Abstract
The New Year started with cautious optimism as the strong acquisition activity in December 2023 continued into 2024. An E&Y analysis concluded that the top 25 global pharmaceutical companies are holding $13,700 billion on their balance sheets available for further expansion. This is one of the highest starting positions for some time. Indeed, one European pharmaceutical company recently announced an investment in a vast 35-acre manufacturing plant in Ireland. Favourite targets for acquisition are in oncology and rare diseases and the current focus is towards glucagon-like peptide 1 molecules (GLP-1) for weight loss and the antibody-drug conjugates (ADCs) for cancers.
On the medico-political front things are difficult. The Biden administration has announced it is introducing a new policy to allow the Government to seize medicine patents from pharmaceutical companies where the pharmaceutical development was taxpayer-funded but the resulting medicine became unaffordable by USA patients. These are called “March-In” patent rights and were covered by the Bayh-Dole Act which was passed in 1980 but until now unused.
Shareholders at the Interfaith Centre on Corporate Responsibility (ICCR) have been lobbying pharmaceutical CEOs on their patenting strategies and in particular the “Add On” patents. ICCR has been quoting specific products which have enjoyed extended years of exclusivity and a lot of price increases.
Few countries allow price increases to their medicines but in the USA last year there were over 1,400 individual price increases. The Biden administration has identified about 50 medicines where prices have increased faster than inflation and may be subject to rebates as part of the unpopular Inflation Reduction Act (IRA). The government’s health insurance program (Medicare) for those aged over 65 and some disabled people will receive the rebates. Another 500 medicines had their prices increased in January 2024.
The Senate Committee on Health, Education, Labour and Pensions (HELP) chaired by Bernie Sanders has been looking into price comparisons between the USA medicines and other OECD countries. CEOs have been called to discuss how the cost of certain USA medicines were 10-times higher in the USA than in Canada or Europe. Now two of the US CEOs may be subpoenaed to attend the Senate Committee. One can see why the discovery company CEOs are finding the USA medico-political environment difficult. The pricing of patented medicines has often been higher in the USA than in Canada whilst the generic medicine prices in the USA have tended to be similar or lower than those found in Canada. Florida has just become the first USA state to get FDA approval to import drugs from Canada citing a 2021 Biden executive order.
In an unusual move Poland, Romania and Hungary are being sued over their Covid debts with Poland being challenged that it has failed to pay for 60m doses of Covid vaccines at a value of 1 billion euros.
On the generic front there are some positive signs with fewer price reductions seen in USA generic medicines compared to previous years. Generic companies are becoming more selective in their ANDA filings, such as biosimilars, inhalers, peptides and depot injectables. As a result of this selectivity, USA ANDA regulatory filings have fallen to 733 (2023) from 1473 (2014) whilst ANDA withdrawals have reduced to 200 (2023) from 600 (2018). The time spent gaining ANDA approval has also shortened from 42 months (2014) on average to 22 months (2023). All good trends.
Whilst some countries are seeking a faster inspection of pharmaceutical plants from the FDA, the proportion of adverse inspection reports that were classified as Official Action Indicated (OAI) is now at 13% (2023). This is similar to the pre Covid levels but lower than earlier years at 20% (2014). Regulatory uncertainty remains high in the generic world although many companies have mediated this by building multiple manufacturing sites. Even so, the largest Japanese generic pharmaceutical company is pulling out of the USA marketplace and divesting its business to a Taiwanese generic pharmaceutical company.
Over the last 10 years the EV/EBITDA ratio of the seven leading western generic companies has dropped from x11 to x7 which must be concerning. By comparison the ten international Indian generic companies have an EV/EBITDA ratio which has wobbled around x13. Indian companies focussed on the India domestic market have a higher EV/EBITDA at x19 whilst the Indian API/DCMO companies have an EV/EBITDA of x15. The higher values in India are driven by corporate performances and central bank interest rates.
In 2024 there will be a new Secretary General of the International Generic and Biosimilar Medicines Association (IGBA) after a successful five years of leadership by Suzette Kox.
On a positive note, in Europe a new class of antibiotics has been announced which will fight carbapenem-resistant gram-negative infections.
In this issue, we continue with our global footprint of manuscripts with contributions from India, Lebanon, USA and France.