Five stories that speak volumes about US generics market

By Ben Hargreaves contact

- Last updated on GMT

(Image: Getty/Monsitj)
(Image: Getty/Monsitj)

Related tags: Generics, Us, Fda, Novartis, Aurobindo

As Novartis looks to sell a major chunk of its generics portfolio in the US, in-PharmaTechnologist has a look back at some of the stories this year that have signposted larger, on-going trends in the US generics market.

1. The FDA taking measures to lower generics pricing

At the beginning of the year, the US Food and Drug Administration (FDA) was awarded additional funding with a specific remit to bring down the price of drugs, with a particular focus on generics. From then onwards, the FDA has taken a number of steps to encourage competition in the generics market thereby lowering the price of drugs.

Since FDA commissioner, Scott Gottlieb, came into the position, the Agency has taken a proactive approach to ensure that a repeat of Martin Shkreli’s actions with Daraprim does not occur. As a result, the FDA announced the first approval for a generic drug​ under a new pathway known as the Competitive Generic Therapy designation.

2. Organisations seeking alternative means to reduce generic prices

However, for some, relying on the FDA to bring down prices was not the preferred option. in-PharmaTechnologist has observed a growing number of companies and hospitals joining forces to begin their own generic initiatives. One such group was Allied Patients, which formed a partnership of 20 drug development companies. The initiative aims to provide cheaper generic alternatives and ensure that drug shortages don’t happen on critical medicines.

In a similar story, five hospital associations, representing 450 hospitals across the US, banded together to form a not-for-profit generic drug firm​. With both of these projects only starting up this year, it’s unclear yet what impact they could have on the market.

3. The risk of having only one supplier of a critical product

Pfizer’s difficulty manufacturing EpiPen for its partner, Mylan, broke as a story last year, but this year it has grown into a global issue. There were shortages of EpiPens reported in the UK, Canada and the US – with a regulatory notice issued that extended the expiry dates of the product​.

The issue at the heart of the case is the problem resides in having one manufacturer responsible for a single product that is critically important to a number of people worldwide. With few competitors on the market, all with different delivery methods, the EpiPen product remain is the market leader. However, Teva received US approval for the first generic version​ of the product, other than Mylan’s own, during the height of the crisis.

4. Companies reliant on US generics having to adapt to environment

The good news for Teva, on its EpiPen generic approval, comes amid a tough few years for the company. Employing the business strategy of making a number of acquisitions to grow rapidly, it developed a large debt burden that it is now having to take action to manage, as the US generics market has slowed over the previous years.

The pushback against high prices of generics, both from the regulator and from wholesalers looking to outcompete the market, has led to a much more difficult market. With little sign that this is going to abate, Teva has had to find cost savings across its business and the responsibility for taking the difficult decisions has been placed on the shoulders of the new CEO, Kare Shultz. He began by cutting back on manufacturing globally, which led to Rekah Pharmaceuticals taking on responsibility for manufacturing a portion of Teva’s portfolio in Israel.

5. Big pharma looking to divest generics units

This leads to the story that broke last week of Novartis taking the plunge to sell a portion of its generics portfolio in the US. This action was significant enough that the share price of the big generics producers immediately took a tumble, with Mylan falling from $39.48 (€33.64) per share to $37.64, and Teva falling from $22.87 shekels to $20.18.

Companies heading to the exit is always going to be a concern for the relevant industry and Novartis is still widely expected to attempt to sell its US generics business entirely​. After Pfizer’s recent reshuffle​, there are signs that it may be joining Novartis in looking at a sale.

On the other side of the deal is Aurobindo, which will, after completing the deal, become the second largest generics manufacturer in the US and just posted improved revenue by 15% year-on-year in its Q1 results released last month. The stock market reacted positively to the news, suggesting investors believe Aurobindo could make a success of the acquisition, with its share price immediately rising from 772 ($10.73) to 804 rupees.

Related topics: Processing, Globalisation

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