Trends still favor generic drug makers

[JohnMack]

Source: Boston Globe

By Matthew Perrone, AP Business Writer

WASHINGTON --Profits for generic drug makers should scale new heights in coming years although the threat of an innovation drought and increased competition loom, a top industry analyst predicted Thursday.

Sales in the global generic drug market are increasing at a 14 percent annual rate, far better than the single-digit annual growth rate at brand-name drug makers.

"The wind is behind the backs of the generic pharmaceutical industry," Doug Long, vice president at drug research firm IMS Health Inc. told an audience of several hundred industry professionals at the Generic Pharmaceutical Association's policy conference.

However, Long cautioned executives from companies, including Teva Pharmaceutical Industries, Watson Pharmaceuticals Inc. and Barr Pharmaceuticals Inc., that an innovation slowdown could bring the generic drug makers up short.

Even though generic drugs accounted for 63 percent of all drug prescriptions in the U.S. last year, growth depends on having new drugs to replicate, Long cautioned.

In the meantime, generic drug companies are sitting pretty as medicines worth $12 billion lose patent protection this year and $20 billion worth will be up for grabs next year, including Merck's osteoporosis drug Fosamax and Johnson & Johnson's schizophrenia treatment Risperdal.

It doesn't hurt that the Medicare prescription drug benefit, which launched in 2006, has boosted federal spending on pharmaceuticals. The program accounts for 20 percent of prescriptions filled in the U.S. according to Long, and 66 percent of those prescriptions are for generic drugs.

As more retiring baby boomers become eligible for the program over the next five to 10 years, Long estimates the government will handle more than half of U.S. spending on pharmaceuticals.

Despite these positive trends, Long said the industry, which is concentrated among a few key players, likely will face headwinds in the form of price competition from companies in developing countries, such as India and China.

At the same time, the lack of new drug products that has stifled growth at pharmaceutical giants, such as Pfizer and Wyeth could negatively affect the companies that copy their blockbuster drugs.

"What will have to be reckoned with eventually is the innovation drought for the brand manufacturers, which will mean a drought for the generic marketplace," Long said.

One avenue of growth currently closed to generic drug companies is the market for biotech drugs, where revenues are expanding at 18 percent a year compared compared with growth of 2 percent for patented, traditional drugs.

Lobbyists for the generic drug companies are pushing lawmakers to include an amendment, allowing generic companies to replicate biotech drugs in a bill almost certain to be approved by Congress this year because it reauthorizes user fees that drug companies pay to help fund the FDA's approval process.

However, allowing the generic replication of biotech drugs, which are much more complicated than traditional, chemical-based drugs, does not seem to have the support of key House legislators.

Even Rep. Henry Waxman, a Democrat from California who has been an industry ally on the Hill, says he is not optimistic generic biotech legislation will pass this year.

"The prospects are extremely slim, but it is still in play," Waxman told attendees at Thursday's conference. Waxman co-authored the bill that became law, allowing the first approved generic drugs in the early 1980s.

[jimmy03]

Rightly said Developing countries like India and China they provide Generic Drugs at very cheap price worldwide.Generic Drugs are replacing now branded drugs,as now they are much more cheaper than Branded drugs.US is turning out to be a good market for Generic Drugs.