The growing loss of patent protection on blockbuster drugs over the next few years and the rising need to contain spiralling healthcare costs are going to lend significant impetus to the growth of Europe's generics and biogenerics market, says a new report.
The sector will grow from a value of $10.9 billion in 2003 to $21.2 billion (€16.5bn) in 2010, forecasts the new study from Frost & Sullivan.
One of the main drivers will be the efforts by European governments to implement pricing controls in a bid to contain excess spending as they strive to provide partial or total reimbursement of prescription drug costs to the patient. The use of generics in Europe yielded estimated annual cost savings of nearly $25 billion over branded drugs in 2003.
The Netherlands and UK have well-established generics markets and generics have begun to take a firmer hold in France, while in Italy they are developing more slowly; says F&S; overall, their use has been strongest in Germany and the UK.
Generics are preferred mainly because of their 20 to 80 per cent price differential from the patent-expired brand, and removing copy drugs from the health economics equation is likely to render European Union health care systems 'financially unsustainable', according to F&S senior analyst Dhiraj Ajmani.
The report suggests that government healthcare providers have played a pivotal role in spearheading this initiative. Increasingly, they have begun to adopt generics either as a step therapy or as a formulary alternative for which patients make the lowest co-payment.
However, while the generics and biogenerics market shows great potential, unclear regulatory processes and patent issues are likely to pose a major challenge, particularly for biogenerics, due to their much more complex formulations and the difficulties in demonstrating true equivalence.
The EU has become the first western market to formally clarify its approval process for biogenerics, passing legislation in June 2003 letting companies apply to sell generic versions of genetically-engineered drugs. As regulators seek to fine-tune the guidelines, biogenerics are likely to be evaluated individually.
Also, new EU legislation due to take effect in 2005 should provide a boost to generics. With an ever-growing number of structural reforms in the pipeline, regulatory procedures will likely be streamlined to speed up the process of approving new generics, according to F&S.
However, the widely held view that branded drugs are much more efficacious than generics or biogenerics is likely to restrain overall market growth, as it often results in 'brand name shift' - consumers simply switching from one branded drug to another instead of an identical generic.
Nevertheless, in some cases the generic is preferred. For example, generic paracetamol is much more popular than branded Panadol for pain relief. On the whole, generics tend to enjoy better brand awareness among EU citizens in the self-medication and retail markets where they pay for the drugs themselves, says the study.