Often in business, one industry’s loss is
another’s gain.
As the pharmaceutical industry suffers through
a period of extensive losses of patents on key drugs, retail pharmacies
are reaping the benefit because they earn substantially more money
dispensing generic medicines than brand names.
Recently, Walgreen Co. said higher sales of generic
drugs helped push its first-quarter profit up 5 percent, besting
estimates and increasing its stock price. Sales of generic drugs
were driven higher by nonbranded versions of Sanofi-Aventis Group
allergy medication Allegra, Walgreen
said.
Benefits from patent losses are expected to accelerate
because the pharmaceutical industry entered a period of intense
patent losses last year. Lehman Brothers estimates that branded
drugs with total sales of $70 billion in 2005 through 2010 will
face generic competition.
This year, Lehman anticipates the industry will
relinquish $11.8 billion in sales to generics as numerous drugs
including two of the top ten selling drugs — Merck & Co.’s
cholesterol pill Zocor and Pfizer’s
antidepressant Zoloft — lose exclusivity.
The patent losses come at a particularly fortuitous
time for retail pharmacies because the industry is facing Medicaid
cuts that analysts say will crimp profits. The new Medicare drug
benefit is also expected to negatively affect earnings initially,
but opinions are divided about its long-term impact.
“Without a doubt the generic benefit will
offset what else is going on in the industry,” said Meredith
Adler, an analyst at Lehman Brothers.
