Wacky World of Generics: Lipitor Edition--Or The End of The World as We Knew It

Circle the date: November 30, 2011.

That is the date when the first generic version of Pfizer's ultra-super-megablockbuster atorvastatin (Lipitor) will enter the market. At least, it sure looks that way after Pfizer and Ranbaxy settled patent litigation in the US and several other important markets. (You can read all about the settlement in The Pink Sheet DAILY.)

It will be the largest generic launch in history. And it will be as good a date as any to declare the end of the blockbuster era.

That's because Lipitor is not only too big for Pfizer to replace, it is--figuratively at least--too big for the industry to replace. There is simply too much infrastructure and too few blockbusters to replace Lipitor--or Plavix, or Zyprexa, etc. etc.

By now, the patent "cliff" facing Big Pharma at the start of the next decade is well understood. Less clear is what the industry will look like when it emerges on the other side.

The Pfizer/Ranbaxy settlement agreement certainly doesn't answer that question. But it does do two things. First of all, it assures Pfizer of an extra year of protection on Lipitor beyond the earliest potential "at-risk" launch date of a generic, and about five months more protection than investors seemed to expect. For a brand generating about $7.5 billion a year in the US, that is big news. (So big, in fact, that the settlement caused UBS to cut its ratings on some of the largest pharmacy benefit management companies in the US, because they will miss out on the potential profits from a generic launch in 2010.)

More importantly, it sets a deadline for Pfizer to settle on its post-Lipitor future. We have already offered one modest proposal for the company to think about, but there are plenty of other creative ideas around for how Pfizer could reinvent itself. (Not to mention old standbys like buying Wyeth or Amgen or Merck or all three.)

The point is that Pfizer now knows when the day after Lipitor will come. There is nothing like a deadline to focus the mind.