The Indian pharmaceutical majors who are set to sell Lipitor in the US market are likely to be hit by an unexpected price erosion.
Indian companies such as Dr Reddy's Labs (DRL) and Lupin are likely to launch Lipitor, the largest-selling drug in history, in the US, by the middle of 2012.
The US market has witnessed price erosion in the range of about 70 per cent in sales of Lipitor over the past few months. Lipitor has been sold by three players in the US after it lost patent protection in November last year.
Ranbaxy, the only Indian company which sells Lipitor in the US and has a 180-day marketing exclusivity, has indicated price erosion of 60 to 70 per cent in generic Lipitor. This is much higher than the typical range of price erosion of 40 to 50 per cent in other products during 180-day exclusivity periods. Pfizer and authorised generic maker-Watson Pharma have been selling Lipitor in the US apart from Ranbaxy. Ranbaxy's exclusivity will end by May 2012.
Lipitor (Atrovastatin), the cholesterol-lowering drug, had a sales of $5.5 billion when it went off-patent on November 30, 2011. The drug had achieved a sales of $13 billion in 2006.
According to Girish Bakhru, analyst with HSBC Securities, the action of Pfizer, which reduced the price of Lipitor, might have forced other generic makers to cut prices further.
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A report from Standard Chartered Bank said, "Higher-than-anticipated price erosion reduces available market size for new entrants post exclusivity expiry in May 2012 and upside for new entrants like Dr Reddy’s and Lupin could be at risk."
Generic Lipitor is an important product for DRL and Lupin, with estimated sales of $20-40 million each for FY13, constituting 5-10 per cent of the US revenue for the companies in the financial year 2013, said the report. Also, Ranbaxy's commitment to protect its current market share of 42 per cent in Lipitor sales even after May 2012, will add to Indian companies' woes, experts pointed out.
Ravi Agarwal of Standard Chartered Bank said, "Price erosion reduces available market size for new entrants. Higher-than-anticipated price erosion has important implications for residual market assumptions post exclusivity expiration and consequent shares available for new market entrants."
An assumption of 95 per cent price erosion would reduce the available market size for all generics by 50 per cent from a base case assumption of 90 per cent.
A Dr Reddy’s Labs spokesperson refused to comment on Lipitor launch in the US. Refusing to disclose details on generic Lipitor launch, a spokesperson from Lupin said, "We won't be a player in the near term, so it would really not make any difference and it's hard for us to comment on the same. For long term, we believe our marketing and vertical integration capabilities make this a very viable product for us."
Bakhru said, "We are expecting more players such as DRL, Teva and Mylan to join the Lipitor market by May 2012. Even though the price erosion will hit new generic makers, DRL can gain if they get at least 10 per cent of generic Lipitor market." We expect Ranbaxy's market share may reduce to 25 per cent in next couple of quarters, he added.
Manoj Garg of Edelweiss Securities believes that 90 per cent price erosion is common and the Lipitor market is big enough for each generic player. He expects about $40-50 million sales for each generic maker from May 2012.