The modern generic drug industry was born in the US, the largest pharmaceutical market in the world, with the passing of Hatch-Waxman Act in 1984. The US generic drugs market has since grown to a 13.9 billion dollar business in 2001. With the pressure to contain healthcare costs growing, the market share of lower priced generics has been steadily increasing over the years in the US and some of the developed markets in Europe. With the expiration of patents of several blockbuster drugs likely in the next three to four years, production and demand for generic drugs is expected to expand many fold. According to an industry estimate, the US generics market is slated to peak 36 billion dollars by 2007-08. Europe is the second highly potential market region opening up for generic drugs. The US and Europe thus hold out a huge generic drug market considering the size of the current world pharmaceutical market of 350 billion dollars. With clear cost advantage over generic manufacturers of US and Europe, Indian pharma companies stand to gain from a mega export opportunity in the coming years. Already Ranbaxy, Dr Reddy's, Cipla, Wockhardt, Morepen, IPCA, etc. have established themselves as reliable and quality suppliers of branded generics in these markets during the last five years. In fact, a larger part of the annual turnovers of these companies come from growing generic exports. That much is good.
At the same time, a totally different scenario has emerged in generic drug business in the domestic sector of India over the last ten years. During the first half of the nineties, generic manufacturing was an insignificant activity dominated by small and medium scale drug units. The scene has completely changed today with the entry of most of the top pharma companies like Ranbaxy, Dr Reddy's, Cipla, IPCA, etc into this segment in a big way. It is no more a small time operations now although profit margins from generics are extremely low. And unlike in the US and European markets, generics are no cheaper than branded products at the retail counters in this country. The entire advantage of low manufacturing costs of generics is being passed on to retailers in the face of cut throat competition. This intense competition in generics marketing has resulted in pushing out of many small drug companies from business. In fact, it is this unhealthy competition that has given rise to a deep misunderstanding amongst the large and small drug companies of this country today. And the government has been closely watching this growing anarchy in generics business where the only beneficiary is the pharma trade. And its threat to intervene in controlling generic trade margin has brought one result. The big players have decided to phase out of generics activity as they now feel that just volume building with no profit margins makes no business sense. Exiting from generics by large companies indeed is a honourable move. But NPPA still needs to intervene in generic business and bring an end to the practice of offering unacceptable margins to pharma trade. The matter should not be left to be decided by only industry and trade.