Australia - How will the imminent expiry of a number of blockbuster drugs affect the Australian pharmaceutical market?

The Australian generics market will benefit from the impending patent expiry of a number of successful drugs, which will cushion it against further government price cuts.

Recently-released data from the Pharmaceutical Benefits Scheme (PBS) indicated that 12 out of the top 20 best-selling drugs by volume in 2008 were now available as generic drugs; the majority of these drugs experienced falling sales in the same year. An example of one of these drugs is Merck’s Zocor (simvastatin), whose patent expired in December 2008; this was the second leading drug by volume of sales. However, generic drugs are also going to be the target of further PBS price cuts, as the Scheme seeks to keep health expenditure low. For example, legislation that came into effect towards the end of 2008 has generally been viewed as negative by generic companies, which believe that they reduce the pharmacist’s ability to discount, as well as cutting prices.

It is likely that Australian imports of pharmaceuticals will increase by a substantial amount in 2010. This is because the Australian dollar in 2010 is projected to be as close to parity with the US dollar as it ever has been. Having invested in R&D pipelines in recent years, the PBS will be expecting new blockbuster drugs to emerge, and like in the past, the PBS will be willing to pay for them. Indeed, generic drugs will likely face the brunt of price cuts if a new blockbuster drug were to emerge.

Further reading - A detailed analysis of the Australian pharmaceutical market is available from Espicom: The Pharmaceutical Market: Australia (published January 2010)