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Generic drugs present an opportunity for drug companies to generate substantial revenues. But where do companies find the best return for their investment of time and money? With mature markets such as the United States and Europe saturated with competition, drug companies can turn to emerging markets to capitalize on their investments. Countries such as Brazil, Russia, India, China, Mexico and Turkey are showing strong signs for future growth in the generics market.
The rheumatoid arthritis market in the United States is an extremely profitable sector, but market leaders exclude smaller drug companies by restricting their financial returns. Blockbuster drugs such as Humira, Remicade, Enbrel and Orencia account for about 97% of this market (IMS Database). Humira alone generated $12.5 billion while Enbrel and Remicade generated $7 billion and $5 billion each. With such strong competition in mature markets, pharmaceutical companies can turn to the emerging markets to find new growth opportunities. Due to the competition from large pharmaceutical companies, smaller companies are forced to turn to new opportunities in these emerging markets. With tons of drugs coming off patent, companies can emulate these products to formulate generics products and introduce them into emerging markets to generate substantial revenue.
Emerging markets are growing quickly, overtaking the top 5 EU economies (Germany, France, Italy, the UK and Spain) in pharmaceutical spending at $85 billion in 2014. But operating in emerging markets is more complicated than in developed markets. These emerging markets often make substantial investments in infrastructure, funding services and expanding health insurance to a broader population. So where can the opportunities for emerging markets be found? Within the next 5 years emerging markets such as Brazil, Russia, India, China, Mexico and Turkey (BRIC-MT countries) are anticipated to account for $190 billion in sales growth, with approximately 40% from innovative drugs.
Figure 2 shows the increasing prevalence of noncommunicable diseases in emerging markets. Diseases like diabetes, cardiovascular disease, cancer and others are on the rise, which creates an opportunity for pharmaceutical companies to deliver generic drugs in these regions. Creating diabetic drugs in Southeast Asia and Eastern Mediterranean could prove profitable to a pharmaceutical company due to the fact that mortality is increasing in this region and the market is open.
Pharmaceutical companies can venture into emerging markets to increase their sales of generics products. One generic opportunity for companies to expand on in emerging markets is inhalers for respiratory issues. With roughly $19 billion of inhalers going off patent by 2018, the generics field is open to new opportunity for drug companies. The complication with inhalers is that the drug delivery platforms are usually covered with 7-10 patents per inhaler products. Opportunity exists outside US and Europe, specifically in African, South American and Asian countries. “For instance, an Algerian generics company has established a program with local authorities to get approval for a generics version of Seretide. The country has significant medical needs, but no generics guidelines for inhalers” (Mckinsey May 2013).
Another market drawing signs of prospective future growth is the sterile injectables market. This sector remains an attractive market due to the fact it is projected to grow $10 billion by 2018. Growth will be driven by loss of patent life, product formulation alterations, and demand. In the emerging markets, there are few global players that focus on this opportunity. “The key success factors in generic sterile injectables include the nature and degree of portfolio differentiation, the scale and age of manufacturing facilities and the level of manufacturing and quality assurance talent” (Mckinsey May 2013). A drug company can prosper from this product class because of the low costs, less competition and differentiation of product.
|Opthalmic||1||3||1||0||0||0||5||Missed opportunities (if not already invested)|
|Transmucosals||0||0||1||0||0||1||2||Missed opportunities (if not already invested)|
|Topicals||0||0.5||0.1||0.2||0||0.1||1||Missed opportunities (if not already invested)|
|Intranasals||0||1||0||0||0||0.2||1||Missed opportunities (if not already invested)|
|Transdermals||1||0||0||0||0||0||1||Missed opportunities (if not already invested)|
|Oral Solids||14||16||22||15||11||10||88||Missed opportunities (if not already invested)|
In conclusion, emerging markets offer many opportunities for drug companies to turn to for high returns in their investments of research and development. Brazil, Russia, India, China, Mexico and Turkey are some of the leading markets that should grow substantially in the next 5-10 years because of the opportunity for generics. Among inhalers and sterile injectables, two markets that are going to flourish with generic opportunities are biologics and oral solids. In Table 1, biologics show that 20 products will lose patent protection and be exposed for generic opportunity in turn, leading to a highly profitable sector. Oral solids are proving to be fiscally rewarding because of the loss of 10 products patent production by 2018. In markets in Africa and Latin America, the opportunity for drug companies to jump at the generic market in biologics, inhalers and oral solids will reap the benefits. “The broader pharmaceuticals market, currently estimated at $18 to $19 billion, is expected to grow to about $50 billion by 2020, representing an annual growth rate of 12 percent. Generics are one of the most vibrant sectors of the market. Worth $4 billion, it is expected to reach $18 billion by 2020 on annual growth of 22 percent” (Mckinsey May 2013). So as it is seen, drug companies can start exploring the areas discussed in global emerging markets to profit in their investment of generics.
About the author:
Marc Teitelbaum. analyst at DrugPatentWatch
Marc is completing his Master's in the Georgetown University's Biotechnology / Biobusiness program. He was also previously a Business Development and Marketing intern at Kashiv Pharma and researched oncology therapeutics at Mt. Sinai Medical Center in New York.
Marc can be contacted at firstname.lastname@example.org.