In business, it is a common situation that when one industry loses, another one - gains.
The pharmaceutical industry suffers through a span of extensive losses of patents on key medicines and at the same time retail pharmacies are getting the benefit because they receive significantly more money giving out generic drugs than brand names.
According to recent opinion of Walgreen Co., higher sales of generic medicines helped increase its first-quarter profit up 5 percent. It bested estimates and boosted its stock price. Walgreen says that increased sales of generic medicines results from popularity of nonbranded versions of Sanofi-Aventis Group allergy drug Allegra.
It is expected that benefits from patent losses will expedite because last year the pharmaceutical industry went into a period of huge patent losses. According to estimates of Lehman Brothers, branded medicine with their total sales of $70 billion in 2005 through 2010 will have to deal with generic competition.
Lehman predicts that this year the pharmaceutical industry will relinquish $11.8 billion in sales to generic medicines as numerous drugs lose their exclusivity. This process is exemplified by Zocor, Merck & Co.’s cholesterol drug and Zoloft, Pfizer’s antidepressant - the two of the top ten selling medicines in the United States.
The patent losses appear at an especially fortuitous time for retail pharmacies because the industry is dealing with Medicaid cuts that, according to analysts, will limit profits. It is also expected that the new Medicare drug benefit will initially affect earnings negatively, but if it is about its long-term impact - opinions are divided.
Meredith Adler, a Lehman Brothers’ analyst stated: “Without a doubt the generic benefit will offset what else is going on in the industry.”
