Some $160 billion in branded sales will be exposed to copycat rivals by 2015, according to a new report by market analysts at Datamonitor but, rather than it being a good time for the generics industry, the sector isn't without its challenges as aggressive merger and acquisition activity takes hold, while biosimilar approvals and authorised generics make their dent in growth dynamics.
The rising cost of healthcare globally is driving the pace of generic drug take-up, with governments implementing a raft of new powers on pharmacists, for example, to substitute generic drugs for branded ones. But, while volume growth is expected to be considerable, Datamonitor believes that greater scrutiny of drug prices will mean such expansion in volume is unlikely to translate into higher market value.
This year, some key blockbusters will be coming, or have come, off patent, including Merck & Co's Zocor (simvastatin), Bristol-Myers Squibb's Pravachol (pravastatin), Pfizer's Zoloft (sertraline), Sanofi-Aventis' Ambien (zolpidem), GlaxoSmithKline's Zofran (ondansetron) and Novartis' Lamisil (terbinafine). Datamonitor market analysts noted: “Within the next five years, an estimated $80 billion in 2005 product sales will be exposed to generic competition, while a further $77 billion will be subject to generic incursion between 2011 and 2015.”
With such significant opportunities being presented for the generics companies, many are readying themselves to take advantage, and some significant unions have taken place in recent times, including Teva's acquisition of IVAX, Sandoz snapping up Hexal and Eon Labs and a marriage between Croatia's Pliva and either Barr or Actavis on the cards.
An alternative strategy being pursued is to partner a branded pharmaceutical company to market and distribute a so-called 'authorised generic', products that are usually manufactured by the originating brand company, but distributed and sold as generics. Joanna Chertkow of Datamonitor says: “The creation of an authorised generic agreement with a patent challenger can provide a mutually beneficial end to costly patent litigation, with the branded pharmaceutical company obtaining a guarantee that generic competition will not be launched for several years while the generic company gains a period of market exclusivity.” But this also means the highly lucrative 180-day exclusivity period is impinged on. “It is feared,” Chertkow says, “that the increased competition within the 180-day exclusivity period may act as a deterrent to future patent challenges, which could threaten the long-term profitability of the generics industry.” The Federal Trade Commission is currently investigating the claim that such agreements are, in fact, anti-competitive.
But, while there are challenges in the shape of pricing pressures and increasing competition, Datamonitor says there are several opportunities to be seized - including the major patent expiries in certain therapy areas such as HIV, cardiovascular and asthma. The biosimilars market also presents a good option for future growth, with the first products approved in the EU in April 2006 and, somewhat unexpectedly, the US in May 2006. Perhaps one of the most exciting prospects is the underdeveloped Japanese generics market - which is currently estimated to be worth between $3 billion and $4.8 billion, but only has a 5-8% share of the value of the total pharmaceutical market and is expected to experience substantial growth over the next four to five years.
“The strong growth expected in this market and the pricing pressures and stagnating growth in the more mature generics markets in the EU and the US, mean that Japan will become more important in driving the future development of the global generics market,” Chertkow finishes.