Biotechnology is the fastest-growing segment of the pharmaceutical industry, but it almost certainly never will capture more than a small slice of the $200 billion-plus retail prescription market.
Part of the explanation lies in the complexity and high cost of most biotech products. Mainly delivered by injection, these drugs require a great deal of professional know-how to store and deliver. A year's worth of a single medication can run anywhere from $10,000 to $100,000 or more, and with the increasing emphasis on reining in soaring drug costs, reimbursement can be a challenge.
The key to biotech drugs is targeted therapy. Although many biotech drugs are extremely expensive, industry proponents point out that because they are used for small groups of patients most likely to benefit, their cost is not significantly greater than that of less expensive medications delivered to much larger numbers of patients.
The biotech industry has concentrated its marketing efforts on hospitals, physician practices and specialty pharmacies that are capable of providing a full range of therapeutic services to these relatively narrow patient populations, including those with specific types of cancer, multiple sclerosis, or autoimmune-inflammatory disorders like rheumatoid arthritis and lupus.
Drug chains have been able to claim a part of this market by creating specialty pharmacy units separate from their regular retail business. Since 1999, for example, Walgreens Specialty Pharmacy has provided injectable drugs and other medications, many of them biotech products, to patients with complex health conditions, including cystic fibrosis, growth hormone disorders, H1V/AIDS and chemotherapy-related conditions like anemia.
Walgreens Specialty Pharmacy is a part of Walgreens Health Initiatives, which offers pharmacy benefits management, as well as mail order and home care services to corporate clients. By combining the provision of costly biotech products with drug therapy management services and counseling, Wal-greens is able to claim better patient outcomes, as well as financial savings, for its clients.
PharmaCare Specialty Pharmacy, a unit of CVS' PharmaCare prescription benefit management subsidiary, is another leading provider of biotech products aimed at a range of diseases, including autoimmune disorders, hepatitis, cancer, multiple sclerosis, respiratory ailments, rheumatoid arthritis and others.
Until April of this year, PharmaCare Specialty Pharmacy was known as CVS ProCare, which served some 120,000 patients and almost 50,000 physicians across the country. PharmaCare provides specialty pharmacy services not only through home delivery, but also to walk-in patients at 38 locations in 21 states across the country.
In late July, PharmaCare nearly doubled in size by adding Eckerd Health Services, Eckerd's billion-dollar mail order and pharmacy benefits management businesses. The merger was part of the deal in which CVS acquired some 1,260 Eckerd stores from J.C. Penney. Eckerd Specialty Pharmacy Services, a part of Eckerd Health Services, is another unit that has targeted the fast-growing biotech drug market.
Hundreds of biotech drug companies are involved in laboratory research around the world. Most are small and undercapitalized, without the resources to take their embryonic product concepts to the clinical research and development stage. Many of them act in effect as industry farm teams, licensing promising biologic drug candidates to the largest pharmaceutical companies. At the top of the U.S. biotech market are a handful of companies like Amgen, Genentech, Serono and Genzyme that have attained sales of a billion dollars or more.
Amgen, with more than $8.3 billion in sales last year, is more than twice the size of the next-leading U.S. biotech manufacturer, Genentech, whose revenues topped $3.3 billion in 2003.
Amgen's success has been based largely on several billion-dollar-plus products. Epogen, a drug used to counter anemia in patients, undergoing kidney dialysis, has been the company's leading product, with sales of more than $2.4 billion. Aranesp, its second-generation. red blood cell-boosting drug, is approved for anemia associated with cancer chemotherapy, as well as kidney dialysis.
Amgen also has a product called Neupogen ($1.7 billion) for increasing white cell counts in chemotherapy patients and a second-generation product in the same category called Neulasta. In 2002, the company gained the rheumatoid arthritis drug Enbrel, a $1.3 billion product, in its $10 billion acquisition of Immunex. Enbrel also has been approved for the treatment of psoriasis.
Genentech, in which Roche has a majority ownership stake, has launched three drugs in the past year: Avastin, a cancer treatment; Xolair, a drug for asthma; and Raptiva, for patients with psoriasis. Avastin, which blocKs the blood supply to cancer cells, is expected to be a blockbuster, with sales eventually exceeding $2 billion. Only Genentech's Rituxan, a drug used to treat non-Hodgkin's lymphoma, is currently a member of the billion-dollar club, with sales last year of about $1.4 billion.
The biotech industry is now more than two decades old. Some of the oldest biologic products now have become attractive targets for generics companies, despite the high costs associated with manufacturing biologics. A 2003 study by Front Line Strategic Consulting forecasted that the generic biologics market would reach $12 billion in 2010, with such products as recombinant human insulin and anemia drugs like erythropoeitin leading the way.
Click here to view table showing top 10 biotechnology drugs by US sales in 2003