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Projections of Drug Approvals, Patent Expirations, and Generic Entry from 2000 to 2004


C. Daniel Mullins, Ph.D.
Francis Palumbo, Ph.D., J.D.
Bruce Stuart, Ph.D.

University of Maryland School of Pharmacy


University of Maryland Center on Drugs and Public Policy

A background report prepared for the
Department of Health and Human Services'
Conference on Pharmaceutical Pricing Practices, Utilization and Costs

August 8-9, 2000

Leavey Conference Center, Georgetown University
Washington, DC

Final Version

In discussing pharmaceutical costs and pricing practices, it is important to have some sense of the market mix of branded versus generic drugs. Despite the debate over market practices, expanded competition and new government programs, pharmaceuticals are among the most highly regulated products in the United States. Thus, any approvals of a new drug application (NDA), or abbreviated new drug application (for generic drugs) must withstand the close scrutiny of the Food and Drug Administration. In this paper, we discuss the potential for approvals of new drugs and generic drugs and, with regard to the latter, take into consideration the possible expiration times of patents on the innovator products. On its face, this would appear to be no more than a simple mathematical problem. However, the pharmaceutical regulatory world is far from simple. For example, patent expiration is at best a reasonable guess since there are many strategies for extending patents and there are many regulatory incentives (e.g., pediatric studies) for granting extended periods of market exclusivity.

We examine two separate categories in this paper. First, we estimate the number of “pipeline” drugs, those new drugs under development, that may emerge in the next 2-5 years. Second, we consider the expiration of patents and exclusivity periods and estimate the number of branded drugs that will be subject to generic competition during the period from 2000 to 2004. Finally, we offer some concluding remarks on the potential impact of generic drugs on prescription drug costs. For these analyses, we used several sources: 1. Published literature 2. The FDA “Orange Book" and 3. FDA CDER Reports to the Nation for 1997, 1998 and 1999 and New and Generic Drug Approvals: 1998-2000.

Pipeline categories

The process of drug development has evolved into an extremely complex procedure. The average drug takes 12 years and $270 million from initial discovery to public usage.(1) For every drug that is deemed marketable by the FDA, thousands of others are considered either unsafe or ineffective clinically. Beginning with preclinical research, new chemical entities (NCEs) are discovered in laboratories and tested in animals for safety and biological activity. If a compound is thought to be safe and effective as a chemical agent, a pharmaceutical company then submits an investigational new drug application (NDA) to the FDA. Once approved for clinical studies, a three-phase process begins where safety and efficacy are continually assessed with increased scrutiny and an increasing patient population. Approximately 70% of drugs entering clinical trials complete Phase I, 33% complete Phase II, and 27% complete Phase III.1 After Phase III is completed a company then submits a NDA to the FDA. Those drugs that are approved for marketing comprise an extremely small percentage of new chemical entities (NCEs) that are tested. In fact, from thousands only a handful of drugs undergo clinical studies, and even fewer receive market approval.

Table 1 presents the number of new drugs, within treatment categories, that are currently undergoing Phase II/III or Phase III clinical trials in the United States or are awaiting drug approval in the US for treatment of human diseases and disorders.(2) It is presumed that drugs undergoing at least Phase II/III have the greatest chance of getting approval from the FDA within the next 2-5 years, but only one in every 3.5 drugs entering Phase II ultimately is approved by the FDA as a marketable drug. Some drugs may be represented under several different therapeutic categories in Table 1 since they are tested for more than one indication. Although Table 1 presents a total of 643 potential drug approvals, many drugs will not make it to the market because later human trials will demonstrate lower than anticipated efficacy results or unfavorable side effect profiles. To put these numbers in context, a list of the number of NDA and generic drug approvals by year is provided in Table 2.

Patent expirations and entry of generic drugs

There were fewer drugs that went off patent in 1997 or 1998 than the anticipated number of drugs with patent expirations in the years 2000 – 2004. A list of the number of drug patents that expire in years 2000-2004 grouped by treatment category is provided in Table 3. This list highlights particular therapeutic categories that are most susceptible to generic entry; however, there are several caveats. First, some drugs have several patent numbers due to different treatment indications and are therefore represented more than once in the table. Second, many manufacturers are successful at extending the effective patent life of their product by obtaining new patents. Third, even without additional patents, some manufacturers are able to gain exclusivity for additional months or years. Finally, many manufacturers have developed newer medications with improved efficacy or reduced side effects by the time their products' patents expire. In such cases, if patients are switched to the newer medications, the patent expiration on the older product does not lead to as much generic competition.

The Food and Drug Administration’s own statistics can assist in estimating the emergence of generic products onto the market. The overall number of generic approvals has decreased over the past three years, yet the number of approvals representing the first time a generic drug was available for the brand name product has remained stable for at least the last two years, as shown in Table 3. There has been some speculation that the number of generics and first generic entrants may increase over the next five years.

It is not only the number of drugs going off patent that will influence the expenditure equation. The dollar value of expiring patented drugs will increase significantly over the next five years, as compared to the last 3 years. Warburg Dillon and Read, a brokerage firm, estimated that the value of sales of expiring patented drugs was only $1.1 billion in 1998 and $3.3 billion in 1999 compared with projected values of $6.5 billion, $6.7 billion, $2.8 billion, $6.0 billion and $3.5 billion for years 2000 - 2004, respectively.(3) Thus, estimates predict that the number of dollars spent on drugs that are subject to generic competition over the next five years will be between 2 and 5 times the annual dollar volume of recent years.

The impact of greater numbers of patent expirations on drugs with high sales will help to curb the impact on spending. Furthermore, the extent of generic entry may be greater due to increased pressure for less expensive products. According to Standard & Poor, "spurred by the expanding influence of managed care and by the large number of branded drugs coming off patent within the next few years, generic drugs are expected to account for over two-thirds of all prescriptions written by 2003, up from 46% in 1998 and 22% in 1985. In dollar terms, the retail market for generic pharmaceuticals is expected to reach $20 billion by 2003, up from an indicated $14 billion in 1999.(4)

Table 1. Number of Drugs with Potential Approval in the US within the Next 5 Years

Treatment category Number of drugs with potential approval

1. Cancer and cancer related treatments


2. Anti-infective treatments


3. Central nervous system treatments


4. Cardiovascular/cerebrovascular treatments


5. Respiratory treatments


6. Endocrine, nutritional, metabolic and immunity treatments


7. Topical treatments


8. Hormonal treatments


9. Musculoskeletal and connective tissue treatments


10. AIDS and AIDS related treatments


11. Analgesic treatments


12. Digestive system treatments


13. Blood disorder therapies


14. Genitourinary treatments


15. Miscellaneous treatments


Source: Engel S. What's in the Pipeline? A supplement to Med Ad News. July 1999. Engel Publishing Partners, U.S.A. Fourth edition.

Table 2. Number of NDA and Generic Drug Approvals and First Generic Entrant by Year

Year NDA Approvals Generic Drug Approvals First Generic Available
1995 82 207 NA
1996 131 212 NA
1997 121 273 NA
1998 90 225 46
1999 83 186 43

Sources: CDER Report to the Nation, 1998 and1999 ( and CDER New and Generic Drug Approvals, 1998-2000 (

Table 3. Number of Drugs with Patents Expiring in Years 2000-2004, Grouped by Treatment Category

Treatment category

2000 2001 2002 2003 2004

1. Cancer and cancer related treatments

5 6 4 2 10

2. Anti-infective treatments

2 6 2 3 5

3. Central nervous system treatments

6 2 2 5 3

4. Cardiovascular/cerebrovascular treatments

13 13 6 17 4

5. Respiratory treatments

5 3 4 5 2

6. Endocrine, nutritional, metabolic and immunity treatments

3 2 2 3 2

7. Topical treatments

5 1 3 7 1

8. Hormonal treatments

1 4 1 5 2

9. Musculoskeletal and connective tissue treatments

1 0 1 0 0

10. AIDS and AIDS related treatments

2 2 0 1 1

11. Analgesic treatments

1 5 5 1 3

12. Digestive system treatments

5 1 5 0 4

13. Blood disorder treatments

0 0 0 0 0

14. Genitourinary treatments

1 0 1 3 3

15. Miscellaneous treatments

3 8 5 6 6

Source: FDA Orange Book:


1 Montagne M. "The Role of Clinical Research in the Drug Development Process" in Clinical Research in Pharmaceutical Development, Bleidt B and Montagne M, eds. Marcel Dekker, New York, 1996.

2 Engel S. What's in the pipeline. A supplement to Med Ad News. July 1999. Engel Publishing Partners, U.S.A. Fourth edition.

3 Treppel JI, Forman AS, Seto AS, O'Brien GG for Warburg Dillon Read. "Specialty Pharmaceuticals Industry: The Thrifty Fifty" (May 5, 1999).

4 Standard & Poor's Healthcare: Pharmaceuticals Industry Survey (December 16, 1999).