer

Figure 5.23 illustrates the point prevalence of each of the five major pharmacologically
treated cancers in the seven major pharmaceutical markets; the US, Japan, France,
Germany, Italy, Spain and the UK. Point prevalence in this case is defined to be the
number of patients active with the disease (i.e. they have detectable disease and/or are
candidates for treatment).

The diseases with the highest point prevalences are breast and prostate cancer.
Although the incidence of these two cancers is comparable to that of lung cancer, the
less aggressive nature of these two cancers means that survival times for the diseases
are typically far longer than those for cancers of the lung. There are thus more people
alive with traces of the disease in the case of prostate and breast cancers than with
cancers of the lung. The low ovarian cancer prevalence is a consequence both of the
fact that the incidence of the disease is lower compared with other tumours, but also a
function of the disease’s severity and speed of progression. Around 25% of patients

226
diagnosed with ovarian cancer do not survive for more than a year following diagnosis.
In contrast, 97% of breast cancer patients and 99% of prostate cancer patients can
expect to live for a year following diagnosis.

Figure 5.23: Point prevalence of five cancers in seven major markets*, 2000

2,000
1,800
1,600
1,400
Point prevalence (000s)

1,200
1,000
800
600
400
200
0 Lung

Ovarian
Breast

Prostate

Colorectal

Source: Datamonitor

The prevalence of the major cancers in the main pharmaceutical markets is not high
when compared to the prevalence of other diseases for which Datamonitor forecasts
blockbusters, such as hypertension or hyperlipidaemia. However, the severity of the
disease and the high level of unmet need means that many of the therapies can
command premium prices, which Datamonitor believes will enable some drugs to
achieve blockbuster sales.

Therapeutic and payer/provider unmet need in the treatment of cancer

Despite the considerable amount of cancer research by both pharmaceutical companies

and charitable organisations, there is still much clinical unmet need in this disease area.
The unmet needs that could be addressed by potential blockbusters include:

‰ efficacy;

227
‰ side effects;

‰ drug resistance;

‰ administration;

‰ affordability.

Affordability is only an issue for a couple of particularly high priced drugs, the cost of
which can lead to reduced use. For example, the use of Taxol (paclitaxel) in the UK has
been restricted due to the cost burden that it would impose upon the government funded
NHS.

Blockbusters forecast for the treatment of cancer

Table 5.64 shows the forecast blockbuster sales in the cancer market to 2005.

Table 5.64: Global sales forecasts for cancer blockbusters, 2000–5

Company Brand Generic 2000 2005

($m) ($m)

Johnson & Johnson Procrit erythropoietin 2,709 2,100

Amgen Epogen epoietin alfa 1,962 2,200
Bristol-Myers Squibb Taxol paclitaxel 1,592 1,000
Schering-Plough Intron A interferon alpha-2b 1,360 2,500
Merck & Co Fosamax alendronate sodium 1,275 2,600
Amgen Neupogen filgrastim 1,224 1,150

Source: Datamonitor

228
Depression

Future trends in the prevalence of depression

Figure 5.24: Forecast prevalence of depression in seven major markets* to
2005

50

47.5
48

46
Prevalence (million)

44

42
40.7

40

38

36
2000 2005

Seven major markets = US, Japan, Germany, France, Italy, Spain, UK

Source: Datamonitor

The data above illustrates that the size of the depressed population is forecast to
increase over the period 2000–5 in the seven countries studied. The depressive
prevalent population is forecast to increase by approximately 20% by 2005.

The size and forecast increase in the prevalence of depression provides considerable
opportunity for future blockbusters. This opportunity can be increased by interested
companies through the use of disease awareness campaigns, since a large proportion
(approximately 50%) of the patient population do not currently seek medical treatment.

Therapeutic and payer/provider unmet need in the treatment of depression

A common problem with treatment in both the US and Europe is a lack of patient
compliance with pharmacotherapy, although psychotherapy is also often prematurely

229
terminated by the patient due to a perceived lack of efficacy. Lack of compliance with
pharmacotherapy is mainly due to insufficient patient support and contact during the
course of the treatment. Patients with depression often need to be reminded to take their
treatment and to have reiterated the importance of maintaining therapy if they are not to
become despondent. This also underlines two of the main disadvantages of current
pharmacological therapies:

‰ the relatively long period prior to onset of action;

‰ the presence of side effects, such as insomnia.

The combination of these two factors makes compliance a significant problem. Regular
contact throughout a course of treatment with a healthcare professional trained in
depression could improve patient compliance and, therefore, overall outcomes. A new
drug with a more rapid onset of action and reduced side effects would potentially gain
blockbuster sales. Likewise, patient support by a pharmaceutical company could
increase the effectiveness and the use of its anti-depressive.

Blockbusters forecast for the treatment of depression

Table 5.65 shows the forecast blockbuster sales in the depression market to 2005.

Table 5.65: Global sales forecasts for depression blockbusters, 2000–5

Company Brand Generic 2000 2005

($m) ($m)

GSK Seroxat/Paxil/Deroxat paroxetine 1,332 2,100

AHP Effexor venlafaxine 1,336 1,750
Lilly Prozac fluoxetine 2,574 500
Pfizer Zoloft sertraline hcl 2,140 1,700

Source: Datamonitor

230
Diabetes

Future trends in the prevalence of diabetes

The scale of the problem diabetes poses to world health is still relatively unappreciated.
Recent WHO estimates predict that, if current trends continue, the number of people
with diabetes worldwide will more than double, from 143 million to 300 million by
2025. The greater proportion of the increase is likely to occur in the developing
countries - the communities least able to afford it. The WHO anticipates that the
prevalent population for diabetes in developing countries will increase by 170%, from
84 million in 1995 to 228 million in 2025. In developed countries, the prevalent
population is expected to rise less dramatically, by 41%, from 51 million in 1995 to 72
million in 2025. Estimates reveal that the prevalent population in the seven major
markets will increase by 38%, from 31 million in 1998 to 43 million in 2025.

The graph below include the prevalence of both type I diabetes, also known as insulin-
dependent diabetes mellitus (IDDM) and type II, non-insulin-dependent diabetes
mellitus (NIDDM). From its primary research of treatment algorithms, state estimates
that only 50% of diabetics are diagnosed; type I accounts for 5–10% of diabetes cases
diagnosed and type II accounts for 90–95% of diabetes diagnosed in the US.

Looking at the forecast prevalent population in the major markets in 2000 and 2005,
growth is likely to vary from country to country and to be between 0–2% per year. The
reasons for this variation are unclear, but may be due to demographic and lifestyle
factors. In a country with longer life expectancy and a greater proportion of old people,
there will be a higher incidence of diabetes and a larger prevalent population the longer
those old people live. In addition, since diabetes is a chronic, long-term illness, the
availability of effective drugs to treat it will enable people to live longer, thereby
increasing the prevalent population.

The growth of the diabetic patient population forecast for the US and Japan presents a
significant opportunity for new blockbusters in this disease area. Since such a high

231
proportion of diabetics has NIDDM, this opportunity is not just for insulin products, but
any NIDDM pharmacotherapy.

Figure 5.25: Forecast prevalence of diabetes in seven major markets* to 2005

35
34.1
34

34
Prevalence (million)

33

33

32 31.7

32

31

31
2000 2005

Seven major markets = US, Japan, Germany, France, Italy, Spain, UK

Source: Datamonitor

Therapeutic and payer/provider unmet need in the treatment of diabetes

Type I diabetes is only treated with insulin, and therefore the only opportunities for new
products in this market are new formulations and delivery systems for insulin.
However, there are opportunities for blockbusters in the treatment of this disease, not
only because the prevalence is increasing, but also because formulation and
administration regime can be used to differentiate products. Since the disease is chronic
and patients require insulin continually, ease of administration provides opportunities
for new products to gain market share.

While synthetic insulin is also used in the treatment of type II diabetes, a number of oral
hypoglycaemic agents (OHAs) are also used to control patients’ glucose levels. At
present, the most widely used OHAs are the drug classes of biguanides and

232
sulphonylureas. However, the clinical profiles of these drugs leave sufficient unmet
need in terms of efficacy and side effects to provide the opportunity for new
blockbusters in the diabetes market.

Blockbusters forecast for the treatment of diabetes

Table 5.66 shows the forecast blockbuster sales in the diabetes market to 2005.

Table 5.66: Global sales forecasts for diabetes blockbusters, 2000–5

Company Brand Generic 2000 2005

($m) ($m)

BMS Glucophage metformin 1,732 690

Novo Nordisk Novolin insulin 1,591 900
Lilly Humulin insulin 1,115 960
GSK Avandia rosiglitazone 699 1,330
Takeda Actos pioglitazone 470e 1,150

Source: Datamonitor

233
Hyperlipidaemia

Future trends in the prevalence of hyperlipidaemia

Figure 5.26 details the forecast trends in the prevalence of hyperlipidaemiain the seven
major healthcare markets to 2005.

Figure 5.26: Forecasts for the prevalence of hyperlipidaemia in seven major

markets* to 2005

335
332.5

330
Prevalence (million)

325

320 317.8

315

310
2000 2005

Seven major markets = US, Japan, Germany, France, Italy, Spain, UK

Source: Datamonitor

Therapeutic and payer/provider unmet need in the treatment of hyperlipidaemia

As existing hyperlipidaemia treatment is efficacious, the main therapeutic area of unmet

need is patient compliance. Datamonitor believes that this may be addressed to promote
new blockbusters through two methods:

‰ general education through media publicity and advertising campaigns. This

approach has been instigated by health authorities launching education programmes
and pharmaceutical companies promoting their products;

234
‰ development of a lipid lowering formulation which requires less frequent
administration.

Lipid lowering agents need to be administered daily and, as hyperlipidaemia demands

long-term treatment, patients can easily tire of the regime. The development of new and
easier administration formulations could improve compliance and therefore overall
efficacy. However, although some opportunity does exist in improving the formulation
of hyperlipidaemia treatments, Lipitor has gone a long way to improving the treatment
regime as far as possible, and that the unmet need remaining may not be sufficient to
drive sales of a new blockbuster.

As hyperlipidaemia is widely regarded as being a major risk factor in the development

of cardiac disease, the main issue surrounding the cost of treating hyperlipidaemia is
whether this cost can be reclaimed through a reduction in the cost of the treatment of
cardiac disease. Cardiac diseases are more expensive to treat than hyperlipidaemia, and
therefore prevention of cardiac disease by earlier treatment of hyperlipidaemia is
viewed as highly cost-effective. However, hyperlipidaemia therapy itself is also fairly
costly and it is impossible to predict with certainty whether a patient will develop
cardiac disease if their hyperlipidaemia remains untreated. Once the use of
pharmacoeconomics by healthcare payers becomes more widespread, the cost savings
that lipid lowering treatments offer through the prevention of cardiac disease will
increase in importance and may differentiate a product sufficiently to drive sales.

Blockbusters forecast for the treatment of hyperlipidaemia

Table 5.67 shows the forecast blockbuster sales in the anti-hyperlipidaemia market to
2005. Blockbuster sales have not been forecast for any hyperlipidaemia drugs that did
not already post sales over $1bn in 2000. This is largely due to the success of Pfizer’s
Lipitor, which was launched in 1997. Lipitor has addressed most of the remaining
unmet need in hyperlipidaemia. The improved efficacy and administration regime of
Lipitor, and its good side effect profile, mean that there is insufficient unmet need to
support a new blockbuster. In addition, new drugs in the anti-hyperlipidaemia market

235
will soon have to compete with cheap generic versions of the current blockbuster
statins, once their patents begin to expire.

Table 5.67: Global sales forecasts for hyperlipidaemia blockbusters, 2000–5

Company Brand Generic 2000 2005

($m) ($m)

Pfizer Lipitor atorvastatin 5,031 6,250

Merck & Co. Zocor simvastatin 5,280 6,000
BMS Pravachol pravastatin 1,817 2,300
Sankyo Mevalotin pravastatin 1,510 880

Source: Datamonitor

The product profiles and sales performance of the 2000 anti-hyperlipidaemia

blockbusters have been examined elsewhere in this report.

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Hypertension

Future trends in the prevalence of hypertension

Hypertension is one of the most prevalent conditions/diseases in the Western world.

Figure 5.27 shows the forecast prevalent populations of hypertensives in the seven
major markets from 1998 to 2005.

Figure 5.27: Forecast prevalence of hypertension in seven major markets* to

2005

110 109.7

110

109
Prevalence (million)

109
109

109
108.6
109

108
108

108
2000 2005

Seven major markets = US, Japan, Germany, France, Italy, Spain, UK

Source: Datamonitor

The prevalence rate of hypertension increases steadily with age. This distinguishes it
from many cardiovascular conditions, such as CHF, that are particularly diseases of the
elderly. The prevalent population for hypertension is therefore distributed over a wide
age range. This has been a major contributor to the recent increases in the number of
hypertensives, as post-war ‘baby boomers’ have already contributed to the prevalent
population. Conversely, whilst the hypertensive population will increase over the next
decade, in many developed countries this will not be as sharp an increase as will be
seen for diseases of the elderly, since the gradual prevalence increase with age has
smoothed the effect of the baby boom.

237
The limited overall growth of the hypertensive patient population in the seven major
pharmaceutical markets limits the future opportunities for new blockbuster drugs. New
anti-hypertensives will have to exhibit considerably improved purchaser/payer and
therapeutic benefits in order to cannibalise sales of current blockbusters if they are to
gain blockbuster sales.

Therapeutic and payer/provider unmet need in the treatment of hypertension

Once the patents protecting current anti-hypertensives begin to expire (for example,
Vasotec’s US patent expires in 2000 and Zestril’s expires in 2001), it is expected that
the rapid introduction of cheap generic forms of these drugs. These cheap generics will
fill any payer/purchaser affordability unmet need.

As for hyperlipidaemia, existing treatment for hypertension is efficacious and so the

main therapeutic area of unmet need is patient compliance. Patient compliance in
hypertension treatment may be addressed in the same way as in hyperlipidaemia
treatment, specifically:

‰ general education through media publicity and advertising campaigns;

‰ development of hypertension treatments which require less frequent administration.

238
Blockbusters forecast for the treatment of hypertension

The table below forecasts blockbuster sales in the anti-hypertension market to 2005.

Table 5.68: Global sales forecasts for hypertension blockbusters, 2000–5

Company Brand Generic 2000 2005

($m) ($m)

Pfizer Norvasc amlodipine 3,362 4,100

Merck & Co Vasotec enalapril 1,790 1,500
Merck & Co Cozaar losartan 1,715 3,000
Zeneca Zestril lisinopril 1,188 740
Merck & Co Prinivil lisinopril 1,075 500
Bayer Adalat nifedipine 1,065 650
Novartis Diovan valsartan 728 3,000
Yamanouchi Harnal tamsulosin 650e 1,150
Takeda Blopress candesartan 400e 1,750
BMS/ Avapro irbesartan 381 3,000
Sanofi-Synthelabo
AstraZeneca Atacand/Amias candesartan 293 1,200
Banyu Nu-lotan losartan 250e 888

Source: Datamonitor

HIV

Future trends in the prevalence of HIV

The human immunodeficiency virus (HIV) is a retrovirus that has been isolated by
scientists and recognised as the aetiologic agent of acquired immunodeficiency
syndrome (AIDS). AIDS is the most severe manifestation of HIV infection.

Combining the HIV and AIDS prevalent populations results in a total potential HIV
patient population in each of the seven major pharmaceutical markets. This is shown in
Figure 5.28 below. These illustrate that, despite the decreasing incidence of HIV and
AIDS, the extended life expectancy of HIV and AIDS patients will result in a
substantial increase in the total numbers of HIV infected individuals in the developed
world.

239
 Figure 5.28: Forecast prevalence of HIV in the US, Europe and Japan
2000–5

700,000

600,000

500,000
HIV prevalence

400,000

300,000

200,000

100,000

-
2000 2001 2002 2003 2004 2005

US Europe Japan

Source: Datamonitor

The spread of HIV is likely to continue, especially in the absence of a vaccine or other
effective means of prevention, and particularly in developing countries. However,
industrialised countries have, in recent years, seen a decrease in the incidence of both
HIV and AIDS. The decline in HIV incidence is due to improved patient awareness of
the virus and of possible prevention methods. This decline has occurred despite
improvements in diagnosis, which have meant that lower viral loads could be detected,
and previously overlooked HIV cases could be included in epidemiological statistics.

240
 Figure 5.29: Forecast prevalence of AIDS in the US, Europe and Japan
2000–5

350,000
300,000
AIDS prevalence

250,000
200,000

150,000
100,000
50,000
-
2000 2001 2002 2003 2004 2005

US Europe Japan

Source: Datamonitor

Combination therapies that have proved to be far more efficacious than the previously
prescribed monotherapies, thus slowing the progression of HIV to full-blown AIDS.
Combination therapies have also made a substantial impact on the quality of life and
life expectancy of sufferers in developed countries, and have led to an increased
prevalence of the disease, with the number of patients who live longer outpacing the
number contracting the disease. Datamonitor believes that the severity and prevalence
growth of HIV provide the opportunity for therapies to gain blockbuster sales.

Therapeutic and payer/provider unmet need in the treatment of HIV

Despite the developments in HIV therapy that have increased the life expectancy of
patients, there is still considerable clinical unmet need in this disease area. The unmet
needs that could be addressed by potential blockbusters include:

‰ efficacy;

‰ drug resistance;

‰ side effects;

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‰ patient compliance;

‰ affordability.

The last of these unmet needs, affordability, is not such an issue in the major
pharmaceutical markets. However, there is a massive and largely untreated patient
population in the Third World, where the cost of efficacious drugs remains prohibitive.

Blockbusters forecast for the treatment of HIV

Table 5.69 shows the forecast sales to 2005 of HIV therapies that are expected to
achieve blockbuster status, or be near the billion dollar milestone in 2005. As the table
shows, although no drug had blockbuster sales in 2000, several drugs will reach high
sales peaks over the mid-term, with GSK’s Combivir forecast to exceed $2,000m in
sales in 2005.

Table 5.69: Global sales forecasts for HIV blockbusters, 2000–5

Company Brand Generic 2000 2005

($m) ($m)

Agouron/Pfizer Viracept nelfinavir 500 546

GSK Combivir lamivudine/zidovudine 850 2,227
BMS Zerit stavudine 618 976
DuPont Sustiva efavirenz 386 803
GSK Trizivir lamivudine + zidovudine n/a 967
+ abacavir

Source: Datamonitor

Blockbuster lifestyle drugs

The rise of ‘lifestyle’ drugs provides a number of opportunities for pharmaceutical

companies to develop blockbuster products. Special considerations and opportunities in
the management of lifestyle drugs have been examined previously in this report,
particularly the use of DTC marketing, disease awareness and the use of the mass
media as a marketing strategy. This section will define lifestyle drugs and examine the

242
market dynamics affecting them. It should be noted that depression can be included
within the definition of lifestyle drugs. However, the opportunities for future
blockbusters in the treatment of this disease have already been examined.

Defining lifestyle drugs

The media imposed the term ‘lifestyle’ on certain currently available drugs. However,
some general characteristics are identified that can be used to decide whether a
pharmaceutical product is a lifestyle drug. These characteristics are shown on the
following figure.

Figure 5.30: Characteristics of lifestyle drugs

medicalisation of the natural ageing process

Social
characteristics
erosion of social taboos opens new markets

unwanted side-effects of ageing

maintaining a healthy image with medication

Disease chronic, requiring long-term drug therapy

characteristics
symptoms associated with underlying diseases

high public awareness

perceived unmet quality of life needs

rapidly effective with visible results

side-effects < efficacy, immediacy

Product + convenience
characteristics
simple dosage regimen

convenient formulation

LIFESTYLE
DRUG

Source: Datamonitor

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Lifestyle drugs are likely to be future sources of blockbuster sales. The sales of these
drugs will be driven by:

‰ strong brand and disease awareness created by mass media interest in lifestyle;

‰ the ageing population in major pharmaceutical markets;

‰ the ability and willingness of patients to pay for lifestyle drugs that are not
reimbursed;

‰ the likelihood of future DTC marketing in the EU;

‰ the breaking down of health taboos.

Lifestyle drugs, by definition, generally treat diseases associated with the signs of
ageing rather than life-threatening conditions (exceptions being obesity and depression,
which can be considered life threatening in certain circumstances). Therefore, as the
middle to old aged populations of major pharmaceutical markets grow, so the demand
for lifestyle drugs can be expected to increase. In addition, primary research indicates
that pharmaceutical companies expect the cost burden of expensive drugs in European
countries, especially lifestyle products, will gradually be shifted onto patients.
Datamonitor believes that patients will be willing and able to pay for lifestyle drugs,
awareness of which will have been created by mass media coverage.

The strongest factor in favour of lifestyle drugs will be the involvement of the media in
generating patient demand. However, it should be pointed out that the media can have a
detrimental effect on the sales performance of a lifestyle drug, as with the case of
reported deaths supposedly associated with Viagra use. Even when the media coverage
is positive, the product faces the burden of inflated patient expectations. However, the
experiences of Viagra and Prozac demonstrate that media coverage attention has an
extremely positive effect on product sales overall. What remains in question is how
new lifestyle drugs perform when they are second to market. The strongest factors
against the success of lifestyle drugs are thought to be prescription and reimbursement

244
control. As mentioned previously, lifestyle drugs are not guaranteed reimbursement
even when they are proven to be medically necessary. Viagra, a case in point, is proven
to be the most efficacious and most cost-effective treatment available for erectile
dysfunction and yet reimbursement as part of standard health insurance plans was
initially refused in virtually every major market.

As explained earlier, DTC marketing of ethical pharmaceutical products will become

legal in the EU, although not until at least 2004–5 or even later. DTC marketing in the
US and the EU will allow pharmaceutical companies to control the image of their
lifestyle drugs more closely. DTC advertisements can be used to influence or correct
information, opinions or representation of lifestyle drugs presented by the mass media.
Companies will, therefore, be in a better position to balance increasing demand for a
lifestyle drug with maintaining its image as an effective medication for a serious
medical condition.

Social taboos that previously prevented patients seeking medical help for non-life
threatening, but psychologically damaging, conditions and symptoms have been
gradually broken down over the last four decades. Depression is a classic example of
this. In the 1950s and 1960s, pharmaceutical companies were reluctant to develop drugs
to treat depression because the market was poorly defined and the true epidemiology of
the disorder unknown. Depression was also associated with mental disorders and,
therefore, carried a heavy social stigma. Consequently, the mass media shied away from
depression, which, in any case, was generally considered to cure itself without
pharmacological intervention in 80% of patients. The original antidepressants received
a lukewarm welcome, although the use of tranquillisers, most notably benzodiazepines
(e.g. Librium and Value), for the treatment of anxiety, stress and insomnia, was creating
a sizeable and growing market. In the 1970s, antidepressant drug therapy was
complicated by the manipulation of drug molecules and the launch of several tricyclics
and other related products. This meant that, whilst prescribing antidepressants became
more commonplace, scepticism surrounding their use was perpetuated. It was not until
1988, with the launch of the first successful SSRI, Prozac, that depression was

245
interpreted as biological in origin. This theory gained ground at a time when depression
was being redefined as a widespread disease requiring long-term drug therapy. In turn,
Prozac rapidly matured into a global brand through mass media fascination.

Viagra has had a similar effect on erectile dysfunction. While the social taboos
surrounding this condition have decreased over the last decade, the extra attention and
media coverage driven by the launch of Viagra has increased the awareness of the
widespread nature of the condition. In addition, Viagra offers what for many patients is
the first acceptable treatment due to its oral formulation. Viagra can therefore be said to
have created its own market by removing some of the stigma surrounding erectile
dysfunction, and making discussion of this condition more socially acceptable.

There are, therefore, potential opportunities for future blockbuster lifestyle drugs.
However, for such drugs to be successful in terms of sales, future blockbuster lifestyle
drugs and the conditions they treat will have to adequately comply with the disease and
product characteristics discussed below.

Disease characteristics

Clearly, some conditions are more conducive to the development of lifestyle drugs than
others. Such conditions include: impotence, obesity, wrinkles, baldness and depression.
However, the list may be augmented to embrace: contraception, fertility, diabetes,
prostate disease, osteoporosis, Paget’s bone disease, insomnia, Alzheimer’s and
Parkinson’s disease, incontinence, osteoarthritis, rheumatoid arthritis, eye disorders,
skin disorders and sepsis. It is suggested that, whilst many of these diseases are
endocrine in origin, this should not be interpreted to mean that hormonal conditions are
any more advantageous to lifestyle drug development than any other therapeutic
categories. This reflects the fact that many endocrine conditions are actually manifest
in, for example, urological or musculoskeletal symptoms.

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Specific disease criteria are a prerequisite for identifying lifestyle drugs. These criteria
need not be common to all lifestyle drugs, but include the observations that:

‰ they are unwanted side effects associated with the natural ageing process (e.g.
diabetes);

‰ they are relatively severe yet blur the distinction between ‘classical’ medical
diseases or symptoms and the pharmaceutical maintenance of a healthy, cosmetic
self-regard (e.g. obesity);

‰ they are chronic, require a long term commitment to drug therapy, but respond
rapidly to drug therapy, often with visible results (e.g. baldness);

‰ they are frequently symptoms associated with an underlying disease (e.g. impotence
and baldness may reflect circulatory problems);

‰ they are ailments that enjoy relatively high public awareness and understanding (e.g.
impotence);

‰ they reflect a perceived unmet quality of life need on the part of consumers rather
than physicians (e.g. wrinkles).

Perhaps unsurprisingly, these disease characteristics are similar to those which make a
product suitable for DTC marketing. Herein lies one of the keys to the commercial
success of lifestyle drugs: (1) through mass media attention they enter the public psyche,
which perceives an unmet therapeutic need; (2) patients (in the guise of consumers)
pressure physicians to prescribe particular drugs; (3) this leads to a dramatic, and often
immediate, improvement in patients’ quality of life and locks them into long-term drug
therapy; (4) success stories attract further media attention; (5) product sales soar.

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Product characteristics

A lifestyle drug must be sufficiently effective and easy to administer that compliance
can be guaranteed. To this end, it is believed that all, or a selection of, the following
product characteristics are fundamental to creating a blockbuster lifestyle drug:

‰ rapidly effective;

‰ acceptable side effects which are marginalised by product efficacy, immediacy or

convenience;

‰ simple dosing regimen;

‰ convenient formulation.

It is noted that all of these features render prescription products closer to OTC status
and suggests that this is another clue to developing and marketing a potential
blockbuster lifestyle drug. Product sales will be driven by patients feeling that they have
greater control over their medication by being able to draw upon past experiences with
OTC drugs. This also presents the possibility that ethical lifestyle drugs can eventually
be switched to OTC status to maintain sales in the event of increased competition or
patent expiration. This has already happened to Pharmacia & Upjohn’s treatment for
baldness, Rogaine (minoxidil).

Speed is of the essence

Failure to be rapidly effective or to have acceptable side effects partly accounts for why
pre-SSRI antidepressants did not become blockbusters or lifestyle drugs. Despite the
fact that lifestyle drugs generally treat conditions that are not life-threatening and
instead aim to improve quality of life, it is apparent that patients are prepared to suffer a
certain level of side effects for the sake of immediacy and efficacy. Thus, whilst lipid
lowering drugs are effective, they do not act immediately and, in any case, raised
cholesterol levels may not yet have impacted upon a patient’s quality of life. In contrast,
Viagra is immediately effective in impotent men and, importantly, has visible results.
Similarly, therapeutics to treat baldness and obesity should also induce visible effects in

248
patients. This partly explains why these products are more generally referred to as
lifestyle drugs than, for example, those indicated for Alzheimer’s disease or arthritis.

Side effects are acceptable

Viagra has become a success despite the adverse publicity that has surrounded the
deaths of a few patients, many of whom apparently failed to comply with Pfizer’s
advice that the product is contra-indicated in men taking nitroglycerin or other nitrates
for heart disease. Viagra also has other publicised side effects, including headaches and
flushing in 16% and 10% of trial patients, respectively. Prozac is associated with
several side effects (e.g. nausea, diarrhoea and sexual dysfunction) and the possibility
that it may trigger aggression and hostility has been widely debated and has even been
the subject of at least one court case. Furthermore, the use of the treatment for baldness,
Propecia, is restricted to men only, since it can cause birth defects in women. This risk
is so great that women are advised not to even handle the product since some of the
potent mutagen could seep into the skin. However, patients clearly consider the quality
of life benefits of these products to be sufficiently significant that they compensate for
any adverse reactions.

Simplicity and convenience

A simple dosage regimen and a convenient formulation together have a positive

influence on patient compliance, even more so when this is accompanied by rapidly
visible outcomes. In turn, this is apparent in swift product uptake upon launch and
prolonged high volume sales. Failure to meet these criteria explains why Pharmacia &
Upjohn’s injectable Caverject (alprostadil) has not enjoyed the acclaim of Viagra,
which has an oral formulation. Other potentially simple and convenient dosage
regimens include:

‰ infrequent injections (as for female contraception);

‰ lotions/gels (as for baldness and skin treatments);

‰ nasal delivery (yet to figure in lifestyle drugs);

249
‰ patches (as for contraception but largely unused for lifestyle drugs).

To date, drug delivery has been an underrated element of lifestyle drug development.
This presents a significant commercial opportunity to differentiate between lifestyle
drugs as more ‘me-too’ products are launched and competition between them
intensifies.

Forecast blockbuster lifestyle drugs

It is believed that the following therapy areas will product additional blockbuster
lifestyle drugs in the coming years:

‰ erectile dysfunction;

‰ obesity;

‰ depression.

The opportunities for blockbusters in depression have been examined earlier in this
chapter. The market dynamics affecting blockbuster lifestyle drugs in the other two
disease areas listed above are examined below.

Erectile dysfunction: Viagra

Sales forecasts for Viagra, profiled earlier in this report, are detailed below in Table
5.70.

Table 5.70: Global sales forecasts for erectile dysfunction blockbusters,

2000–5

Company Brand Generic 2000 2005

($m) ($m)

Pfizer Viagra sildenafil 1,344 2,150

Source: Datamonitor

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Obesity: Xenical (orlistat)

Xenical is an inhibitor of gastric and pancreatic lipases, enzymes that play a pivotal role
in the absorption of dietary fat. Essentially, its action is to reduce the amount of fat
absorbed into the body. Fat molecules in the gastric tract are initially too big to pass
through the intestinal wall into the blood (to either serve as fuel for cells or else be
deposited in fatty tissue). The fat molecules must therefore first be broken down into
smaller parts, which is done by the lipase enzyme. Xenical attaches itself to a large
number of these lipase enzymes in the intestine and thereby inhibits lipase activity,
causing the fat molecules to pass out of the body undigested. Conventional drugs to
combat obesity do so by dissolving the myelin sheath surrounding nerve fibers and
incur the risk of multiple sclerosis-like side effects and chemical addiction, a side effect
not linked to the treatment of obesity by Xenical.

In a two year European study, 688 obese patients were randomised to receive Xenical
or placebo. 38.8% of Xenical recipients lost >10.0% of their initial body weight
compared with 17.6% of placebo recipients. During year two, Xenical significantly
reduced weight regain compared with placebo and also had significant reductions in
total cholesterol levels compared with placebo. A further one year study involving type
II diabetic patients resulted in similar weight loss effects. In the Xenical group, a
reduction of 23.0% in the total dose of diabetic medications required was also
observed, which is highly significant.

Xenical was associated with gastrointestinal side effects including flatulence, fecal
urgency, fatty or oily stools, increased defecation and fecal incontinence. However,
these appeared to be minor and were associated with a withdrawal rate of about 2.0% in
trials. Systemic absorption of Xenical was negligible.

In June 1996, the first approved prescription treatment for obesity, Redux
(dexfenfluramine), was launched by Wyeth-Ayerst. The compound, developed by
Interneuron Pharmaceuticals, worked by controlling levels of serotonin, a
neurotransmitter that has been shown to influence appetite. Redux was therefore

251
significantly different from Xenical in terms of mechanism of action, by controlling the
appetite and therefore consumption of fat, rather than its absorption into the body. The
high sales potential of any effective drug launched in this market was underlined as
Redux experienced the fastest selling launch of any pharmaceutical in history at that
stage. In September 1997, however, new evidence about side effects of Redux was
found. The drug was found to cause heart malfunctions. The study, involving 291
patients, found that patients had higher than average heart valve readings and 30.0%
had heart malfunctions, but were not showing any symptoms. The product was
voluntarily withdrawn from the global market by Wyeth-Ayerst, and the company faces
several law suits and expects additional legal action.

Xenical offers a significantly better side effect profile than Wyeth-Ayerst’s compound.
Xenical’s safety advantage in this area becomes especially significant given the high
incidence of heart disease that exists in obese individuals, and this, along with the
withdrawal of Redux, was expected to smooth Xenical’s market entry.

Despite the advantages of Xenical, its approval in the US was delayed due to concerns
over cases of breast cancer that occurred in patients during trials. In a study of 747
women aged 45 years and over who were randomised to receive Xenical, nine
developed breast cancer whereas only one out of 579 comparable patients who received
placebo developed the disease. Further trials were organized which concluded that the
cases of breast cancer were unrelated to Xenical administration and regulatory approval
was expected. However, in March 1998, the FDA advisory panel recommended
approval of Xenical, but cited a 50:50 split regarding approval of the drug because of
the breast cancer concerns. The FDA committee recommended that Xenical should be
taken with a multivitamin because the agent inhibits the absorption of some fat-soluble
vitamins.

On 12 May 1998, Roche, as a result of receiving the approval letter, announced that the
US launch would not occur until mid-1999, at the earliest. This was another setback for
Roche, which originally scheduled Xenical’s launch for mid-1997, after submitting

252
Xenical for NDA review in November 1996 and receiving priority review status. Due to
concerns over safety, the FDA asked Roche to submit follow-up safety data from
Xenical’s ongoing clinical programmes. In addition, the FDA requested Roche to alter
the labeling of the product. In April 1999, the FDA finally granted marketing approval
for Xenical.

The market for prescribed diet drugs is relatively small, due to the small number
currently available and the costs of regulation. However, the potential for expansion in
this area of the diet spectrum is huge, given that obesity is a growing medical problem
in the industrialized world and a contributory factor to many secondary diseases such as
diabetes, arteriolosclerosis and heart attacks. It follows that, by eliminating the main
drivers behind these conditions, the huge costs associated with these conditions could
be substantially reduced. The results of the potential of the market could be seen in
1999 when Xenical sales grew by 623%, with nearly 50% of sales originating from
Europe and approximately 30% from North America. In 1999, over five million
patients were treated with Xenical. Datamonitor predicts that with continued market
penetration and global rollout, Xenical sales were $563m in 2000 and $1,400m in 2005.

In 1998, Knoll received US approval for its anti-obesity product, Meridia (sibutramine),
which would have competed directly with Roche’s product. Meridia failed to gain
presence in the obesity market and sales declined in 2000 to $111m from $132m in
1999. Compounds currently undergoing research in this field include neuropeptide-Y
(undergoing small stage testing with Neurogen Corp). Roche intends to increase sales
of Xenical during 2001 through the continuation of unbranded DTC promotion in the
US and strengthened pharmacoeconomic studies for targeted reimbursement
applications. Roche is also conducting clinical studies for the use of Xenical in the
treatment and prevention of type 2 diabetes.

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 Table 5.71: Global sales forecasts for obesity blockbusters, 2000–5

Company Brand Generic 2000 2005

($m) ($m)

Roche Xenical orlistat 563 1,400

Source: Datamonitor

Drivers and resistors of blockbuster sales

Figure 5.31 illustrates both historic and future drivers and resistors of blockbuster sales.
The historic drivers and resistors were examined previously, and the future drivers and
resistors are explained below. As the figure indicates, Datamonitor expects that the
impact of resistors of blockbuster sales will increase, while the impact of the drivers
will decrease. Therefore, Datamonitor believes that, although there will be new
blockbusters to 2005, there will be fewer than have emerged over recent years.

Future drivers of blockbuster sales

Increased global launches

The benefits of global launch on the sales of a potential blockbuster have been
illustrated by the rapid market penetration of Vioxx and Celebrex, as discussed earlier.
Datamonitor expects that the successful launch strategies of these and other products
will be emulated for many future products with high sales potential, increasing the
probability that they will achieve blockbuster sales.

DTC in Europe

It is expected that DTC marketing for ethical pharmaceuticals will eventually become
legal in the EU. However, this is not likely to become a reality until 2003–4 or possibly,
in the absence of persuasive arguments for its legality from a range of sources, even
later. Unsurprisingly, support for DTC marketing will be driven by the pharmaceutical

254
industry and healthcare advertising agencies. Furthermore, as European patients
become more aware of healthcare issues (e.g. through an increased appreciation of
healthcare costs due to increased patient co-payments and self-medication, or through
increasing private healthcare insurance, approvals for more lifestyle drugs and the
general information revolution), demand for product information will follow. Providing
firm opposition against such demand will be individual governments and physicians,
keen to maintain their power in the prescribing process, primarily as a means of
containing healthcare expenditure. Quite how governments can be persuaded of the
merits of or at the very least agree to demands for DTC marketing is not yet clear.
However, one potent means of persuasion would be for more data to be collected in the
US on how DTC marketing may reduce overall healthcare expenditure (e.g. increased
patient awareness and responsibility leads to improved compliance, which may increase
drug spend but should decrease the greater costs associated with non-compliance). This
will prove a distinct advantage to pharmaceutical companies at a time when an ageing
European population is driving increasing demand for healthcare.

Figure 5.31: Future drivers and resistors of blockbuster sales

Historical drivers and resistors Future drivers and resistors

Resistors
•products specific to patient sub-groups
Resistors from pharmacogenomics
•cost containment by healthcare payers •increased pricing restrictions
•relative lack of R&D portfolio management •increased rationing of expensive products
•pricing regulations •increased competition
•reimbursement restrictions •decreased unmet need in traditional
blockbuster therapy areas

Blockbuster drugs Blockbuster drugs

Drivers Drivers
•general expansion of pharmaceutical market •increased number of global launches
•increased size and marketing capability of •DTC marketing in EU and rest of the world
pharmaceutical companies •lifestyle drugs, especially for the ageing
•large areas of unmet need population
•significant advances in innovation •preventative care
•screening and increased diagnosis growing •innovative products/cures from genomic
the patient population treated research
• DTC marketing in US •increased use of R&D portfolio management

Size of arrow is relative to strength of force

Source: Datamonitor

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Datamonitor expects the use of DTC marketing in the EU and the rest of the world to
drive blockbuster sales as it has done in the US. This will also mean that future
blockbusters will also be less dependent upon the US than they are at present and will
derive a greater proportion of their global sales from the EU. DTC marketing in the EU
will be especially important for driving sales of future blockbuster lifestyle drugs.

Preventative care

Research has identified preventative care as an area that will provide opportunities for
blockbuster drugs in the future. The prevention of chronic or fatal conditions certainly
presents a new and largely unserviced market for pharmaceuticals. Preventative drugs
targeted at sub-populations with a high risk of heart disease or cancer, for example, will
provide scope for future sales. However, preventative care will require high levels of
patient compliance over long periods of time if it is to be successful. Current levels of
patient compliance in chronic diseases such as hypertension and diabetes are
notoriously poor. Datamonitor believes that patients’ approach to preventative medicine
will have to be developed considerably before significant sales are achieved in this
market and, therefore, that preventative care will not provide significant opportunities
for new blockbusters before 2005.

Innovative products/cures from genomic research

Genomic research offers both an opportunity and threat to future blockbuster sales. The
threat comes from the use of pharmacogenomics, a distinct discipline within genomic
research. Pharmacogenomics may be used to identify for which patients a drug will be
most efficacious. Conversely, genetic testing of patients will identify which drug is best
suited to their needs. This will decrease the need for blockbuster drugs that are widely
suitable and an increased demand for drugs that are more finely-tuned and focused on
patient sub-groups. The end result may be a larger total number of drugs, but with each
drug being used for a smaller patient population.

However, proteomics, another discipline within genomic research, is expected to

produce greater understanding of disease processes by identifying sets of proteins that

256
cause particular diseases. Having identified proteins involved in disease pathways,
pharmaceuticals can be developed to target those proteins. This will allow the
development of more efficacious therapies, and perhaps even new cures. Datamonitor’s
primary research indicates that future products derived from proteomics will be
possible blockbusters. The blockbuster status of these therapies will, of course, still be
dependent upon the existence of sufficient unmet need that they can address and upon
successful marketing and management.

However, whilst genomic research is beginning to produce therapeutic results, it will

not significantly impact the pharmaceutical market before 2010. Once genomic research
does come to fruition, Datamonitor expects that it will have both the effects described
above. This will lead to fewer opportunities for blockbuster sales of conventional
pharmaceuticals and new blockbusters derived from proteomic research.

Increased use of R&D portfolio management

Earlier in this report, Datamonitor identified the relatively low use of R&D portfolio
management as a historic resistor of the development of blockbusters. A number of the
major pharmaceutical companies have started using more systematic R&D portfolio
management during the last decade, including Merck & Co., SmithKline Beecham, and
Lilly, and this has undoubtedly aided the development of their blockbuster drugs.
However, the use of structured R&D portfolio management processes is still in its early
stages. primary research has revealed that only 25–30% of pharmaceutical companies
are currently implementing structured R&D portfolio management processes. By 2010,
this is expected to have increased to 70%, at which time R&D portfolio management
will be an even greater driver of the number of blockbusters launched, or at least the
number brought to market sufficiently early to fulfil their sales potential. Datamonitor
expects the use of R&D portfolio management to increase, enabling pharmaceutical
companies to focus their R&D investment on products with high potential sales.

There is a danger that R&D portfolio management will allow pharmaceutical

companies to over-emphasise the need to develop blockbuster drugs, ignoring the

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opportunity to develop lower selling drugs that entail less risk. It is necessary for
pharmaceutical companies to ensure that their R&D pipelines are sufficiently balanced
to ensure a balanced product portfolio. This will ensure that companies do not become
overly dependent upon blockbuster drugs for the greater part of company revenues.

Future resistors of blockbuster sales

Increased pharmacoeconomic restrictions by healthcare payers

It is expected that increased restrictions by healthcare payers will be a significant

barrier to future products achieving blockbuster sales. As the cost of healthcare
increases throughout the major pharmaceutical markets, healthcare payers are
instigating increasingly restrictive cost containment measures. In Europe,
pharmacoeconomics has recently been introduced as a fourth hurdle before launch in
Italy, Finland and The Netherlands.

The introduction of the use of pharmacoeconomics by regulatory and health authorities

will have an especially significant effect on lifestyle drugs. Indeed, the recent focus on
these products, particularly Viagra, may have been one of the factors driving the
introduction of pharmacoeconomics. Products such as Viagra, the medical necessity for
which is debated, but the demand for which is potentially huge, present a problem to
healthcare payers. It is expected that Viagra will treat a large erectile dysfunction
patient population that does not currently present to physicians. These extra patients,
combined with the high price of Viagra relative to other therapies, potentially form a
large extra cost for healthcare payers. However, the regulatory bodies that now use
pharmacoeconomics may try to restrict the use of Viagra and other lifestyle drugs that
present the same budgetary problem. Reimbursement authorities that now use
pharmacoeconomics (i.e. Finland, The Netherlands and Italy) could limit the cost of
Viagra to the healthcare system by denying or restricting reimbursement.

In the UK, where NICE applies pharmacoeconomics to produce clinical guidelines for
physicians, the prescription of expensive lifestyle drugs could be restricted by NICE’s
recommendations. However, NICE was established too late to preside over the UK

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government and NHS’s initial reactions to Viagra. Instead, in 1998, the Department of
Health sent out a circular advising UK physicians not to prescribe Viagra, an act that
was ruled to be unlawful by a UK High Court in May 1999. This overturning of
government advice to physicians through the law courts could set a precedent for
pharmaceutical companies to fight regulatory authorities’ rulings that restrict the use of
lifestyle drugs, especially in Europe where governments must act in accordance with
EU legislation.

Decreased unmet need in traditional blockbuster therapy areas

Apart from those drugs that achieved blockbuster status in 2000, blockbuster sales are
not forecast for any drugs in the treatment of the following diseases, all of which have
traditionally been sources for blockbuster sales:

‰ hyperlipidaemia;

‰ schizophrenia;

‰ gastroduodenal ulcers.

There are unlikely to be future blockbusters in the treatment of these diseases due to the
fact that there is insufficient unmet need remaining to drive blockbuster sales for
products that have not already captured a significant share of these markets. This is
because the clinical profiles of the current blockbusters for the treatment of these
conditions are very good. In addition, payer/purchaser unmet need in terms of drug
affordability is likely to be negated in the near future by the introduction of cheap
generic versions of current and previous blockbusters once their patents have expired.

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