As Diabetes Explodes, Big Pharma Is Gearing Up

Diabetic injecting insulin
Diabetic injecting insulin

Diabetes is a growing global scourge, but for Big Pharma it's more of a lifesaver. In the U.S. alone, a whopping 105 million people have diabetes or prediabetes, according to new estimates from the Centers for Disease Control and Prevention. Nearly 26 million Americans have diabetes, a 10% increase from 2008. And an estimated 79 million adults have prediabetes, a staggering 39% increase from 2008. No wonder pharmaceuticals companies are eager to tap the market.

Characterized by high blood-sugar levels, diabetes results from the body's difficulty to produce and/or use insulin -- a hormone that helps the body use blood sugar for energy. Type 1 diabetes develops when the body can no longer make insulin. In Type 2 diabetes, which accounts for 90% to 95% of cases, the body gradually loses its ability to use and produce insulin.

In prediabetes, which affects 35% of the adult population, blood sugar levels are higher than normal, but not high enough to be diagnosed as diabetes. Prediabetes, though, raises a person's risk of Type 2 diabetes.

Hefty Price Tag

Despite its growing prevalence, the disease can't be taken lightly. Diabetes is the seventh-leading cause of death in the U.S. and is a major cause of heart disease, stroke and high blood pressure. Diabetes is also the leading cause of kidney failure, nontraumatic feet and leg amputations, nervous system damage and new cases of blindness among adults in the U.S.

All that adds up to a hefty price tag. Diabetes, the CDC says, costs $174 billion annually. In November, health insurer UnitedHealth Group (UNH) released a study projecting that the disease will cost the nation $3.35 trillion over the next decade, with diabetes and prediabetes costing almost $500 billion annually. A 2007 study by the American Diabetes Association estimated that 1 in every 10 health care dollars is attributed to diabetes.

The CDC is working with the National Institute of Health on the National Diabetes Prevention Program, as provided for in the landmark Affordable Care Act. It estimates that if current trends continue, as many as 1 in 3 U.S. adults could have diabetes by 2050. Just in 2010, 1.9 million new cases were diagnosed in adult Americans. The CDC estimates that 84% of adults diagnosed with diabetes take insulin and/or oral medication.

The Top-Selling Drugs

In 2009, the U.S. diabetes market grew 17% from 2008, reaching $14.9 billion, according to data from health care information company IMS Health. Worldwide, the market generated sales of over $25 billion, according to independent business information provider Visionagain. By 2019, Morningstar projects the worldwide diabetes market, excluding insulin, will grow to over $55 billion.

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That's why pharmaceutical companies, in search for more revenue in light of the many high-price drugs that are coming off patent, are focusing much of their efforts on this growth market. According to IMS Health, the top-selling diabetes drugs in the U.S. now are Takeda's oral drug Actos, with nearly $1.8 billion in sales in the first half on 2010; Sanofi-Aventis's (SNY) Lantus products, with nearly $1.5 billion in sales, and Merck's (MRK) Januvia, with $854 million in sales. The total diabetes market in the first half of 2010 was $8.7 billion, nearly as much as full-year 2005's market of $9.3 billion.

Rounding out the top five diabetes drugs in the U.S. are Novo-Nordisk's (NVO) Novolog and Eli-Lilly's (LLY) Humalog, both of which are analog insulin drugs. Other players include Lilly and Amylin's (AMLN) Byetta, which had fourth-quarter 2010 sales of $174.6 million, and Novo-Nordisk's Victoza, which had sales of roughly $127 million in the third quarter. Both are antidiabetes hormone analog drugs. And then there's the controversial oral pill Avandia from GlaxoSmithKline (GSK), whose sales declined to roughly $112 million in the third quarter.

Drugs that are analogs of human insulin, such as Lantus, held 42% of the U.S. market, followed by so-called glitazones, such as Actos and Avandia, with 28% of the market, and DPP-4 Inhibitors, such as Januvia and Bristol-Myers Squibb's (BMY) and AstraZeneca's (AZN) Onglyza, with 14% of the market, according to IMS Health data.

An Epidemic in China and India

Big Pharma continues to push ahead. In January alone, Lilly and Boehringer Ingelheim announced an agreement to jointly develop diabetes compounds. And a new class of drugs, SGLT-2 inhibitors, holds the promise of becoming blockbusters, according to Morningstar, with Bristol and Astra further along in development of these compounds.

But diabetes research isn't necessarily easy. MannKind's (MNKD) inhaled insulin, for one, was rejected last week by the Food and Drug Administration. And when Roche faced setbacks with its once-weekly insulin, it resorted to massive job cuts.

Diabetes is also becoming a global problem, and in some countries, such as China and India, an epidemic. Pharmaceutical companies are paying attention. Lilly recently announced plans to open a research center focused on diabetes in China.

As long as diabetes cases keep expanding, this market will become increasingly important to Big Pharma.

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