The US pharmaceuticals Generic market is the largest in the world with an estimated market size of 16 billion USD. This market has been attractive for new entrants but is facing a tough challenge in the past 12 months. The market has faced tremendous competition because of various reasons:
- Authorised Generics
- Shared exclusivity
- OTCs
- More approvals on day one

Authorised Generics

Authorised generics are the low cost (generic) option of the innovator molecule that has been 'authorised by the innovator' to be marketed before the patent expiry. In some cases the innovator company authorises another generics company to do the marketing (after a good business agreement and handsome down payments), whereas in other cases the innovator themselves launch the generic version of the drug.

The Authorised Generics undermine the 180 days exclusivity incentive for the generics companies to challenge patents. Under Hatch Waxman Act, recently Waxman said that the Branded drug companies are circumventing the intent of the law which is to reward generics companies for bringing in generics early to the market. Given the urgency of bringing down prescription drugs bills, it is important to ensure that Generic versions are readily available.

Authorised generics have surely changed the landscape of research. The earlier focus of R&D spend was on the speed of filing by Generic Pharma companies. It costs close to 2 million USD - 4 million USD to develop an ANDA for a generic company. The cost of development depends upon the API input cost, which can be quite high in the early days of product development.

The cost of R&D remains the same but returns are on the decrease due to the changed and highly intensified competitive environment.

Shared Exclusivity

Earlier the 180 days exclusivity was granted to the first generics company to file their ANDA. Now it is granted on a shared basis to the companies filing on the first day.

Shared exclusivity has resulted in more competition On the first day of the 180 days exclusivity period itself there are now more than one company with their generics in the market, this has resulted in massive price erosions on day one itself.

OTC Versions

The innovator companies are forced to try new strategies to protect their returns from the molecules which are to go off patent shortly.

Launching an OTC (over the counter) version of a product like loratidine by Schering Plough was a strategy to increase the product life cycle. Sandoz used to be the leading generic producer of loratidine and because of this they had to change their projections.

With competition heating up, now typically on Day One of the patent expiry, there are more than a handful of companies ready with the generic versions of the drug.

The recent example has been ciprofloxin, almost 11 generic companies were in the market with prices going down to 3% of the branded drug price. In fact, many generic companies did not launch the product although they had full scale development and approvals of the molecule.

Similar examples have been fluconazole and citalopram generic launches.

Time to Think, strategize and stay ahead

Indian companies have been very active in the past 12 months in the US market, with many Drug Master Files and ANDAs being filed. Is it that too many companies are operating or is it because too much of eagerness by these companies to get a market share? Whatever may be the reason, it is not benefiting the generics industry as a whole. In fact the benefits mainly get passed on the channel as well as the health insurance sector rather than the patients because the health insurance premiums are not correspondingly reduced.

It is very clear that the next two years would be years of survival and consolidation by all the companies who wish to stay and make their presence felt in the US.

Few of the strategies that are key to success in this environment:
- Look at strategic API partnership
- Low cost development centers for formulation development to keep up the speed of filings.
- Cost effective BE / BA centres for development of a bio-study.
- Develop niche molecules that are not so competitive
- Look at conversion of generics into super generics with a small differentiator.
- Build strong IPR in-house to look at possible patent challenges
- Look at low cost manufacturing bases such as India
- Look at 180 days exclusivity as a low risk option to stay ahead.
- Build world class manufacturing facilities / capacities at competitive pricing in a low cost environment.

Most of the generic companies like Sandoz, Teva, Ranbaxy, DRL, Mylan have taken lead to be the change masters, but the question is will the other companies also think like-wise. Companies that are focussed will stay, survive and eventually grow.

The market is changing, the option is to be a part of that change or the victim of the change.