After much consternation and hand-wringing, India’s Ranbaxy Laboratories appears ready to gain the much-sought-after approval from the U.S. Food & Drug Administration to sell a copycat version of the mega-blockbuster cholesterol drug Lipitor in the U.S. On Wednesday, Pfizer‘s (NYSE:PFE) patent on Lipitor, the best-selling medication of all time, expired.
Getting the FDA’s blessing won’t come cheap for Ranbaxy. The unit of Japan’s Daiichi Sankyo may have to pay up to $400 million to settle issues with the U.S. agency relating to quality-control problems and allegedly falsified data. Those issues led to a 2008 FDA ban on the import of drugs made at two Indian plants.
Ranbaxy has the coveted first-to-file status for its Lipitor copy, giving the company 180 days as the only independent generic rival to the Pfizer brand. During that time, the Ranbaxy’s version may generate as much as $650 million, according to the median estimate of five Mumbai-based analysts surveyed by Bloomberg.
Ranbaxy won’t have the generic market all to itself. Watson Pharmaceuticals (NYSE:WPI) has the rights to sell an authorized generic of Lipitor, which generated nearly $11 billion in revenue last year. Under the deal, which runs until November 2016, Pfizer is manufacturing and supplying Watson with all dosage strengths of the product, in exchange for a share of sales.
New Jersey-based Watson is getting right to the task. It has shipped about 1.5 million bottles of generic Lipitor to customers, including distribution centers and about 28,000 pharmacies, Watson spokesman Charlie Mayr told The Wall Street Journal. Some of the pharmacies should have received the product already and have it available to patients, he added.
Watson Chief Executive Paul Bisaro said in an interview on CNBC that the company is selling its generic version of Lipitor at a 50% discount to the recent price of the branded drug. Listed prices have ranged from $3.50 to $5 per pill, depending on the region of the country. Six months from now, as new generic competitors join the fray, prices are likely to decline further.
Pfizer’s efforts to squeeze every last dollar from Lipitor have been well documented on InvestorPlace.com. Besides the patent settlement with Ranbaxy, Pfizer is offering co-pay cards that lower a patient’s cost for the drug, and it’s making deals with drug-benefit plans to fill prescriptions with brand-name Lipitor. Last week, Pfizer said it’s partnering with Diplomat Specialty Pharmacy in Flint, Mich., to mail Lipitor to patients who order the pills directly through the pharmacy.
The cheaper generic versions of Lipitor may spell trouble for the AstraZeneca‘s (NYSE:AZN) cholesterol drug Crestor. A recent AstraZeneca-funded study found the drugs were comparable in reversing plaque buildup in the arteries. Cowen & Co. predicted in a research note that prescription volume for Crestor is likely to decline by about 26% in the next 12 months.
AstraZeneca said in a statement that Crestor has a strong position in the U.S. market, especially for high-risk patients. The company said doctors continue to prescribe the drug for high-risk patients in many cases because they failed to achieve treatment goals on other options.
As of this writing, Barry Cohen is long PFE and AZN.