Look to 'Third Sector' drugs for faster market growth, says IMS Health

For decades, the pharmaceutical market has divided between branded (innovator) drugs and generics, with the latter now the source of more than 85% of prescriptions in the US, and the former representing over 80% of overall industry revenues. Besides differing on price and on single- or multiple-sourcing, each category has a different approval pathway, with generics able to piggyback on innovator drugs’ clinical trial data. Now, says IS Health in a new white paper, there is a “Third Sector” emerging—non-patent-protected chemical entities with distinctive or exclusive routes of administration, product combinations or dosage forms. The IMS definition excludes vaccines, and biological products except for already accepted biosimilars, and a few other categories, to arrive at an estimated market value of $23.7 billion (global) in 2013, growing at about one percentage point per year faster than the overall pharma market. 2018 revenue is estimated at $32 billion.

The approval pathway and exclusivity of these Third Sector products falls roughly between that of new (innovator) drugs and generics. In the US, it is the 505(b) 2 approval pathway, which combines new and existing testing data; in Europe, it is Article (10) 3. In both cases, the products can be classified as non-substitutable with other forms of the active pharmaceutical ingredient—a key commercial driver. Examples include Mundipharma’s Norspan patch, based on buprenorphine, for pain relief (2013 sales: $353 million); Abbvie’s Duodopa, a formulation of carbidopa and levodopa delivered by a novel intra-intestinal pump, for Parkinson’s disease ($172 million); and Abraxis BioScience’s Abraxane, a version of paclitaxel formulated for easier uptake for cancer patients ($633 million).

The clear counterexample to these successful products is Exubera, the inhaled form of insulin commercialized by Pfizer in 2006, but then abandoned due to poor sales a year later, leading to a $2.4-billion write-off. Exubera failed, says IMS Health, because it more expensive than conventional insulin products, couldn’t deliver better clinical results, and had poor or even negative patient acceptance.

The Third Sector concept isn’t wholly new; IMS Health acknowledges Teva Pharmaceuticals’ concept of New Therapeutic Entities (NTEs), which Teva announced in 2012 and has followed up with over a dozen approval submissions. Teva defines NTEs as “a known molecule that is formulated, delivered or used in a novel way to address specific patient needs.” And the concept is a little fuzzy around the edges—a branded product whose patent life is lengthened by an extended-release formulation is not included, but if the originator company let the patent lapse and someone else came along with an extended-release form, that would be. But it fits very nicely into the forces driving pharma market access today: when a company can show a solid benefit in patient acceptance, lower price (than a branded choice), or better clinical results, a higher cost can be justified and accepted by payers. It also calls for manufacturers to pay closer attention to how well a drug is accepted by patients in addition to the therapeutic benefit.