Global Generics Guide: Part 2 - Benchmarking country markets and strategic issues

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Global Generics Guide: Part 2 - Benchmarking country markets and strategic issues
Market Report, June 2006, 12160 €

Description

IntroductionThe generics market is undergoing significant change, with intense merger and acquisition activity, a raft of upcoming patent expiries and new legislation being enacted to promote generic prescription in the major markets.
In addition, key issues, such as authorized generics, the first biosimilars approvals and increasing competition within the market are also affecting growth dynamicsScopeOverview of the size of the generics market in the US, Japan, France, Germany, Italy, Spain and the UKAssessment of the various policies being implemented to promote generic prescribing and drug useAnalysis of key strategic issues including M&A, authorized generics and patent challengesExamination of the future areas for generic growth, including an update of the biosimilars situationHighlightsThere is still room for growth in the more mature generics markets, with governments examining methods of increasing generic usage even further.
However, pricing pressures may result in this growth not being translated into positive returns for the generics industry.Competition in the generics market is becoming increasingly intense, with low cost producers expanding globally and branded Pharma becoming involved through subsidiaries or via authorized generic agreements.
The wave of consolidation that swept through the generics market has been spurred on by this competition and is unlikely to end any time soon.The biosimilars market has moved on in 2006, with two products (Sandoz's Omnitrope and Biopartners' Valtropin) being approved in the EU.
Omnitrope was finally approved in the US, after a lengthy delay, but the FDA has stated that this does not set a precedent for future approvals of other biosimilars.Reasons to PurchaseIdentify the key factors and issues that will either promote or prevent generic growth in each of the seven major marketsUnderstand the changing competitive dynamics within the generics industry and plan your own strategies accordinglyAssess the strategic issues that are affecting the generics industry and how the key players are addressing them

Sommaire

CHAPTER 1 EXECUTIVE SUMMARY 4
Scope of the report 4
Key findings 4
CHAPTER 2 GENERICS MARKET DYNAMICS 10
Key findings: 10
The global generics market is worth an estimated $60 billion 10
The seven major markets account for over two thirds of the value of the total generics market 11
Teva and Sandoz dominate the generics market but consolidation and globalization are changing the competitive landscape 13
Increasing healthcare expenditure in each of the seven major markets has led to a variety of measures being implemented to increase generic use 15
The changing healthcare environment in the US will drive future generic use 15
Healthcare expenditure is a concern for many Americans 18
There are a variety of generic substitution policies in place 20
Pharmacists are incentivized to dispense generics 22
Cost savings could be significant if generics were used more widely 23
Healthcare providers are implementing a range of incentives to boost generic use 26
Medicare Part D is expected to lead to greater generic use 28
The growing role of patients in their own healthcare choices will drive generic use 30
Cost-containment measures in Germany have led to a healthy generics market 32
Healthcare services are provided for free in Germany 32
There is a wide range of policies in place to promote generic prescribing 34
The AVWG is expected to drive further generic use 35
Jumbo reference pricing could be a double-edged sword for generics 37
Pricing issues may negatively affect profitability for generics companies 38
The UK is one of the most developed generics markets in Europe 40
The National Health System (NHS) is extremely cost-constrained 41
The UK's pharmaceutical pricing structure lends itself to higher generic penetration 43
There are several drivers and resistors to generic dispensing 45
Generic consumption in France is particularly low 47
Most of the population are covered by National Health Insurance 47
Significant advances have been made in the use of generics in France 49
Measures to increase generic prescribing by physicians have been implemented 51
French prices have been a major deterrent of generic use 51
Changes to reimbursement rules may drive generic growth 52
Pharmacists are being mandated to drive generic dispensing 53
Spanish generic use is among the lowest in the EU 54
Healthcare in Spain is decentralized but provided for free for the population 56
Pharmaceutical prices in Spain are much lower than in other European markets 58
Generic substitution is permitted - to a degree 59
Generic awareness is not especially high among physicians or the public 60
Pharmacists and physicians do not drive generic use 61
The Italian generics market looks unlikely to grow in the short-term 62
The decentralized approach to healthcare provision in Italy means there is a wide variety in policies 63
Pricing policies have been reformed to promote generic use 66
Pharmacists and physicians are not encouraged to prescribe generics 68
The Japanese generics market is currently underdeveloped 69
There has been a lack of incentives for the promotion of generic use 70
Generic substitution has only recently been allowed in Japan 74
Generic drugs are regarded with suspicion by prescribers 75
There are several issues which will affect future growth within the generics market 77
Patent expiries, an aging population and cost constraints should drive generic market growth 77
The wave of patent expiries expected over the next ten years will generate major opportunities for generic companies 77
The aging population will drive future uptake of generic drugs 84
Most countries are becoming increasingly cost-constrained 87
Therapeutic substitution becomes a reality 89
The key growth resister is increasing competition within the market 92
Low-cost manufacturers are creating increased competition 93
Increasing cooperation among generics companies is a double-edged sword 95
Some branded companies have generic subsidiaries 97
CHAPTER 3 STRATEGIES FOR SUCCESS: GROWTH THROUGH CO-OPERATION 100
Key findings 100
M&A activity has gained momentum over the last two years 100
There has been increasing consolidation in the generics market 101
2005 was a major year for M&A activity 101
Two key deals have been announced in 2006 104
M&A multiples depend on the portfolio of the target company 106
Authorized generics are becoming increasingly important 108
There can be several advantages for branded Pharma 110
Authorized generics can be a cost-effective method of settling patent litigation 110
Branded Pharma can gain financially 111
Other advantages include acting as a deterrent against patent challenges and utilization of manufacturing capacity 111
Case study - cooperative authorized generic: Shire settles Adderall XR patent litigation 113
Case study - competitive authorized generic: Sanofi-Aventis's Allegra authorized generic foils Teva and Barr 114
The generics industry is split on the issue of authorized generics 116
Authorized generics can provide a boost for companies with a weaker pipeline 117
The pursuit of authorized generics is a key part of many generics companies' strategy 117
The FTC is investigating the anti-competitiveness of authorized generics 120
CHAPTER 4 STRATEGIES FOR SUCCESS: PATENT CHALLENGES 122
Key findings: 122
Patent challenges offer the possibility of significant sales for generics companies 122
Barr obtained 180-days exclusivity after successfully challenging Lilly's Prozac patent 124
Schwarz Pharma's omeprazole generic generated significant sales for the company 126
Teva's strength lies in its patent challenge strategy 127
There have been some important patent challenges taking place in the last two to three years 129
Ranbaxy's Lipitor patent challenge causes concern for Pfizer 129
Key decisions go in Pfizer's favor 130
Ranbaxy has suffered a setback with the loss of the Lipitor challenge 131
Fosamax comes under several patent challenges 132
Merck's outlook takes a turn for the worse 132
Early Toprol generic competition is likely 133
The patent challenge against Plavix is settled but attracts scrutiny 133
BMS/Sanofi-Aventis reach a settlement with Apotex but the move is criticized 134
CHAPTER 5 FUTURE OUTLOOK 135
Key findings 135
Several therapy areas are expected to experience their first major patent expiries 135
Although there are generic statins, the US patent expiries of Zocor and Pravachol will significantly change the shape of this market 136
The patent expiry of Zocor is expected to have the greatest impact 137
The impact on Zocor - branded share is expected to be considerably eroded 138
The impact on Lipitor - will its brand loyalty be enough to maintain market share? 143
The impact on the statins market - dynamics will swing in favor of generics 144
Could the statins be a case study for future therapeutic substitution? 146
The patent expiries of Cozaar and Diovan are expected to lead to price reductions throughout the ARB class 146
Could the statins' substitution paradigm established in the US be repeated for the ARBs? 147
Germany readies itself for the first ARB patent expiry 148
The genericization of the ARBs could lead to switching from other classes 149
The patent expiry of Norvasc could lead to new CV combinations 151
The first antiretroviral patent expiries could herald a return to older treatment paradigms 151
Key first-line therapies will be exposed to generic competition 153
The convenience of fixed-dose combinations is not expected to protect them from generic competition 154
Will there be generic asthma combinations? 156
Advair's combination deemed not novel and, therefore, not patent protected 156
Other asthma combinations may be at risk of genericization 158
Biosimilars are now a reality 158
The first biosimilar was approved in Europe in 2006 159
The US has lagged behind Europe in developing a biosimilar regulatory pathway 160
The Japanese market will experience a significant increase in generic usage 162
Considerable savings could be realized through the greater use of generics 163
The next five years will see the Japanese generics market grow 165
The competitive landscape in Japan is expected to change considerably 166
Sawai and Towa are well-positioned to take advantage of the expected increase in generic use 166
Several companies have entered the Japanese generics market 167
APPENDIX A: ADDITIONAL INFORMATION 169
Limitations of data 169
Standard units 169
Japanese market data 169
Exhange rates 170
APPENDIX B: BIBLIOGRAPHY 171
Journal articles 171
Newspaper articles 173
Company sources 187
Presentations 187
Annual Reports 187
Miscellaneous sources 189
List of Tables
Table 1: Five generics companies are among the top 10 in terms of prescriptions filled under Medicare Part D 18
Table 2: The actual generic fill rate varies among the therapeutic classes 24
Table 3: Several branded Pharma companies have generics subsidiaries 98
Table 4: M&A activity was rife in the generics market in 2005 102
Table 5: The sales multiples for generic M&A transactions have varied 107
Table 6: Diovan and Cozaar dominate the ARB class 147
Table 7: There are considerable savings to be realized by using generic drugs 163
Table 8: Significant annual savings can be generated through the use of generics 164
Table 9: Exchange rates*, 2005 170
List of Figures
Figure 1: The generic market share as a percentage of total pharmaceutical sales varies across the seven major markets 11
Figure 2: The US dominates the global generics market, generating $24 billion in sales in 2005 12
Figure 3: Generic usage is highest in the US, Germany and the UK 13
Figure 4: Teva and Sandoz were the clear generics market leaders in terms of sales value in 2005 14
Figure 5: More than half of all prescriptions dispensed in the US are generics 16
Figure 6: Generics companies dominate the US pharmaceutical market in numbers of prescriptions 17
Figure 7: Generic use in the US is promoted - a resisted - through a number of channels 20
Figure 8: The generic fill rates in the US for 2003 varied considerably by state 25
Figure 9: The tiered co-payment system will lead to greater use of generics 29
Figure 10: Use of generics is encouraged - and resisted - in Germany through several different mechanisms 33
Figure 11: A fall in reference prices is likely to lead to greater use of generics 36
Figure 12: The UK generics market has experienced strong sales growth since 2001 40
Figure 13: Despite a number of resistors, the generics market in the UK is well-developed 42
Figure 14: The French generics market is much smaller than those in other major European markets 49
Figure 15: Despite measures to promote generic use in France there are several resisters still in place 50
Figure 16: Although generic sales and volume use have increased over the last ten years, the generics market only accounts for a small proportion of the Spanish pharmaceutical market 55
Figure 17: There are few drivers of generic growth in Spain 57
Figure 18: The Italian market has experienced limited growth since 1994 62
Figure 19: Measures to promote generic use in Italy have been implemented 66
Figure 20: The Japanese generic market is underdeveloped because of a number of factors 70
Figure 21: Physicians receive a percentage of the price of a prescribed drug 71
Figure 22: Several key products are expected to lose patent protection in 2006, exposing billions of dollars of brand sales to generic competition 78
Figure 23: 2008 and 2011 are expected to be the next bumper years for generics companies 81
Figure 24: Most big Pharma companies are expected to lose significant sales as patents expire over the next 10 years 83
Figure 25: The age distribution of the world's population is expected to change considerably over the next 50 years 85
Figure 26: As the population ages and birth rates decline, population pyramids for more developed regions are expected to become increasingly top-heavy 86
Figure 27: Pharmaceutical expenditure accounts for, on average, between 12% and 22% of total healthcare spend 87
Figure 28: In Germany, generic statins are significantly cheaper than the branded products 91
Figure 29: Pfizer retained a third of gabapentin volume sales after launching a generic through Greenstone 99
Figure 30: Authorized generics agreements can serve several purposes 109
Figure 31: Branded Pharma can gain from authorized generic agreements 110
Figure 32: Apotex's generic paroxetine sales were considerably reduced by the launch of Par's authorized generic 112
Figure 33: In addition to obtaining a share of generic sales, Sanofi-Aventis also reduced Teva's fexofenadine sales through its authorized generic agreement with Prasco 115
Figure 34: There are positive and negative aspects to authorized generics for companies involved in the generics market 116
Figure 35: The authorized generics settlements made in FY 2005 included both cooperative and competitive agreements 119
Figure 36: Barr's Prozac patent challenge delivered high returns for the company 125
Figure 37: Schwarz Pharma generated significant sales after its exclusivity agreement with Andrx and Genpharm 127
Figure 38: Generics account for a relatively small share of the statins market in the US 136
Figure 39: Pravachol only accounts for 10% of US statin sales value ($m) and 7% of sales volume (SUm) 137
Figure 40: Generic simvastatin sales, assuming a relatively high level of switching from Zocor 140
Figure 41: Generic simvastatin sales, assuming a medium level of switching from Zocor 140
Figure 42: Generic simvastatin sales, assuming a low level of switching from Zocor 142
Figure 43: Depending on the level of switching, Lipitor sales could range between $418m and $3.8 billion in the first six months of generic simvastatin's availablity 144
Figure 44: Generics will account for a growing percentage of statins sales volume after 2006 145
Figure 45: Generic zidovudine has made an inroad into the branded products sales despite being available since September 2005 153
Figure 46: Japanese generic sales are expected to reach ?500 billion by 2008 165