Generic drugs play a significant role in treatment decisions, helping to ensure access and reduce costs for millions of patients.
Yet success is not guaranteed; the generics market presents specific business challenges requiring careful consideration.
There remains a high demand for innovative medicines that address unmet needs and pinpoint challenging illnesses. The industry
faces the imminent expiration of many patents, which has significant revenue implications for the whole system. Evolving legislation,
including healthcare reform and the drive toward a biosimilar pathway, will impact the demand for generic drugs.
Timothy R. Wright
In this complex but opportunity-laden environment, generics companies must carve out new business strategies in order to compete.
Generics' Growing Presence
The rapid emergence of the generic drug industry has been fueled by pressures on Big Pharma. Meanwhile, decreasing pipeline
innovation, combined with consumer resistance to rising branded drug costs in developed nations, has created significant opportunity
for generic drug companies. The recent economic downturn—and the continual demand for greater access to care and less expensive
generic drugs—provides further opportunity for generic manufacturers to thrive. Today, 75 percent of all medicines prescribed
in the US are filled as generics.
The generics industry has not only grown in size, it has also changed in composition. Just a decade ago, the generics industry
comprised a multitude of small companies. But with continued marketplace pressure on Big Pharma, major players began considering
the generics space with fresh eyes; in the last two years alone, 11 major pharmaceutical companies created or acquired generics
units, a magnitude equal to the total number of generics companies created by branded manufacturers between 1990 and 2008.
Big Pharma's entrance into the generic market, along with the growth of independent generics firms, signals stiffer competition
in coming years, with volume spread across more players. As Mike Chace-Ortiz, senior director of product strategy for Thomson
Reuters, noted at the June 2010 Argyle Executive Forum for Leadership in Pharmaceuticals and Biotechnology, the generics market
will grow only slightly or be flat in the coming year. If this is indeed the case, prospering in the competitive world of
generic drugs will require business strategies to transform—to become, as it were, "less generic."
Enter the Age of the 'Supergeneric'
While generics companies are not usually regarded as innovators, generic drugs require less capital investment than novel
therapies. This opens the door for innovative development work in the so-called 'supergeneric' drug space—an area of new innovation
leveraging existing competencies in both novel and generics models and specialty medicine channels. As opposed to commodity
generics—which are bioequivalent clones of the original drug—supergenerics differ from the original product in formulation
or method of delivery.
While supergenerics represent one path to renewed success, some generics companies have opted to develop proprietary molecules
in order to tap into the lucrative innovative market. Before the generic firm Pliva was acquired by Barr Pharmaceuticals,
it was responsible for the discovery of the highly successful antibiotic azithromycin. In 2002, the drug, eventually marketed
by Pfizer as Zithromax, was the most-prescribed brand name oral antibiotic in the US, and the second-highest-selling antibiotic
in the world.
Meanwhile, Teva has entered the marketplace with new chemical entities (NCEs). In addition to the more than 140 generics products
it markets domestically, Teva is developing innovative drugs in the neurological and autoimmune therapeutic areas. Teva's
major success has been Copaxone, which is now an important physician-prescribed treatment for multiple sclerosis (MS) in the