The Future of the Generics Industry: Opportunities, threats and key trends

Date: August 22, 2010
Pages: 160
US$ 3,835.00
Publisher: Business Insights
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)

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The Future of the Generics Industry: Opportunities, threats and key trends
Driven by rising demand, patent expiries and pharmaceutical cost-containment policies, generic sales have risen consistently at rates in excess of the pharmaceutical industry average over the past decade. Coupled with changes in the geographic and therapeutic make-up of the sector, this has triggered a period of rapid restructuring within the generics industry. Teva and Sandoz have consolidated their positions at the head of the generic company sales rankings; national and regional businesses have emerged as major forces in emerging generic markets; while new players – including multinationals – have begun to pursue footholds in the generics sector.

Demand for generics will continue to increase rapidly during the next five years. Major patent expiries will present generic manufacturers with substantial new targets – including the world’s best-selling pharmaceutical brand, Lipitor. Sales of branded copies will rise at double-digit rates in many developing countries, while unbranded, bioequivalent follow-on products will be prescribed, dispensed and consumed more widely in some of the world’s biggest markets. Governments and third-party payers will adopt more robust pro-generic policies in a bid to limit pharmaceutical spending. These will include measures designed to encourage the use of biosimilars, which will help to rein in costs associated with the reimbursement of expensive biotech drugs.

While demand for generics will remain strong, pressure on prices in the sector will intensify as competition heats up, and as payers step up their efforts to limit reimbursement spending. Generic manufacturers will also have to overcome barriers to market entry posed by intellectual property laws, regulatory frameworks and defensive strategies employed by originator companies. Levels of brand affinity that persist among physicians, pharmacists and patients will also act as a constraint on rates at which generics are prescribed, dispensed and consumed.

With volume-based growth set to outweigh constraints on price, the generics market will continue to increase rapidly in value during the next five years. The operating environment in the sector will become increasingly difficult for many small and mid-sized players, however. Problems faced by these companies, the expansion of established market leaders and the entry of more new players will combine to drive further significant restructuring in the generics sector.

Key Features of this report
  • Analysis of the size, structure and recent growth of the global generics market, and of the industry it supports.
  • Case studies focusing on individual generic businesses and key generic markets.
  • Identification and detailed discussion of key generic industry drivers and constraints.
  • Appraisal of the impact individual drivers and constraints will have on the market to 2015.
  • Forecasts outlining the anticipated size and structure of the generics market in 2015, assessing future prospects for individual generic businesses and identifying potential major new entrants in the sector.
Key benefits of this report
  • Quantify the size and structure of current opportunities in the generics market and the positions held by key players in the sector.
  • Identify the main factors acting as drivers and constraints on generic market growth, and gauge their likely impact on the structure of the industry.
  • Assess the timing and extent of new opportunities that patent expiries will present for generic manufacturers during the next five years.
  • Track the development of pro-generic healthcare policies implemented in key markets, and their likely impact on the industry.
  • Understand the strategies being employed by originator companies to block or delay the arrival of generic competition, and how future regulatory intervention might affect their ability to defend patent-expired brands.
  • Learn how Teva and Sandoz intend to build on their leadership positions in the generics industry; why second-tier generic businesses are so exposed as acquisition targets; and which pharmaceutical majors are most likely to emerge as major players in the generics sector.
Key findings of this report

Having risen at or close to double-digit rates for the best part of a decade, global sales of generics are now worth some US$140bn – equivalent to approximately 17% of total pharmaceutical market value. With patents on brands that generate combined annual revenues of US$200bn set to expire by 2015, further rapid growth of the generics market is assured.

While the generic industry remains fragmented overall, growing shares of the market have been concentrated in the hands of leading players. Between them, the world’s five biggest generic businesses have spent approximately US$50bn on acquisitions since 2001, with Teva alone committing US$24bn to M&A deals in that period. Teva’s existing business generates around US$3.5bn in net cash per annum, and will provide the funds required to support further M&A-fuelled expansion.

Regulators have been slow to establish explicit pathways for the approval of biosimilars, while approval routes for small-molecule generics are struggling to cope with demand. The backlog of generic submissions faced by regulators in the US has reached 2,000, and median ANDA review times are currently in excess of 26 months.

Originators have perfected the use of intellectual property protection laws and defensive strategies designed to delay the arrival of generic competition. By the time Lipitor faces its first generic competitor in the US, 44% of the brand’s lifetime revenues in that market will have been achieved since the date on which

Pfizer’s basic product patent on atorvastatin was originally due to expire. Pfizer is one of several multinationals expected to pursue more substantial interests in the generics market in the near future. Sanofi-Aventis has been the most aggressive new ‘big pharma’ entrant to date, however, spending close to US$4bn on acquisitions in the sector since the beginning of 2009.

The global market for generics will be worth in excess of US$250bn by 2015. Teva and Sandoz will have consolidated their leadership positions by then, but several prominent second-tier generic players will have changed hands.

Key questions answered by this report
  • Why has the generics market enjoyed such strong growth in recent years, and what are the main factors that will determine its development through the next five years and beyond?
  • What makes markets like Japan and Brazil such attractive targets for generic manufacturers, and why have foreign players struggled to make an impact in these countries?
  • Which major original brands face patent expiry during the next five years, and when will they lose exclusivity in the all-important US market?
  • Why might some supposedly ‘pro-generic’ healthcare policies pose a potentially significant threat to the sector?
  • How are policy-makers attempting to break down opposition to generics among physicians, pharmacists and patients?
  • What steps have regulators taken to curb defensive strategies employed by originators, and how might big pharma’s ability to delay generic competition be compromised in future?
  • How will growth strategies pursued by the two leading players in the global generics industry differ over the next five years?
  • Why is Teva’s dominant position in the US generics market so assured?
  • Which second-tier generic players represent the most vulnerable acquisition targets, and why?
  • Which leading pharmaceutical majors are most likely to pursue assets in the generics market, and which segments will they target?
The future of the generics industry: opportunities threats and key trends
Executive Summary
The generics industry
Generic industry opportunities
Generic industry challenges
The future of the generics industry


The global market for generics
The generics industry
Emergence of the generic giants
The impact of acquisitions on Teva's recent expansion
Growth of regional and national players
Case study: Stada's generic growth engine grinds to a halt
Multinationals join the generic fray
Big pharma generic deals
Biosimilars – new players for a new market
Early biosimilar acquisitions and alliances
New players


Patent expiries
Impact of patent expiries
Recent generic targets
Future generic targets
Generic activity in 2010
Emerging generic markets
Developed markets
Case study: The Japanese generics market
Developing markets
Case study: the Brazilian generics market
Pro-generic healthcare policies
Pricing and reimbursement policies
Generic price caps
Reference pricing
Price approvals and reimbursement listings
Prescribing policy
Dispensing policy
Drug purchasing
Regulatory policies
Financial assistance for generic manufacturers
Early development of the biosimilars market
Regulatory pathways
Early headway made by biosimilars
Biosimilar pricing and reimbursement issues
Biosimilar market prospects
Biosimilar targets
Biosimilar players


Regulatory barriers
Patent exclusivity
Patent-term extensions
Challenging patents
Non-patent exclusivity
Orphan drug and pediatric exclusivity
Quality standards
Good Manufacturing Practice
Regulatory pathways
Issues surrounding generic approval and market entry
Regulatory pathways for biosimilars
Cost-containment policies
Public sector procurement
Tendering procedures
Sole supplier and preferred provider agreements
Pricing and reimbursement policy
Discount-based price cuts
Lower generic price ceilings and post-patent price cuts
More aggressive approaches to reference pricing
Originator strategies
Strategic use of intellectual property and regulatory frameworks
'Pay for delay' agreements
Citizen petitions
Patent layering or 'evergreening'
Development of original brands or franchises
Product hopping
Authorized generics
Pricing and promotional strategies
Pricing tactics
Promotional tactics
Negative promotional activity
Physician, pharmacist and patient attitudes
Shaping physician behavior
Shaping pharmacist behavior
Shaping patient behavior


Generic market prospects
The 'core' generics market
Emerging markets for branded copies
The biosimilars market
Generic industry prospects
Leading players
Other leading players
National players
New market entrants
The generics industry in 2015


Primary research methodology


Figure 1.1: Top-ranked pharma and generic company sales, 2001 and 2009
Figure 1.2: Impact of acquisitions on Teva's global generic revenues
Figure 1.3: Development of Stada's German generic sales, 2002-2009
Figure 2.4: Impact of US patent expiry on Norvasc’s revenues, 2006-2009
Figure 3.5: Impact of extended exclusivity on Lipitor's US revenues


Table 1.1: Top 6 players in the 'core' generics market, 2009
Table 1.2: Teva's major generic acquisitions, 2000-2010
Table 1.3: Stada's performance in key markets, 2009
Table 1.4: Sanofi-Aventis deals targeting the generics sector
Table 2.5: Post-patent decline in US sales of Zocor
Table 2.6: Major brands facing US patent expiry, 2010-2014
Table 2.7: Generic shares of major developed markets, 2009
Table 2.8: Leading Japanese generic company financials, 2009
Table 2.9: Generic shares of the Brazilian market, 2004-2009
Table 2.10: Generic price caps in major pharmaceutical markets
Table 2.11: Reference pricing in major pharmaceutical markets
Table 2.12: EU biosimilar approvals
Table 2.13: Revenues and patent expiry dates for leading biotech brands
Table 3.14: Patent-term extensions granted to major brands in the US
Table 3.15: The US generic approval backlog, 2005-2009
Table 3.16: Comparison of prices in New Zealand with three other markets
Table 3.17: Impact of preferred supplier policy on Dutch generic prices
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