2013 is tipped to be a milestone year for the global pharmaceutical industry. As a number of key blockbuster drugs face the expiry of their US patents over the next year, a strong opportunity opens up for manufacturers to launch their own generic versions in the US. Since the US generics industry is currently worth approximately USD 73 billion and expected to increase to nearly USD 107 billion by 2016, 1 we’re likely to see a number of new entrants capitalizing on these growth prospects, especially from emerging countries like India, Turkey and Israel where production costs are lower. Additionally, as these valuable drugs come off patent, an increasing number of generics manufacturers will be targeted by multinationals for joint ventures and acquisitions. Overall, this significant change in market dynamics is set to shake up the pharmaceutical industry and create a considerable shift in manufacturing and export requirements.
In India, leading generics players Sun, Lupin, Aurobindo, Dr.Reddys, Cipla and Ranbaxy are already leveraging this opportunity having been highly proactive in US applications for Drug Master Filings (DMF) and Abbreviated New Drug Applications (ANDA) over the last few years. 2As India’s pharmaceutical industry is monopolized by generics, it currently represents approximately 20 percent of the world’s pharmaceutical production and accounts for almost 30 percent of the US generics market. Spurred by the success of its generics manufacturers, analysts predict that India's USD 11 billion domestic drug industry is likely to grow to USD 30 billion by 2020. Pharmaceutical exports are also set to increase from just over USD 8 billion to USD 20 billion by 2020.3
Over recent years, Indian firms have also been increasingly targeted by multinationals for acquisition. Since 2008, global pharmaceutical giants have acquired six Indian drug companies, for example, the Japanese company Daiichi Sankyo took over India's largest drug producer, Ranbaxy and Abbott acquired the domestic business of Indian firm Piramal Health Care. So with Indian manufacturers entering into more strategic alliances with foreign multinationals, even more doors are opening for the India pharmaceutical market.
As the ‘pharmerging’ market, as it’s commonly known, grows from strength to strength, attention is also turning to countries like Turkey. With generics comprising 80 percent of the country’s drug sales, Turkey is fast emerging as a leading generics hub.4 Local manufacturers such as Sandoz, a division of Swiss drugmaker Novartis, have already received approvals on ANDA filings to take advantage of the US patent cliff.5 Furthermore, there have been a number of significant takeovers and partnerships, the latest being the acquisition of local generics manufacturer Mustafa Nevzat by US biotech giant Amgen for USD 700 million. This purchase will strengthen Amgen’s move into off-patent medicines and help expand its product range as it loses the patency of various top-selling drugs.
Israel is another hot spot for generics manufacturers, looking to leverage the patent cliff. It’s highly developed pharmaceutical industry is one of the leading industries in the country with the manufacture of generic drugs representing one of the biggest success stories. Teva, currently the world’s leading generics manufacturer with several locations across Israel, has already received approvals on a number of ANDA filings.6
So while the patent cliff creates a strong opportunity for generics manufacturers and multinationals alike especially in emerging markets, the initial market launch of generic drugs is subject to serious regulatory constraints. For the first 180 days after the expiry of a patent, the Food and Drug Administration (FDA) in the US allows only a handful of generics manufacturers to launch products. To do this, they are required to first submit an ANDA for approval by the FDA. While the ANDA application is being processed, the Pre-Launch Activities Importation Request (PLAIR) FDA program allows import and storage of finished drugs for the initial launch phase on a case-by-case basis. Some companies decide to send their generics to a foreign trade zone located in the US in multiple shipments and risk having to recall their products if their FDA application is rejected. Others wait until a few days before the launch and send all their products in one large shipment of containers to a single port of entry in the US.
As the FDA only allows a handful of generics manufacturers to launch products for the first 180 days within the expiration of a patent, implementing a ‘rapid distribution’ model that can effectively handle a first-time direct-to-end customer launch is critical. In order to abide by the FDA guidelines, generic drugs can be stored in advance but the seal cannot be broken until 12.01am of ‘launch day’. Only then can companies quickly ship the generic products to customers e.g. wholesalers, retail pharmacies and distribution depots throughout the US. However to ensure this process is as seamless as possible, it is vitally important to have an efficient transportation provider in place that can safely store and ship a large volume of temperature sensitive drugs. Manufacturers rely on express transportation companies to ensure their drugs reach the destination on time and in the right condition. Cold chain boxes, temperature controlled airfreight containers, thermal blankets and other packaging solutions help maintain the strict temperature regimes of the pharmaceuticals safe-guarding their safety and efficacy during transit.
So with many blockbuster drugs on the brink of losing their US patencies, combined with fierce competition across the generics industry, large multinationals and generics manufacturers need to ensure they have the right shipping infrastructure in place to be able to capitalize on this small yet highly lucrative window of opportunity.
1.PR Newswire article, 2011
2.Frost and Sullivan report, July 2012
3.PWC Report : Global Pharma looks to India
4.Invest in Turkey Report 2012
5.FDA approvals March 2012
6.FDA approvals May 2012
Last updated on: 12/09/2012 16:15:10