Response of Pharma Majors To Drugs Going Off-patent 29 Nov 2012

Branded generics: Response of Pharma majors to drugs going off-patent

The Need

Since the last few years, pharma majors across the globe are facing multiple challenges –

  1. There is a lack of a strong pipeline of new breakthrough drugs
  2. A marked increase in R&D costs
  3. Problems related to patented drugs’ pricing
  4. Cost control measures imposed by developing countries

These and a host of other factors are forcing us to look for other tracks to maintain our growth. In this scenario, rather than focusing on patented products for developed markets only, other possibilities like generics for both developed and developing economies seem very lucrative.

When you are a big brand in pharma, branded generics definitely makes sense for you. Essentially, a branded generic is nothing but a drug that has gone off-patent and is being sold under a brand name. So what is the hype all about?

Why branded generics?

capsules in test tube
  1. Firstly, you have already spent millions marketing a branded drug before its patent expired. It already has a loyal user base. It makes business sense to slash the price (still retaining a premium above the generic drug) and keep on catering to your market rather than completely abandoning the product and leaving it to vanish. I suggest milking the cash cow till it lives, rather than letting it die an early death.
  2. Secondly, launching your own patented drug’s generic version (under your brand name) even before the patent expires will definitely give you the first mover advantage of capturing the generic space before any other competitor can enter.
  3. Thirdly, you have manifold advantages over other generic manufacturers that could venture into the same product – lower production costs, lesser FDA approvals, and lesser legal hassles.
  4. Untapped market for branded generics in developed countries – statistics show that the demand for generics has been growing steadily over the years. Further, the branded generics sales have not yet picked up to the extent of the demand. Hence, the market for branded generics is not just growing but also holds untapped potential for you to explore.
  5. Huge scope in developing countries – In developing countries, the masses pays for their own medication (due to lack of insurance coverage and proper government healthcare programs) and can usually afford only the generics. However, there is an inherent trust factor about receiving better quality drugs from big multi-national pharma companies. A majority of the people are ready to pay a premium for your brand’s perceived quality over generic drugs. So why not cater to these markets? A very attractive option you must consider while entering developing countries is to take the M&A route with local generic drug makers. This provides multiple benefits of well established production, distribution and regulatory set-up and huge in-organic growth possibilities.

If you are going trekking in a jungle and the path suddenly disappears, you don’t just stand there waiting for something to show up. You follow your instincts, choose a direction and discover a new path. And if you are a pharma company with drugs going off patent – you know exactly what I am talking about! In my opinion, Branded Generics are the next path for pharma majors.

– Research Optimus

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