In just the last six months, Ranbaxy has mopped up a cool $600 million (Rs 3,417 crore) in revenue from the sale of generic Lipitor. Between 2012 and 2015, around $60 billion (Rs 3,41,705.1 crore) worth of original drugs such as Lipitor are going to see their patents expire. $34 billion (Rs 1,93,632.89 crore) of that total will be ripe for exploitation this year alone. It’s almost as if the heavens have opened up and rained good fortune — or even better yet, cash — on generic drug makers.
Indian pharma companies are in the forefront of this never-seen-before opportunity to make a lot of money in the US, thanks to a wave of drugs — such as Lexapro, Actos and Diovan — that will see their patents expire in the next few years. This is what happened to billion-dollar drugs such as Sanofi’s Plavix and Eli Lilly’s Zyprexa in the last decade or so, but the next wave will be even bigger. And no company worth its generic salt can afford to watch the action from the sidelines.
Estimates by Dolat Capital show that the US generic market, currently estimated at $350 billion (Rs 19,93,279.8 crore) (and 75 per cent of pharma industry’s volume), is expected to grow by around 12-13 per cent over 2011-15. “If you want to be a really big, meaningful, global company, you cannot actually avoid or de-focus from the largest markets that are there today, which are the US, Europe and Japan,” says Lupin Chief Financial Officer, Ramesh Swaminathan.
Consequently, major Indian drug makers like Dr Reddy’s Laboratories, Sun Pharmaceutical Industries, Lupin, Glenmark, Aurobindo Pharma and Torrent Pharma are racing to capitalise on this unique opportunity. “Even if we assume 90 per cent price erosion, the market for these new generics would be worth annual sales of around $10 billion (Rs 56,950.85 crore), an addition of 29 per cent to the current market of $35 billion (Rs 1,99,327.98 crore) annually,” says a report by Antique Stock Broking.
| INDIAN PHARMA’S PLANS FOR US EL DORADO | |||||
| Generic name | Brand | Innovator | Therapeutic Area | Innovator market size ($ mn) | Probable launch date |
| Ranbaxy’s key product exclusivities for the US market | |||||
| Pfoglitazone | Actos | Takeda | Diabetes | 3,000 | 2012 |
| Valsartan | Diovan | Novartis | Cardiovascular | 1,860 | 2012 |
| Modafinil | Provigil | Oephalon | Narcolepsy | 925 | 2012 |
| Rosiglitazone | Avandia | GSK | Diabetes | 520 | 2012 |
| Rivastigmine | Excelon | Novartis | Alzheimers | 180 | 2012 |
| desloratadine + pseudoephedrine | Clarinex D2 4 | Merck | Allergy | 22 | 2012 |
| desloratadine + pseudoephedrine | Clarinex D1 2 | Merck | Allergy | 15 | 2012 |
| Desloratadine | Clarinex reditabs | Merck | Allergy | 8 | 2012 |
| Sirolimus | Rapamune | Wyeth- now Pfizer | Transplant - rejection | 201 | 2013 |
| Finasteride | Propecia | Merck | Hair loss | 150 | 2013 |
| Esomeprazole magnesium | Nexium | AstraZeneca | Gastriculcer | 1,850 | 2014 |
| Sun Pharma’s key product exclusivities | |||||
| Atomoxetine | Strattera | Lily | ADHD | 446 | 2012 |
| Rfvastigmine | Exelon | Novartis | Alzheimers | 150 | 2012 |
| Memantine | Namenda | Forest | Alzheimer | 1,100 | 2015 |
| Imatinib | Gleevev | Novartis | oncology | 1,088 | 2015 |
| Pregabalin | LYrica | Pfizer | neuropathy, anxiety isorder | 1,600 | 2018 |
| Lupin’s key product exclusivities | |||||
| Ethinylestradio/ levonorgestrel | Loseasonique | Teva/Barr | OCP | 5 | 2012 |
| Memantine | Namenda | Forest/Lab | Alzheimers | 1,100 | 2015 |
| Metformin HCL | Glumetza | Depomed | Diabetes | 35 | 2016 |
| Pregabalin | Lyrica | Pfizer | neuralgia, neuropathy, anxiety isorder | 1,600 | 2018 |
| Lanthanum | Fosrenol | Shire | Kidney disease | 86 | 2018 |
| Glenmark’s key product exclusivities | |||||
| Metformin ER | Tarka | Abbott | Cardiovascular | 64 | 2014 |
| Ciprofloxacin oral suspension | Zetia | MRK/SGP | Cholesterol | 1,500 | 2016 |
| Source: Antique Stock Broking | |||||
Lupin, which has filed a total of 173 generic drug applications in US so far, launched 8 products in 2010-11 and 11 in 2011-12. The company’s filings during 2011-12 also increased to 25 from 21 in the previous year. Lupin currently sells 41 generic products in the US market and claims to be in the top position for 20 products as per market share.
Glenmark, which had received the highest approvals from the US Food and Drugs Administration in 2010-11, plans to launch 10 new products in the market in the current fiscal. The company, with a focus on niche segments like dermatology and oral contraceptives, launched 12 products in US in 2011-12 as well. It also has 38 generic drug applications pending with the regulator for approval.
Both the US and Europe together account for 53 per cent of the global pharmaceutical market, but the US is the more coveted territory for many reasons. It has a favourable regulatory environment compared to the stringent price control norms in key European markets. A depreciating rupee versus the dollar has also helped. “The rupee depreciation against the Dollar (14 per cent in FY12) works in the favour of most of these drug makers on account of higher realisation on their export receivables,” a report by Dolat Capital said.
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Moreover, generic drugs are now a core part of how the US health system cuts its costs today. According to the Generic Pharmaceutical Association, during 1999-2008, generic drugs saved the American healthcare system more than $734 billion (Rs 41,80,192.49 crore). Expenditure on prescription medicines is one of the fastest-growing components of healthcare costs, and hence, is a prime target for cost reduction.
This means, a hectic scramble to cash in on the opportunity as quickly as possible. According to industry estimates, Indian companies are filling an average of 1,000 abbreviated new drug application (ANDAs) every year in the US to tap the opportunity. The bulk drug filings from Indian companies in US have also increased significantly. Of the total bulk drug filings in US, India accounted for 45 per cent in 2009 and 49 per cent in 2010, which further increased to 51 percent last year.
And yet, they might be a little too late to the generic party, having arrived almost a decade after market leaders like Teva, Sandoz, Mylan and Watson have already penetrated the US market. “By the time Indian companies developed the necessary competencies to effectively compete in the market, the leading global players had already built large product portfolios and wide distribution networks,” a report by Antique Stock Broking says. Consequently, only Lupin and Dr Reddy’s Labs have shares of over two per cent each in the US market and all Indian companies together account for a mere nine per cent share.
With opportunity, comes competition, much more so than it ever was in the US pharma industry. “Price erosion can range from 90-95 per cent of the innovator price post patent expires and hence profitable growth will always be a challenge,” says Glenn Saldanha, Chairman and Managing Director, Glenmark Pharma. “There is certainly going to be more competition,” says Sujay Shetty, Partner, PricewaterhouseCoopers. “So, Indian companies will have to haunt for more new and value added products,” adds Shetty.
Which is why, Indian generic companies are thinking of various strategies through which they can make the most of this opportunity. While some companies have chose the Para IV route which allows them an exclusive right to sell their product for 180 days, many have also decided to target niche segments where it is difficult to develop products. For instance, firms like Ranbaxy, Dr Reddy’s and Sun Pharma are targeting 180 days of exclusivity. On the other hand Lupin and Glenmark have a product pipeline focused on niche segments like dermatology and oral contraceptives.
So, how does the future look for Indian generics? “Considering the 16 per cent share in the exclusivities upside and the 30-per cent-plus share in current ANDA approvals, we believe Indian players will acquire a much larger share of the market for new generics (compared to their current share of nine per cent),” says the Antique report, which is a shot in the arm for generics hoping to make a windfall despite a late start.