Indian makers of generic drugs have a fight on their hands as they scramble for access to the $100 billion worth of drugs coming off patent over the next two years.
Fierce competition and lawsuits from rival generic firms, a stricter U.S. health regulator and compliance issues are some hurdles Indian pharmaceutical firms face in their race to grab the opportunity
Indian drug firms, which account for about a third of U.S. applications for approval to sell generics, could add $2 billion to $2.5 billion in U.S. sales in the next five years, doubling their revenue from the country, according to Morgan Stanley. But that opportunity will not be easily won and investor sentiment is reflected in the decline in share prices.
The Indian pharmaceutical index is down more than 9 percent this year, versus a near 6 percent fall in the broader market. Drugs worth more than $140 billion are likely to go off patent in the next five years, analysts said, and the right to sell blockbusters such as Lipitor will be especially contentious
Generics are poised to increase their market dominance in the next few years in the United States, driven by the wave of patent expirations, rising from 77 percent of prescriptions in the first half of 2010 to as much as 85 percent by 2014, according to a forecast by IMS Health Inc. Health insurers, pharmaceutical benefit managers and other healthcare payers also push consumers to use generics to help control spending after the U.S. government enacted a broad healthcare reform law last year. The next two to three years is going to be good. Lots of Indian companies are well-geared for exploiting this market. Turnover will zoom, profits will zoom.
However, there will be lots of lawsuits. It is going to be extremely competitive. The FDA will be a lot more diligent. At the end of December, Lupin had 137 applications filed with the FDA, with 47 approvals won to date.
With so much at stake, rival generic drug makers such as Israel’s Teva and Mylan, as well as the patent holding companies, are expected to leave no stone unturned. In its lawsuit, Mylan contends that Ranbaxy, controlled by Japan’s Daiichi Sankyo , should be forced to forfeit its exclusivity period to sell Lipitor because it violated the FDA’s application integrity policy. A victory for Mylan could cost Ranbaxy $500 million to $600 million in revenue. Analysts expect Ranbaxy, whose shares have lost 23 percent so far this year, to launch generic Lipitor in November, given U.S. approval of its generic version of Pfizer’s Alzheimer’s drug Aricept and its plans to move the manufacturing of generic Lipitor to New Jersey from Paonta Sahib.
While that may placate regulators, moving manufacturing to the United States also undermines the cost advantage of producing in India. There is plenty of opportunity for generics. But unfortunately competition is very fierce both from big pharma and incumbent generics.