The pharma industry has reached the longdreaded patent cliff and profits for branded medicines are plummeting because of generic
erosion. For copycat products, on the other hand, business is booming. Analyst firm Frost & Sullivan has recently released
two reports examining the markets for generic drugs and biosimilars respectively, and has predicted huge growth for both in
the lead up to 2017.
According to Frost & Sullivan's report, Generic Pharmaceuticals Market — A Global Analysis, pharmaceutical products worth $150 billion will go off patent between 2010 and 2017, which will propel the generic-drugs
market from revenues of $123.85 billion in 2010 to an estimated $231 billion by 2017.
However, as competition intensifies, genericdrug manufacturers will need to carefully consider their product segments and
the appropriate time for market launch. Companies will also have to deal with increasingly harsher costcutting measures from
governments and healthcare service providers. Although generic products are often favoured over branded medicines because
of their lower cost, the profit margins of generic manufacturers are still likely to be squeezed. According to the report,
many generic manufacturers, including Teva, Sandoz and Mylan, are opting to produce higher value products, such as difficult
to produce generics, specialty products and biosimilars.
In a press statement, Aiswariya Chidambaram, a research analyst at Frost & Sullivan, advised, "Large multinational generic
firms need to adopt a differentiated approach by opting for products with technologically challenging formulations, products
which require significant regulatory support and products with limited availability of active pharmaceutical ingredients."
Another strategy being adopted by genericdrug companies is to forge alliances with branded pharma for marketing and exclusivity
rights to certain generic blockbusters, such as Lipitor and Crestor, among others.
The global biosimilars market earned revenues of around $172 million in 2010, but this is estimated to jump to $3987 million
in 2017, with the industry growing at a compound annual growth rate of approximately 56.7%. According to Frost & Sullivan's
Analysis of European Biosimilars Market report, impending patent expiries are expected to provide impetus to the market development of several new biosimilars.
But strong growth doesn't necessarily mean that there will be a sudden boom of new developers seeking to enter the market.
Although biosimilars offer "lucrative growth prospects," high investment is also required because of the complex production
processes, expensive biological and chemical materials, rigorous clinical trials and stringent quality and safety tests, which
are all needed for development. High manufacturing costs can also act as a barrier to market entry, but this can be overcome
by using license agreements between companies.
"The need for considerable financial outlays will hinder the entry of small biotech firms in particular," Frost & Sullivan
analyst Srinivas Sashidhar said in a press statement."On the other hand, specialty pharmaceutical companies with biotech expertise
and financial capabilities are well positioned to venture into the biosimilars market."
As with generic smallmolecule drugs, biosimilars are likely to be used in healthcare programmes in place of branded biopharmaceutical
products for cost reasons. However, developing a biosimilar is much riskier than a traditional pharmaceutical. Biosimilars
are highly complex and there is no guarantee that regulators will accept the product's similarity to its biological counterpart.
In the US, in particular, the regulatory pathway for biosimilars is still very new. Uncertainty also remains about how successful
a biosimilar will be in the market. According to Frost & Sullivan, one important factor to help achieve success will be effective
communication with the scientific community, including close interaction with doctors and pharmacists to promote the benefits
of biosimilars and increase uptake.