The emerging generic markets of the world are likely to outshine the US in the coming years but the fact remains that the US generic market is one of its kind - the perfect destination for the Indian generic manufacturers blessed with world class expertise but plagued with limited resources. What makes the US market special for Indian pharma companies? …a host of factors including the following -
- The dominance of “generic generics” makes it easier to penetrate as compared to the branded-generic markets of the emerging world. Indian companies are well on course to adopt winning ways to lure distributors and various classes of consumers with attractive prices, top-notch quality, reliable deliveries and long-lasting value chain relationships
- The presence of an efficient chain of distributors eliminates the need for making huge investments in setting up sales and marketing value chain
- The gestation curves are strikingly shorter as Indian companies need not spend time in building enduring relationships with the medical community in US
- A single-agency approval stands to open a large USD 35 billion market
The US has been leading the cost reduction drive in health care costs for long. It was one of the first countries to promote reduction in prescription-drug costs through the adoption of generics. But the good news for India lies in the market potential despite the 60 per cent share of the current generic volumes in US. This is largely due to the robust growth anticipated in the coming years as well as the aggressive health care reforms that seek to cover the 15 per cent population with no medical cover. This spells a 47 million strong consumer base to be covered largely under the low-end policy bracket - a booming market for generics.
Add to that, the savings from use of generics have been phenomenal - USD 121 billion in the year 2008 alone as compared to USD 734 billion over 1999-2008. No wonder, the US government continues to target expenditure on prescription drugs as the prime target for cost reduction.
Indian companies, though not in the game of big-ticket acquisitions as yet, seem on a ramp up spree. On one hand, they are choosing high-value and niche products to entice US distributors and on the other, they are expanding their product suite to gain competitive edge in the race for achieving large-scale purchases by nationwide distributors. They are also among the most prolific ANDA filers in the US - in 2009, 132 ANDAs out of a total of 419 were filed by Indian companies. This share of 30 per cent is in sharp contrast to the total revenue share of Indian companies in the US market - 7-9%. These together with the large pending approvals augur well for the Indian corporates in the coming years.
The “patent cliff” - the off-patenting of a large number of patented drugs between 2010 and 2014 will throw open a large market for generics manufacturers besides the scores of market exclusivity opportunities in select drugs. The market size of one-off opportunities is estimated to be about USD 19 billion over the coming five years. Indian companies have already bagged a significant share of 16 per cent.
The Biosimilars Opportunity
Biologic drug development capabilities of Indian companies promise a long-term growth in the US market. The US is fast moving towards biologic drugs - hormonal as well as advanced monoclonal antibodies. These involve complex molecules manufactured from living sources like bacteria and cell cultures.
Indian companies are gearing up to address the biologic challenge with emerging market launches and development work for development markets. Indian firms have mainly focused on insulin, erythropoietin, filgrastim and interferons but Dr Reddy’s is concentrating on high-molecular-weight cell culture-based products like monoclonal antibodies.
Although the segment will to evolve into a high-growth, multi-billion dollar business only in 5 to 10 years, the institution of the US regulatory mechanism for biosimilars is likely to provide a near-term fillip.
Towards Competitive Edge
A fundamental shift in strategic positioning has placed Indian companies on a higher pedestal. Indian players have been identifying products with long periods of low competition. As against the large products that get commoditized soon, these offerings address niche segments of the market, are relatively small-revenue products from the low-competition zone and pose greater technological barriers dissuading low-end players competing on price to attempt a kill.
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