REG - AstraZeneca PLC - Annual Financial Report <Origin Href="QuoteRef">AZN.L</Origin> - Part 2
07/03/2017 14:35
- Part 2: For the preceding part double click ID:nRSG7691Ya
the labelling and approval status of currently marketed products.
Failure to obtain and enforce effective IP protection
A pharmaceutical product is protected from being copied for a limited period of time under certain patent rights and/or related IP rights, such as Regulatory Data Protection or Orphan Drug status. Typically, products protected by such rights generate significantly higher revenues than those not protected. Our ability to obtain, maintain and enforce patents and other IP rights in relation to our products is an important element in protecting and recouping our investment in R&D and creating long-term value for the business. Some countries in which we operate do not offer robust IP protection. This may be because IP laws are still developing, the scope of those laws is limited or the political environment does not support such legislation. Limitations on the availability of patent protection, the ability to obtain related IP rights or the use of compulsory licensing in certain countries in which we operate could allow for earlier entry of generic or biosimilar competitor products. This could
have a material adverse effect on the pricing and sales of our products and, consequently, could materially adversely affect our revenues. More information about protecting our IP, the risk of patent litigation and the early loss of IP rights is contained
in the Intellectual Property section on page 57, the Competitive pressures including expiry or loss of IP rights and generic competition risk on page 216 and Note 28 to the Financial Statements from page 185.
Commercialisation risks Impact
Competitive pressures including expiry or loss of IP rights and generic competition
A pharmaceutical product competes with other products marketed by research-based pharmaceutical companies and with generic or biosimilar drugs marketed by generic drug manufacturers. Approval of competitive products for the same or similar indication as one of our products may result in immediate and significant decreases in our revenues. Generic versions of products, including biosimilars, are often sold at lower prices than branded products, as the manufacturer does not have to recoup the significant cost of R&D investment and market development. Expiry or loss of IP rights can materially adversely affect our revenues and financial condition due to the launch of cheaper generic copies of the product in the country where the rights have expired or been lost (see the table in the Patent Expiries of Key Marketed Products section from page 211). For example in 2016, our US Product Sales of Crestor fell to $1,223 million (2015: $2,844 million), following the launch of generics. Additionally, the expiry or loss of patents covering other innovator companies' products may also lead to increased competition and pricing pressure for our own, still-patented products in the same product class due to the availability of lower priced generic products in that product class. Generic manufacturers may also take advantage of the failure of certain countries to properly enforce Regulatory Data Protection or other related IP rights and may launch generics during this protected period. This is a particular risk in some Emerging Markets where appropriate patent protection or other related IP rights may be difficult to obtain or enforce. Various regulatory authorities are implementing or considering abbreviated approval processes for biosimilars, allowing quicker entry to market for such products and earlier than anticipated competition for patented biologics. As well as facing generic competition upon expiry or loss of IP rights, we also face the risk that generic drug manufacturers seek to market generic versions of our products prior to expiries of our patents and/or the Regulatory Exclusivity periods. For example, we are currently facing challenges from numerous generic drug manufacturers regarding our patents relating to key products, including Brilinta, Faslodex, Byetta, Daliresp, Onglyza and Crestor. IP rights protecting our products may be challenged by external parties. We expect our most valuable products to receive the greatest number of challenges. Despite our efforts to establish and defend robust patent protection for our products, we bear the risk that courts may decide that our IP rights are invalid and/or that third parties do not infringe our asserted IP rights. Where we assert our IP rights but are ultimately unsuccessful, third parties may seek damages, alleging, for example, that they have been inappropriately restrained from entering the market. In such cases, we bear the risk that we incur liabilities to those third parties. We also bear the risk that we may be found to infringe patents owned or licensed by third parties, including research-based and generic pharmaceutical companies and individuals. These third parties may seek remedies for patent infringement, including injunctions (for example, preventing the marketing of one of our products) and damages. Details of material patent litigation matters can be found in Note 28 to the Financial Statements from page 185. If we are not successful in obtaining, maintaining, defending or enforcing our exclusive rights to market our products, particularly in the US where we achieve our highest Product Sales, our revenue and margins could be materially adversely affected. In
addition, unsuccessful assertion of our IP rights may lead to damages or other liabilities to third parties that could materially adversely affect our financial performance. Third parties may be awarded remedies for alleged infringement of their IP, for
example injunctions and damages for alleged patent infringement. In the US, courts may order enhanced (ie up to treble) damages for alleged wilful infringement of patents. From time to time we may acquire licences, discontinue activities and/or modify
processes to avoid claims of patent infringement. These steps could entail significant costs and our revenue and margins could be materially adversely affected. Unfavourable resolution of current and potential future patent litigation may require us to
make significant provisions in our accounts relating to legal proceedings and/or could materially adversely affect our financial condition or results of operations.
Price controls and reductions
Most of our key markets have experienced the implementation of various cost control or reimbursement mechanisms for pharmaceutical products. In the US, there is significant pricing pressure driven by payer consolidation, restrictive reimbursement policies, and cost control tools, such as exclusionary formularies and price protection clauses. Many formularies employ 'generic first' strategies and/or require physicians to obtain prior approval for the use of a branded medicine where a generic alternative exists. These mechanisms can be used by payers to limit the use of branded products and put pressure on manufacturers to reduce net prices. In addition, patients are seeing changes in the design of their health plan benefits and may experience variation in how their plans cover their medications, including increases in the out-of-pocket payments for their branded medications. Patient out-of-pocket spending is generally in the form of a co-payment or co-insurance, but there is a growing trend towards high deductible health plans that require that patients pay the full list price of their drugs and services until they meet certain out-of-pocket thresholds. Ongoing scrutiny of the US pharmaceutical industry, focused largely on pricing, is placing increased emphasis on the value of medications. This scrutiny will likely continue across many stakeholders, including policymakers and legislators. The new US political leadership has initiated various legislative and policy processes that could affect the ACA. US prescription drug costs and importation policies could be among the policy proposals considered in initial steps to repeal and replace the ACA. In addition to addressing the ACA directly, lawmaker and policymaker proposals are also discussing a variety of other related changes relating to, for example, tax and Medicare reform. For more information, please see Pricing of medicines in the Marketplace section from page 13. Currently it is difficult to predict what specific proposals may be directed at existing laws and regulations (including the ACA or the Medicare Part D program) and to determine the implications for the healthcare system and pharmaceutical industry. This uncertainty could impact our ability to execute our plans, strategies, and business operations. However, significantly modifying existing laws and regulations, including the ACA and those relating to drug pricing and importation, could affect private health insurance, coverage through Medicaid and the health insurance exchange marketplaces, Medicare coverage and savings provisions, and other facets of the US healthcare market, with potentially significant impacts on the pharmaceutical industry. In Europe, the industry continues to be exposed to various ad hoc cost-containment measures and reference pricing mechanisms, which impact prices. There is a trend towards increasing transparency and comparison of prices among EU Member States which may eventually lead to a change in the overall pricing and reimbursement landscape. In Emerging Markets, governments are increasingly controlling pricing in the self-pay sector and favouring locally manufactured drugs. In addition, the emergence of price referencing is seen in some markets. Concurrently, many markets are adopting the use of Health Technology Assessment (HTA) to provide a rigorous evaluation of the clinical efficacy of a product at, or post,
- More to follow, for following part double click ID:nRSG7691YcRecent news on AstraZeneca
See all newsRCS - LHH - LHH, EZRA's AI Leadership Transformation Program
AnnouncementREG - AstraZeneca PLC - Baxdrostat met primary endpoint in Bax24 Ph3 trial
AnnouncementREG - AstraZeneca PLC - Datroway improved OS and PFS in TROPION-Breast02
AnnouncementREG - AstraZeneca PLC - Total Voting Rights
AnnouncementREG - AstraZeneca PLC - Enhertu improved IDFS in early BC in DB-05
Announcement