Targeted Strategies Could Keep Smaller Generic Companies Competitive

Pharmacy TimesAugust 2012 Pain Awareness
Volume 78
Issue 8

For smaller generic drug manufacturers, finding specialized niche markets might 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 size can be an advantage for smaller firms, 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 injectable drugs. 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. “So when you are thinking of competition from some of the new market players, then if you are in a segment that is hard to manufacture, there will be fewer competitors.”

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

“In psychiatric disorders like schizophrenia and depression, patients have to take the drugs for a very long time,” Christoph Bieri, advisor with consultancy firm IMAP, told Reuters. “These drugs interfere with each other and each formulation. So, if you get a psychiatric doctor to prescribe your generic in the beginning, there is a high probability that the patient will stay on that generic even if there is a cheaper alternative found on the market.”

Distinguishing their products from those manufactured by larger generics firms or focusing on a single market for specific drugs will also be a key to profitability. Improved generics, tweaked versions of branded drugs that offer 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.

Related Videos
Practice Pearl #1 Active Surveillance vs Treatment in Patients with NETs
© 2024 MJH Life Sciences

All rights reserved.