Generic drugs or simply generics are pharmaceutical drugs
that are produced and distributed minus the patent protection. While these drugs may still hold the patent on the formulation, the active ingredients are not protected.
The history of generic drugs in the United States dates back to the 1960s, however it was only after the passage of the legislation 'Drug Price Competition and Patent Term Restoration Act of 1984' also known as 'Hatch-Waxman' that the drug industry flourished. As a consequence, the size of the industry grew from a meager $1 billion in annual revenues to $63 billion at present. Today, close to 69% of all prescriptions in the US include generics.The US Generic Drugs Industry
The total US generic pharmaceutical manufacturer sales for the year 2007 was$58.5 billion, whereas the sales of branded pharmaceuticals during the same year amounted to $228 billion.
The FDA's Orange Book, which is a compendium of approved drug products lists over 12,751 drugs, of which more than 10,072 or 79 percent of the products have a generic version available.
About 2.6 generic pharmaceutical drug prescriptions are dispensed on an annual basis. Generics drugs account for 69% of all prescriptions dispensed. According to IMS Health's National Prescription Audit the top 10 generic drugs, by prescriptions for the year 2008 were HYCD/APAP, Levothyroxine, Amoxicillin, Lisinopril, Simvastatin, hydrochlorothiazid, amlodipine besy, azithromycin, warfarin sodium, and furosemide.
The key reason behind the popularity of generic drugs is that they can save both the patients and insurance companies substantial costs. Once a drug loses patent, competition among producers becomes tough. Despite the competition, since companies do not develop these drugs from scratch they are able to make and sell them at lower cost to consumers and yet maintain profitability. For example, according to the National Association of Chain Drug Stores, the average retail price of a generic drug prescription was $34.34 in 2007, while for a brand name prescription drug the average price stood at $119.51, which is three and half times higher. On similar lines a Congressional Budget Office study in 1998 found that generics can save consumers between $8 billion and $10 billion annually.
According to IMS Health, the generic drugs industry is expanding at a growth rate of 7.8%, which faster than the world's market for pharmaceuticals. Generic Drugs Industry Facts & Trends
- The market share of the generic drug industry will capture a larger share of the drugs market worldwide. Estimates reveal that the brand name drug sales of $70 billion will face increasing competition from generics through 2012.
- Efforts to increase the generic substitution rates from 65% to over 70% for all prescriptions in order to save money for consumers and the government is favorable to the generics industry.
- Consolidation of of small and mid sized companies by industry leaders will continue.
- In 2009, a number of blockbuster drugs are losing patent protections, some of them include Prevacid, Imigran, Arimidex, Keppra, Cellcept, Flomox, AmbienCR, Valtrex, and Topamax.
- There is also a possibility of bio-generic drugs to surface. These drugs will be the generic versions of costly medicinal biotechnology products.
- An aging population and growth in the U.S. prescription sales indicate brighter prospects the industry. For example U.S. prescription sales achieved a growth of 1.3 percent in 2008, to $291 billion. Further, the dispensed prescriptions by volume grew at a 0.9 percent pace.
- Generics industry's double digit growth rates will continue through 2011 to $69, and will make up 20% of the total pharmaceuticals market .
- Major growth in the market will come from respiratory, central nervous system, gastrointestinal and anticancer therapeutic agents. Further, cardiovascular drugs alone constituted a major chunk of generic prescription market of about 21 percent in 2002. Other popular categories of drugs included anti-infective drugs (14.4%), and antiarthritics/analgesics (14.0%).
- Amongst the emerging economies, while India is able to supply a low-cost, high quality finished dose products, whereas, China is able to provide low-cost, high quality API and drug intermediates.
- The top eight global markets are the U.S., Germany, France, the U.K., Canada, Italy, Spain and Japan, which account for 84 percent of total generics sales. The US market, currently valued at $33 billion, is the larges market in the world accounting for 42 percent of global sales.
The 2009 financial crisis
has presented the healthcare industry with many challenges, however, its not been hit as bad as some other industries such as the automotive sector. It seems that as the economy recovers, there will be many opportunites for business to profit from, such as the generic drugs industry.