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Targeted Strategies Could Keep Smaller Generic Companies Competitive

Published Online: Friday, October 5, 2012   [ Request Print ]

For smaller generic drug manufacturers, finding specialized niche markets may be the only option to remain profitable amid consolidation of American and European manufacturers, according to a Reuters report published online July 20, 2012.

According to the report, expiring patents on top-selling drugs and the ensuing deals between larger generic manufacturers coupled with US and European price caps for generics would likely change existing industry dynamics. As a result, smaller companies, such as Impax Laboratories and Hi-Tech Pharmacal Co Inc, would need to shift to specialized markets or leaner operations to compete, the report stated.

The report noted Watson Pharmaceuticals’ purchase of Actavis Group and Novartis’s purchase of Fougera Pharmaceuticals, as well as Teva Pharmaceuticals’ purchase of Ratiopharm and Mylan’s purchase of Merck’s generics unit, as evidence of generics consolidation. Although smaller manufacturers can cut costs by deals with larger manufacturers, capitalizing on their smaller size can be an advantage, according to the report.

The shift to specialized markets allows smaller firms to avoid cutting prices, providing they choose medications with high price points, such as injectables. Many larger companies have ceased production of specialty products due to manufacturing costs, causing hospitals that buy the drugs to grapple with supply shortages. The report noted that an increase in demand for biosimilar products would also create a larger market for small generic manufacturing firms.

“It is a lot harder, more expensive, and needs more technical competence to make an injectable product with ampules than an oral pill,” James Vane-Tempest of Jefferies, the global securities and investment banking group, told Reuters.

Another field where smaller manufacturers could flourish is psychiatric and women’s health medications, because patients are likely to stay on the same medication for long periods, the report stated.

Distinguishing their products from those of larger generics firms or focusing on a single market for specific drugs will also be key. Improved generics, tweaked versions of branded drugs offering benefits absent from other generics, command a higher price.

Meanwhile, controlling a market for either high-priced medicines or for high-volume, low-priced medicines can drive profits as well, the report stated.




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