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Women with brittle bones could be in for a bit of a windfall come Feb. 6. That's when Merck's (MRK) Fosamax, the market-leading osteoporosis drug, comes off patent and patients can start buying generic versions. If history holds, prices for the generic medication, called alendronate, should run 40% to 60% less than the $90 a month Fosamax tends to cost.



Those deep discounts on generics are creating unease within the pharmaceutical industry, however. This year alone more than 10 major drugs will lose patent protection [BusinessWeek.com, 2/6/08], and there are no potential blockbusters emerging from the development pipeline to take their place. In 2010 the blockbuster, cholesterol-lowering medication Lipitor loses patent protection; the world's biggest-selling drug pulled in $13 billion for Pfizer (PFE) last year, and the company has yet to come up with a comparable replacement.



Pharmaceutical consultancy IMS Health says that, in all, by 2011 drugs worth some $60 billion will come off patent. Makers of generic drugs, which already hold 60% of the U.S. prescription market, have nowhere to go but up. "Within the first six months to a year of a brand going off patent, it loses 80% of its revenues to generic competitors," says Amanda Zuniga, a senior analyst with the market research firm Cutting Edge Information.



Generic Alternative

Big Pharma, however, is trying to stem that rush to generic makers by creating a relatively new category, authorized generics. Essentially, the original manufacturer licenses exact copies of its branded drug to a generic manufacturer, allowing it to hang onto some of the generic revenues. This approach also appeals to those patients who feel most comfortable with a name they know. Merck, for example, signed a deal on Jan. 11 to supply Fosamax to Watson Pharmaceuticals (WPI). "It's become a huge tactic for the pharmaceutical companies," says Zuniga. "It's their last chance to remain competitive."



Medical specialists advise patients to treat authorized generics just like any other drug in a category, however. "There is no advantage to a branded generic over any other generic," says Catherine Tom-Revzon, a pediatric clinical pharmacist at Montefiore Medical Center in New York. "There is no reason to remain on the brand name if a generic is available."