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Patent Cliff and the Future of Generics in Asia : Trends that will Impact the Market in the Short Term

  • December 2014
  • 56 pages
  • Frost & Sullivan
Report ID: 2582126


Table of Contents

Executive Summary

•The generic drug manufacturers in Asia have started looking beyond patent cliff to drive growth. As less drugs are expected to go off patent in 2015–2017, the manufacturers are adopting the strategy of focusing more on market expansion and raising the quality of their existing portfolio of drugs.
•The pipeline for new molecules is still weak in 2014. Some big generic manufacturers have started restructuring their business models to survive the competition and have also invested heavily in research and development (R&D). But as the impact of these investments can be seen only in x years or later, new molecules are not expected to be a major growth driver in Asia.
•To counter the patent cliff, major branded drug companies have opened their own generics division to maintain their current global market share. Pfizer and Sanofi are some of the major companies which have changed their business models due to patent cliff.
•The generics market is expected to grow globally at a CAGR of x % (2014–2018). However, the growth is expected to be more in Asia at a CAGR of x – % (2014–2018) due to heavy demand for generics in the United States and Europe.
•The United States remains the biggest consumer of generic drugs, followed by Europe.
•In Asia, India is one of the major markets for generic drug manufacturing, followed by South Korea and Japan. Other promising markets include Indonesia, Malaysia, and Taiwan.
•The domestic consumption of generics is expected to increase in Asia due to the following government initiatives:
oJapan: The government has set a target of increasing the volume of generic prescription from x % (2012) to x % by 2018 ( in 2014, x % volume is expected).
oIndia: The new government’s universal health plan will be rolled out from 2015 to cover the entire population by 2019. The state governments are promoting the use of generic medicines in state-run public hospitals to cut down rising healthcare costs.
oIndonesia: With the universal health coverage scheme implemented from January 2014, the consumption of medicines is expected to increase from this year onwards.
•In Asia, governments are the biggest buyers of generic medicines. However, due to price capping and regulatory norms, most of the tenders are awarded to local generic manufacturers (especially in China, India, and Japan). The profit margin remains low in such deals and remains a major concern for the manufacturers.
•The Indian market consists of branded generics, un-branded generics, and traditional medicine (like Ayurveda, Unani, etc.). The branded generics market is expected to continue its growth for the next x – years as end users and physicians (preferred first line of treatment) prefer branded generics.
•China continues to remain a conservative generics market, where local manufacturers are favoured over MNCs. Some of the MNC giants have survived due to join ventures with domestic companies (e.g. Hisun-Pfizer), while a few others left in 2014 and entered other markets due to limited growth (e.g. Generic company Actavis moved out of China in January 2014 and entered Singapore 3 months later by setting up its regional headquarters.)
•Generic manufacturers in Asia are looking at newer markets like Africa, Mexico, Argentina, and Brazil to expand in 2015–2017. Indian manufacturers are especially considering Japan generics market as the next big opportunity.
•The Philippines showcases a different business model for generics. Most of the products are consumed in the domestic market. Drugs are dispensed majorly through retailers. RiteMED model is the most successful model in the Philippines, and local drug manufacturers look up to RiteMED while pricing their products. Pfizer is one of the largest generic participants in the market.
•While the ASEAN Free Trade Agreement is expected to boost the economy in Southeast Asia, the generic manufacturers do not expect any immediate benefit from this agreement.
•Mergers and acquisitions are expected to reduce regional competition and increase product pipeline (also new molecules). However, the big manufacturers may create a monopoly and try to control the market through pricing.
•From 2013, there has been an increase in the price of generics. For example, the generic eye drop market is majorly driven by Pacific Pharma and Sandoz in the United States. In 2013, the price of a particular eye drop, sold under a brand name, was increased from $ x to $ x .
•The generics market is largely divided into demand and supply markets. The West (the United States and Europe) continues to demand low-cost, high-quality generics, with Asia being the biggest supplier.
•Though the quality of generics was a major issue in the US market, the manufacturers in Asia have started investing heavily to upgrade their facilities and comply with international standards.
•The generics market is largely a volume-driven one and manufacturers can only make money if the business model is based on high volumes and low costs. Branding and visibility are the other factors which help these manufacturers partner with local governments, as generic manufacturers have marketing limitations (they usually do not sell through medical representatives).

Key Questions This Study Will Answer

What are the key trends in the Asian generics market post 2012?
What are the new strategies which the domestic manufacturers are likely to implement?
How will the major generics markets grow in the next 5 years?
What is so unique about the Philippines generics market?
Did patent cliff make drug companies change their existing business models?

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