CVS Chief Sees Profit in Generics

DECEMBER 01, 2005

With anywhere from $16 billion to $24 billion worth of brand name drugs expected to lose patent protection during 2006, the chain drug store industry is anticipating a softening of gross prescription dollar sales, as cheaper generics replace higher-priced branded pharmaceuticals. Rather than fretting about the effect on sales, however, chain drug industry leaders are eagerly looking forward to the upsurge in generic prescriptions and predicting a positive effect on bottom-line profits as patients look to save money.

Thomas Ryan, chief executive officer of CVS, for example, calls generic drugs a win-win-win situation for patients, payers, and providers alike. In a recent interview with the New York Times, Ryan said that, although branded drugs are priced higher, CVS expects to sell more generics in the future. The higher gross margins on generics will offset lost sales from branded drugs, he reasoned. Currently, generics account for 54% of total prescription sales at CVS stores nationwide, and Ryan expects that average to increase in the years ahead.




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