New Dynamics and Challenges in the Generics Market 2007

Generic drugs (generics) are now an established part of pharmaceutical markets and healthcare policies around the world. According to IMS Health data, they already account for 63% of all prescriptions dispensed in the US, the world' s largest single pharmaceutical market.

The European Generic Medicines Association, the EGA, has predicted that, by the end of the decade, generics could account for 75% by volume of all pharmaceuticals sold in an expanded European Union (EU), with a total market value of € 21 billion.

This forecast takes into account both new Member States such as Poland and the Czech Republic that have a strong heritage of generic production from previously nationalised pharmaceutical industries, as well as Western European countries, such as France, Spain or Portugal, in which ballooning healthcare costs have finally persuaded governments to take more aggressive action to encourage the use of generics.

Seen in value terms - and generics remain very much about lower prices - the advances are less dramatic. In the fiercely competitive US market, for example, IMS Health estimated generic penetration by value to be around 11% in 2005. In the UK, the country with the highest value share that year - about 24%, excluding discounts - branded and unbranded generics made up 64% of the overall market by volume.

There is clearly plenty of room for further expansion of the generics sector, albeit in an environment where low-cost generics manufacturers from countries such as China and Brazil are remorselessly dragging down prices and some important markets, such as Japan, are still lagging significantly in their efforts to stimulate sales of generics.

IMS Health is forecasting generics sales growth of 13-14% worldwide in 2007, compared with 5-6% for the pharmaceutical market as a whole. Such growth would increase the value of the global generics market to $60-65 billion.

Two key factors are particularly fuelling this growth: European governments' efforts to slow the rise of healthcare costs and the string of patent expiries on key pharmaceutical brands in the US and other major markets.

Prescription drugs with aggregate sales of $51 billion faced patent expiry in the five years to 2006, IMS Health notes; the figure for the period between 1996 and 2000 is only $17 billion.