[ccebook.cn]The World in 2010

European Commission have already expressed their displeasure at perceived antitrust violations involving Big
Pharma’s efforts to thwart competition from generics (through, for example, “pay for delay” deals that bribe
rivals to put back the launch of generic pills). The year ahead could well see tough talk turn to regulatory
action. This trend too should change attitudes at big firms, so that generics are not seen merely as pests to be
tolerated or paid off, but rather as inspiration for a radically different business model.
That is especially true when it comes to the developing world, which is where the action is these days. In
2010 much of the revenue growth for the drugs industry overall will come from the leading economies of the
poor world. IMS Health, another consultancy, calculates that the seven biggest emerging pharma markets
made up more than half of the global industry’s total sales growth in 2009. By 2012, nine of the top 20
markets will be emerging economies.
The trick to winning over the rising middle classes in such markets is not to peddle over-priced patented drugs
on the Western model, cursing the local generics firms as rip-off artists. Big Pharma has tried that route for
years with little success. Rather, the key is to pitch branded generic drugs. These are off-patent pills and
potions that can be sold more cheaply than the on-patent variety, but which still command an attractive price
premium in poor countries due to the proliferation in local markets of fakes and drugs of dubious quality.
In 2010 the big Western drugs firms will enter the branded generics markets in full
force by joining up with local generics firms to get cheap access to this booming
niche. A few pioneers have already headed down this path.
Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved.
The key is to pitch
branded generic
drugs
Some, like America’s Pfizer, have experimented with licensing deals and alliances with
Asian generics firms. Others have gone a bit further, as Britain’s GlaxoSmithKline did with its recent acquisition
of a share in Aspen, an African firm specialising in branded generics. Yet others go the full Monty, as Japan’s
Daiichi Sankyo did by gobbling up India’s Ranbaxy Laboratories. Watch for a dramatic acceleration of this
trend in the coming year—which could even lead to the end of the independent generics industry in India.
Taken together, these trends point to 2010 being a turning-point for the global generics business. Big Pharma
is in big trouble, but it may yet find comfort in the arms of that erstwhile foe.
Vijay Vaitheeswaran: health-care correspondent, The Economist
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