A generic drug is identical — or bio-equivalent — to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use. They need to have same high quality, strength, purity stability as that of branded drugs and generic versions of the branded drugs only come to market when the patent of the branded drugs expire.
The cost involved in developing a generic drug is very low considering the shortened development process compared to the innovator.
- With nearly 8 out of 10 prescriptions filled in the US for generic drugs, the use of generic drugs is expected to grow over the next few years.
- Estimates show that the Generic drugs will account for nearly $350 Billion in revenue by year 2015 with an expected CAGR of 12% over next five years.
- The big difference between generic and branded drugs is the price; with the generic drugs costing 80 to 85 percent lower than the branded product.
- According to the Congressional Budget Office, generic drugs save consumers an estimated $8 to $10 billion a year at retail pharmacies. Even more billions are saved when hospitals use generics.
Top Market Opportunities
First to file exclusivity – The USFDA provides approval to a generic manufacturer to market their drug exclusively for 180 days through its First to file exclusivity policy. In such a scenario, for a particular drug there would be only two suppliers; one being the innovator and the second is the generic company first to file. This exclusivity also prevents other generic manufacturers thereby providing advantage to the first filed generic firm. One of the most relevant examples is of Lipitor for which Ranbaxy was awarded the exclusivity by USFDA
Quality deliverables – As previously mentioned the USFDA is stringent in its regulatory guidelines; pharmaceutical companies should have robust quality systems and provide quality deliverables to win a higher margin of revenue in the market.
Expansion of manufacturing base to cost effective countries – With high manufacturing costs in US, generic drug manufacturers should expand their manufacturing base to countries such as India, China and other South East Asian countries which provide high cost advantage. Such a move would also help them in supplying their drugs at a competitive cost compared to the generic manufacturers from those countries.
The Global Generic drug market is witnessing growth due to the key factors such as –
- Demand for Cost Effective medication – The therapeutic equivalency and lower cost of generic drugs are proving to be cost effective medication.
- Rising Healthcare expenses – The rising healthcare expenditure is forcing government and insurance companies to identify ways to control healthcare costs. Thus creating increased demand for generic drugs.
- Increased aging population – Globally there is an increase in aging population which would lead to the higher drug utilization and hence an increased focus on generics. According to GlobalData, the elderly will make up to 22 percent of the population of US by 2020 which is around 19 percent currently.
- Patent expiration of blockbuster drugs – A major number of patented drugs are coming off patent by 2020, leading to increase in the opportunity for generics. Biosimilar, first-to-file and branded generics are the key focus areas.
- Enhanced government support – The introduction of the Affordable Care Act would increase the numbers for newly insured and add those who will sign up for accessible insurance plans. Thus boosting the healthcare spending of US and increase the revenue of generic firms. Also the USFDA is proposing to charge a fee for ANDAs under the Generic Drug User Fee Act which might lead to faster review of applications and increased availability of the drugs in the market.
- Competitive Environment – Increase in competition in the generic drug market is due companies from Indian, China, and Eastern Europe as manufacturers from these countries have a high cost advantage creating a highly competitive environment