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

Table of Contents

• CHAPTER 1 EXECUTIVE SUMMARY
  • Scope of the report
  • Key findings
• CHAPTER 2 GENERICS MARKET DYNAMICS
  • Key findings:
  • The global generics market is worth an estimated $60 billion
    • The seven major markets account for over two thirds of the value of the total generics market
    • Teva and Sandoz dominate the generics market but consolidation and globalization are changing the competitive landscape
  • Increasing healthcare expenditure in each of the seven major markets has led to a variety of measures being implemented to increase generic use
    • The changing healthcare environment in the US will drive future generic use
      • Healthcare expenditure is a concern for many Americans
      • There are a variety of generic substitution policies in place
      • Pharmacists are incentivized to dispense generics
      • Cost savings could be significant if generics were used more widely
      • Healthcare providers are implementing a range of incentives to boost generic use
      • Medicare Part D is expected to lead to greater generic use
      • The growing role of patients in their own healthcare choices will drive generic use
    • Cost-containment measures in Germany have led to a healthy generics market
      • Healthcare services are provided for free in Germany
      • There is a wide range of policies in place to promote generic prescribing
      • The AVWG is expected to drive further generic use
      • Jumbo reference pricing could be a double-edged sword for generics
      • Pricing issues may negatively affect profitability for generics companies
    • The UK is one of the most developed generics markets in Europe
      • The National Health System (NHS) is extremely cost-constrained
      • The UK's pharmaceutical pricing structure lends itself to higher generic penetration
      • There are several drivers and resistors to generic dispensing
    • Generic consumption in France is particularly low
      • Most of the population are covered by National Health Insurance
      • Significant advances have been made in the use of generics in France
      • Measures to increase generic prescribing by physicians have been implemented
      • French prices have been a major deterrent of generic use
      • Changes to reimbursement rules may drive generic growth
      • Pharmacists are being mandated to drive generic dispensing
    • Spanish generic use is among the lowest in the EU
      • Healthcare in Spain is decentralized but provided for free for the population
      • Pharmaceutical prices in Spain are much lower than in other European markets
      • Generic substitution is permitted - to a degree
      • Generic awareness is not especially high among physicians or the public
      • Pharmacists and physicians do not drive generic use
    • The Italian generics market looks unlikely to grow in the short-term
      • The decentralized approach to healthcare provision in Italy means there is a wide variety in policies
      • Pricing policies have been reformed to promote generic use
      • Pharmacists and physicians are not encouraged to prescribe generics
    • The Japanese generics market is currently underdeveloped
      • There has been a lack of incentives for the promotion of generic use
      • Generic substitution has only recently been allowed in Japan
      • Generic drugs are regarded with suspicion by prescribers
  • There are several issues which will affect future growth within the generics market
    • Patent expiries, an aging population and cost constraints should drive generic market growth
      • The wave of patent expiries expected over the next ten years will generate major opportunities for generic companies
      • The aging population will drive future uptake of generic drugs
      • Most countries are becoming increasingly cost-constrained
      • Therapeutic substitution becomes a reality
    • The key growth resister is increasing competition within the market
      • Low-cost manufacturers are creating increased competition
      • Increasing cooperation among generics companies is a double-edged sword
      • Some branded companies have generic subsidiaries
• CHAPTER 3 STRATEGIES FOR SUCCESS: GROWTH THROUGH CO-OPERATION
  • Key findings
  • M&A activity has gained momentum over the last two years
    • There has been increasing consolidation in the generics market
      • 2005 was a major year for M&A activity
      • Two key deals have been announced in 2006
    • M&A multiples depend on the portfolio of the target company
  • Authorized generics are becoming increasingly important
    • There can be several advantages for branded Pharma
      • Authorized generics can be a cost-effective method of settling patent litigation
      • Branded Pharma can gain financially
      • Other advantages include acting as a deterrent against patent challenges and utilization of manufacturing capacity
      • Case study - cooperative authorized generic: Shire settles Adderall XR patent litigation
      • Case study - competitive authorized generic: Sanofi-Aventis's Allegra authorized generic foils Teva and Barr
    • The generics industry is split on the issue of authorized generics
      • Authorized generics can provide a boost for companies with a weaker pipeline
      • The pursuit of authorized generics is a key part of many generics companies' strategy
    • The FTC is investigating the anti-competitiveness of authorized generics
• CHAPTER 4 STRATEGIES FOR SUCCESS: PATENT CHALLENGES
  • Key findings:
  • Patent challenges offer the possibility of significant sales for generics companies
    • Barr obtained 180-days exclusivity after successfully challenging Lilly's Prozac patent
    • Schwarz Pharma's omeprazole generic generated significant sales for the company
    • Teva's strength lies in its patent challenge strategy
  • There have been some important patent challenges taking place in the last two to three years
    • Ranbaxy's Lipitor patent challenge causes concern for Pfizer
      • Key decisions go in Pfizer's favor
      • Ranbaxy has suffered a setback with the loss of the Lipitor challenge
    • Fosamax comes under several patent challenges
      • Merck's outlook takes a turn for the worse
    • Early Toprol generic competition is likely
    • The patent challenge against Plavix is settled but attracts scrutiny
      • BMS/Sanofi-Aventis reach a settlement with Apotex but the move is criticized
• CHAPTER 5 FUTURE OUTLOOK
  • Key findings
  • Several therapy areas are expected to experience their first major patent expiries
    • Although there are generic statins, the US patent expiries of Zocor and Pravachol will significantly change the shape of this market
      • The patent expiry of Zocor is expected to have the greatest impact
      • The impact on Zocor - branded share is expected to be considerably eroded
      • The impact on Lipitor - will its brand loyalty be enough to maintain market share?
      • The impact on the statins market - dynamics will swing in favor of generics
      • Could the statins be a case study for future therapeutic substitution?
    • The patent expiries of Cozaar and Diovan are expected to lead to price reductions throughout the ARB class
      • Could the statins' substitution paradigm established in the US be repeated for the ARBs?
      • Germany readies itself for the first ARB patent expiry
      • The genericization of the ARBs could lead to switching from other classes
    • The patent expiry of Norvasc could lead to new CV combinations
    • The first antiretroviral patent expiries could herald a return to older treatment paradigms
      • Key first-line therapies will be exposed to generic competition
      • The convenience of fixed-dose combinations is not expected to protect them from generic competition
    • Will there be generic asthma combinations?
      • Advair's combination deemed not novel and, therefore, not patent protected
      • Other asthma combinations may be at risk of genericization
    • Biosimilars are now a reality
      • The first biosimilar was approved in Europe in 2006
      • The US has lagged behind Europe in developing a biosimilar regulatory pathway
  • The Japanese market will experience a significant increase in generic usage
    • Considerable savings could be realized through the greater use of generics
    • The next five years will see the Japanese generics market grow
    • The competitive landscape in Japan is expected to change considerably
      • Sawai and Towa are well-positioned to take advantage of the expected increase in generic use
      • Several companies have entered the Japanese generics market
• APPENDIX A: ADDITIONAL INFORMATION
  • Limitations of data
    • Standard units
    • Japanese market data
  • Exhange rates
• APPENDIX B: BIBLIOGRAPHY
  • Journal articles
  • Newspaper articles
  • Company sources
    • Presentations
    • Annual Reports
  • Miscellaneous sources
  • List of Tables
    • Table 1: Five generics companies are among the top 10 in terms of prescriptions filled under Medicare Part D
    • Table 2: The actual generic fill rate varies among the therapeutic classes
    • Table 3: Several branded Pharma companies have generics subsidiaries
    • Table 4: M&A activity was rife in the generics market in 2005
    • Table 5: The sales multiples for generic M&A transactions have varied
    • Table 6: Diovan and Cozaar dominate the ARB class
    • Table 7: There are considerable savings to be realized by using generic drugs
    • Table 8: Significant annual savings can be generated through the use of generics
    • Table 9: Exchange rates*, 2005
  • List of Figures
    • Figure 1: The generic market share as a percentage of total pharmaceutical sales varies across the seven major markets
    • Figure 2: The US dominates the global generics market, generating $24 billion in sales in 2005
    • Figure 3: Generic usage is highest in the US, Germany and the UK
    • Figure 4: Teva and Sandoz were the clear generics market leaders in terms of sales value in 2005
    • Figure 5: More than half of all prescriptions dispensed in the US are generics
    • Figure 6: Generics companies dominate the US pharmaceutical market in numbers of prescriptions
    • Figure 7: Generic use in the US is promoted - a resisted - through a number of channels
    • Figure 8: The generic fill rates in the US for 2003 varied considerably by state
    • Figure 9: The tiered co-payment system will lead to greater use of generics
    • Figure 10: Use of generics is encouraged - and resisted - in Germany through several different mechanisms
    • Figure 11: A fall in reference prices is likely to lead to greater use of generics
    • Figure 12: The UK generics market has experienced strong sales growth since 2001
    • Figure 13: Despite a number of resistors, the generics market in the UK is well-developed
    • Figure 14: The French generics market is much smaller than those in other major European markets
    • Figure 15: Despite measures to promote generic use in France there are several resisters still in place
    • 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
    • Figure 17: There are few drivers of generic growth in Spain
    • Figure 18: The Italian market has experienced limited growth since 1994
    • Figure 19: Measures to promote generic use in Italy have been implemented
    • Figure 20: The Japanese generic market is underdeveloped because of a number of factors
    • Figure 21: Physicians receive a percentage of the price of a prescribed drug
    • Figure 22: Several key products are expected to lose patent protection in 2006, exposing billions of dollars of brand sales to generic competition
    • Figure 23: 2008 and 2011 are expected to be the next bumper years for generics companies
    • Figure 24: Most big Pharma companies are expected to lose significant sales as patents expire over the next 10 years
    • Figure 25: The age distribution of the world's population is expected to change considerably over the next 50 years
    • Figure 26: As the population ages and birth rates decline, population pyramids for more developed regions are expected to become increasingly top-heavy
    • Figure 27: Pharmaceutical expenditure accounts for, on average, between 12% and 22% of total healthcare spend
    • Figure 28: In Germany, generic statins are significantly cheaper than the branded products
    • Figure 29: Pfizer retained a third of gabapentin volume sales after launching a generic through Greenstone
    • Figure 30: Authorized generics agreements can serve several purposes
    • Figure 31: Branded Pharma can gain from authorized generic agreements
    • Figure 32: Apotex's generic paroxetine sales were considerably reduced by the launch of Par's authorized generic
    • 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
    • Figure 34: There are positive and negative aspects to authorized generics for companies involved in the generics market
    • Figure 35: The authorized generics settlements made in FY 2005 included both cooperative and competitive agreements
    • Figure 36: Barr's Prozac patent challenge delivered high returns for the company
    • Figure 37: Schwarz Pharma generated significant sales after its exclusivity agreement with Andrx and Genpharm
    • Figure 38: Generics account for a relatively small share of the statins market in the US
    • Figure 39: Pravachol only accounts for 10% of US statin sales value ($m) and 7% of sales volume (SUm)
    • Figure 40: Generic simvastatin sales, assuming a relatively high level of switching from Zocor
    • Figure 41: Generic simvastatin sales, assuming a medium level of switching from Zocor
    • Figure 42: Generic simvastatin sales, assuming a low level of switching from Zocor
    • 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
    • Figure 44: Generics will account for a growing percentage of statins sales volume after 2006
    • Figure 45: Generic zidovudine has made an inroad into the branded products sales despite being available since September 2005
    • Figure 46: Japanese generic sales are expected to reach Ұ500 billion by 2008