Combining of Branded and Generic Companies Continues

The lines that separate the branded pharmaceuticals and generic pharmaceutical industriesare increasingly murky, according to the report "Combating Generics: Pharmaceutical BrandDefense," published recently by Cutting Edge Information, a business intelligence firm.

A contributing factor driving this trend is the constant legal tug of war between branded andgeneric companies. The enormous cost associated with legal battles is draining both industries,pressuring executives to solve disputes with colicensing agreements. The report stated that 70%of patent infringement cases are settled in favor of generic companies, and these companies arebecoming more skilled at choosing arguments they know they can win.

When pharmaceutical companies enter into manufacturing and distribution agreements withgeneric challengers, it allows them to retain a portion of the market share lost to generic drug salesand to continue operating manufacturing plants at capacity. On the flip side, prominent genericdrugmakers are building innovative research and development competencies so that they can startreaping the higher-margin benefits of branded, proprietary drug sales.

"Many of these companies are targeting niche markets left open by large pharma companiessuch as urology, contraception, and treatments of lupus and other diseases," said JohnHess, senior analyst at Cutting Edge Information. "These markets are characterized by smallerpopulations but still offer longer market exclusivity and higher margins than generics."