Pharma- How generics drug industry is facing stiff competition
There is a growing trend which has been noticed in the pharmaceutical industry for the last couple of years. The phenomena can be attributed to the growing pressure on the generics segment from both the originators( who develop the drugs) and the generics manufacturers who produces the drugs in a large scale after it goes off space. What is the phenomena?
There is a growing shift of interest towards the specialty drugs and biosimilars, away from the generic drugs. The shift is more pronounced in the European markets. The specialty drugs comprises inhalable products such as eye drops, certain injectable therapies and topical treatments. Biosimilars are follow on versions of original drugs produced after the expiration of the patents is supposed to have same effect on usage. The experts attribute this to mainly four forces - increasing cost pressure from the consumers, powerful distributors and pharmacies, sustained pressure on the free production of generics and finally, fragmentation of the generics industry.
The manufacturing of specialty drugs and the biosimilars involve complex processes. Even after the drugs go off patent, the originators strives to hold onto them using a mix of commercial, regulatory, legal and product development strategies and hence, it is difficult to be easily replicated by the generics industry. The percentage market share of the originators after the drugs have gone off-patent in the generics, specialty and biosimilars segments are 55%, 70% and 85% respectively. This shows how the originators are trying to hold onto the last two segments and this is where the fight is going to be in the coming years as far as pharma industry is concerned.
So, there are three strategic options available for the generics industry:-
A. Fight it out in the highly competitive and commoditized generics segment using scale as a leverage and better marketing and distribution strategies.
B. Go for the more higher margin and profitable specialty and biosimilar segment by investing more in research and development activity.
C. Be present in both the segments.
For example, the airlines industry has a relentless focus on costs.
* They are focused on point to point travel
* They have standard fleet of planes to reduce maintenance and operational cost
* They have introduced online booking and checking
Similarly, the generics industry on these lines can focus on
* Reducing the number of SKUs (stock keeping units)
* Standardize manufacturing processes
* Focus on online and quick regulatory approvals
In textile industry, the focus is on fast changing consumer trends.
* They have systems and processes in place to monitor and identifying changing trends.
* The processes can easily prototype the new development and role out new designs and offerings in minimal time
Similarly, the generic companies need to have systems and processes in place to identify the latest developments in the sector and forecasting the demands in advance can go a long way to ensure profitability and early mover competitive advantage.
References:
Kreid, & Reeves. (2014). Transforming Europe's generics industry. Boston Consulting Group
