Global prescription sales growth of generics drugs slowed to 3.6 per cent in the twelve months ending September 2008, down from 11.4 per cent in 2007, according to a new report by IMS Health, the world's leading provider of market intelligence to the pharmaceutical and healthcare industries. Global generics products generated $78 billion in audited sales in the twelve months through September, reflecting the changing industry dynamics that are affecting branded pharmaceutical products.
Murray Aitken, senior vice president, Healthcare Insight, IMS said, "The global generics market has posted double-digit gains in recent years. But in 2008, despite robust volume increases, we are seeing the first significant decline in sales growth as manufacturers increasingly compete in fierce price battles within most of the world's major markets. This trend is very apparent in markets like the US and UK as generics companies contend with aggressive competition and cost-containment measures enforced by both private and government payers."
The top eight global markets - the US, Germany, France, the UK, Canada, Italy, Spain and Japan - today account for 84 per cent of total generics sales. The US, the world's largest generics market with 42 per cent of global sales, has experienced a 2.7 per cent sales decline in the twelve months ending September 2008 while volume increased 5.4 per cent during the same period. Generics products now account for 63.7 per cent of the total US pharmaceutical market volume.
The US generics market is currently valued at $33 billion, compared with $34 billion last year, reflecting declining prices and fewer blockbusters losing patent protection in 2008. However, generics sales rose 10.2 per cent in Japan, 16.9 per cent in France, 12.5 per cent in Italy and 10.5 per cent in Spain in the twelve months through September.
The top 10 generics companies currently hold a 47 per cent share of the generics market worldwide. The three leading generics manufacturers are Teva with 11 per cent market share, Sandoz with 9 per cent, and Mylan with 8 per cent.
"Through this decade and next, we expect the distinction between R&D-based pharmaceutical manufacturers and generics companies to blur," noted Alan Sheppard, director, Generics, IMS. "Many of the largest R&D companies have stated their intention to expand their generics businesses to compensate for slower growth in the branded sector. At the same time, large generics manufacturers are looking to capitalise on their development expertise and technology to produce new chemical entities and establish their own R&D businesses. This will give leading generics companies an advantage in building market share over many smaller local manufacturers."
'The IMS 2008 Global Generics Perspective' report identifies that smaller generics producers are experiencing significant margin pressure and large companies are consolidating their operations. The generic companies will see fewer opportunities for branded blockbusters. There will be vertical integration in distribution as wholesalers are sourcing generic products for private label supply and expanding their ownership of pharmacies as governments liberalise pharmacy ownership rules. The new distribution models could reduce the incentive for pharmacies to promote the use of generics.
A trend toward centralised contracting will benefit those generics manufacturers with a broad portfolio and low-cost manufacturing base. Companies with the breadth and scale to fulfil high-volume contracts by payers are most likely to succeed in this environment. Players are turning to contracting as a way to encourage price competition.
The IMS report pointed out that biotech products lose their patent exclusivity and they will more likely to face competition from biosimilars, lower-cost versions of brand-name biotech drugs.
"The global generics industry is about to embark on a decade of seismic change, and the impact to both patients and healthcare systems cannot be overstated," Aitken added. "Over time, scientific innovation flows from the originator to generics manufacturers, increasing patient access to low-cost, effective therapies following the loss of patent exclusivity of branded products. This advances the quality of life for consumers - particularly those with chronic diseases - and also enables healthcare systems to reallocate funds for investments in the next generation of innovative products."