Revenues fall off the patent cliff, rain down on generics firms.

When patents run out, generic pharmaceutical companies reap the benefits.

When we think about the patent cliff, an image along the lines of a massive waterfall, with companies’ revenues in free fall comes to mind. What we usually forget to consider, though, is that the waterfall is nourishing a fertile, green valley below. For while big pharmaceutical companies are scrambling to bolt-on smaller biotechs with marketed drugs to protect themselves, generics manufacturers are reaping windfall profits. While the industry has been nervous about the patent cliff for years, it is turning out to be a blessing in disguise. Patients are benefitting the most by gaining access to the innovative drugs of the past few decades at generic prices. Biotech companies are benefitting from a frenzied M & A environment, and generics companies are reporting record profits. Big pharmaceutical companies, meanwhile, have been forced to respond to the challenge by refocusing their attention and honing their business strategies.

As an example of this phenomenon, it’s worth looking at the biggest loss of the edge of the cliff, Pfizer’s cholesterol drug Lipitor. The company recently released its first quarter earnings, and reported Lipitor sales of $1.4bn, a 42 per cent plunge from the same period in 2011. The drugmaker can hardly complain, though, as the drug recorded cumulative sales of $128bn for Pfizer through the end of 2011. Meanwhile, Watson Pharmaceuticals was the first to begin selling generic Lipitor in November, 2011. As a result of strong generic Lipitor sales, as well as other generic launches including generic versions of Concerta and Lovenox, Watson’s first quarter revenue increased 74 per cent to $1.5bn, compared to $877m for the corresponding period in 2011. Increased sales drove an 87 per cent increase in net income, from $112m in Q1 2011 to $209m in 2012. As a result of its newfound financial heft, Watson was able to expand its geographic reach with the purchase of the European generics firm Actavis. Watson announced the €4.25bn ($5.6bn) acquisition was announced on April 25, and should lead to 2012 pro forma revenue of $8bn for the combined company in 2012, compared to $4.6bn for Watson in 2011 and $6bn in 2012 based on annualized first quarter revenue. Mylan, another major generics company, reported an 18 per cent increase in earnings for the first quarter compared to 2011, to $0.52/share from $0.44/share. This gain was due to a 9 per cent increase in revenue from $1.45bn in Q1 2011 to $1.58bn in 2012.

Pfizer and other big pharmaceutical companies, meanwhile, appear to be on course to successfully navigate the rapids. Although Pfizer saw its earnings drop 19 per cent in the first quarter compared to 2011, there are bright lights on the horizon. The FDA is set to decide on its rheumatoid arthritis drug tofacitinib by August 20, and the drug has the potential to generate up to $1.5bn in revenue before the end of 2012. The company has another drug before the FDA for review, with a decision expected by June 28. Eliquis was co-developed with Bristol-Myers Squibb for the prevention of strokes in patients with arterial fibrillation, and also has blockbuster potential. Finally, Pfizer is flush with cash after selling its infant nutrition unit to Nestle for $11.9bn, and ready for another round of acquisitions that could range from small, bolt-on biotech purchases to another pharmaceutical mega-merger.

The biggest development regarding the patent cliff will be watching large pharmaceutical companies’ attempts to maintain growth in the face of expiring patents. But regardless of how whether Big Pharma stays atop its mountain or goes over the cliff, generics firms will continue to reap the profits of major pharmaceutical patent expirations.

Dr. Jerry Isaacson is the head of GlobalData healthcare industry dynamics. Their website can be found at www.globaldata.com.

Photograph: Getty Images

Dr. Jerry Isaacson is head of GlobalData healthcare industry dynamics.

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How to think about the EU result if you voted Remain

A belief in democracy means accepting the crowd is wiser than you are as an individual. 

I voted Remain, I feel sick about this result and its implications for what’s to come. But I’m a believer in democracy. This post is about how to reconcile those two things (it’s a bit unstructured because I’m working it out as I go, and I’m not sure I agree with all of it).

Democracy isn’t just fairer than other systems of governance, it’s smarter. It leads to better decisions and better outcomes, on average and over the long run, than countries that are run by autocrats or councils of wise men with jobs for life. It is simply the best way we have yet devised of solving complex problems involving many people. On that topic, if you’re not averse to some rather dense and technical prose, read this post or seek out this book. But the central argument is that democracy is the best way of harnessing ‘cognitive diversity’ — bringing to bear many different perspectives on a problem, each of which are very partial in themselves, but add up to something more than any one wise person.

I don’t think you can truly be a believer in democracy unless you accept that the people, collectively, are smarter than you are. That’s hard. It’s easy to say you believe in the popular will, right up until the popular will does something REALLY STUPID. The hard thing is not just to ‘accept the result’ but to accept that the majority who voted for that result know or understand something better than you. But they do. You are just one person, after all, and try as you might to expand your perspective with reading (and some try harder than others) you can’t see everything. So if a vote goes against you, you need to reflect on the possibility you got it wrong in some way. If I look at the results of past general elections and referendums, for instance, I now see they were all pretty much the right calls, including those where I voted the other way.

One way to think about the vote is that it has forced a slightly more equitable distribution of anxiety and alienation upon the country. After Thursday, I feel more insecure about my future, and that of my family. I also feel like a foreigner in my own country — that there’s this whole massive swathe of people out there who don’t think like me at all and probably don’t like me. I feel like a big decision about my life has been imposed on me by nameless people out there. But of course, this is exactly how many of those very people have been feeling for years, and at a much higher level of intensity. Democracy forces us to try on each other’s clothes. I could have carried on quite happily ignoring the unhappiness of much of the country but I can’t ignore this.

I’m seeing a lot of people on Twitter and in the press bemoaning how ill-informed people were, talking about a ‘post-factual democracy’. Well, maybe, though I think that requires further investigation - democracy has always been a dirty dishonest business. But surely the great thing about Thursday that so many people voted — including many, many people who might have felt disenfranchised from a system that hasn’t been serving them well. I’m not sure you’re truly a democrat if you don’t take at least a tiny bit of delight in seeing people so far from the centres of power tipping the polity upside down and giving it a shake. Would it have been better or worse for the country if Remain had won because only informed middle-class people voted? It might have felt better for people like me, it might actually have been better, economically, for everyone. But it would have indicated a deeper rot in our democracy than do the problems with our national information environment (which I accept are real).

I’m not quite saying ‘the people are always right’ — at least, I don’t think it was wrong to vote to stay in the EU. I still believe we should have Remained and I’m worried about what we’ve got ourselves into by getting out. But I am saying they may have been right to use this opportunity — the only one they were given — to send an unignorable signal to the powers-that-be that things aren’t working. You might say general elections are the place for that, but our particular system isn’t suited to change things on which there is a broad consensus between the two main parties.

Ian Leslie is a writer, author of CURIOUS: The Desire to Know and Why Your Future Depends On It, and writer/presenter of BBC R4's Before They Were Famous.