In our earlier blog The “Patent Cliff” & Pricing Pressure, you heard about the challenges facing the pharmaceutical industry due to the patent cliff and the relentless pressure to reduce pharmaceutical costs. While putting pressure on big pharma, these two trends are driving the growth of the generics industry.
Generics manufacturers can produce and sell drugs at a fraction of the cost of big pharma. The principal reason for this is that generic manufacturers do not need to recover the enormous R&D investment that it takes to bring a therapy from conception through to mass production. As drugs come off patent, generics manufacturers can flood the market with a generic version of the same brand name drug at a fraction of the price (20% in some cases). This has resulted in some governments, in an attempt to reduce costs, incentivizing doctors and primary care organizations to prescribe generic alternatives to brand name drugs. This huge growth in generics is predicted to continue as more and more drug come off patent.
In 2011 the global generic market was an estimated $225B and is expected to almost double over the next six years. In the U.S. almost 80% of all prescriptions now are for generic drugs, saving U.S. consumers $193B annually according to health information firm IMS.
This is a dramatic shift from a regulatory perspective. Now, instead of regulating the limited number of brand name manufacturers, regulatory bodies must ensure the quality and safety of the growing number of generics manufacturers.