Emerging Business Models in the Pharmaceutical Industries ...

Short Term Strategies – Pre- and Post-Patent Based
Generic vs. Patent Competition
Patent based Pharma companies are looking for ways
to lengthen the revenue streams of their products, and
face the threat on their revenues from a new breed of
generic companies. Companies are switching patients
to next generation drugs to balance the drop in
revenues due to generic replacements. Public,
political, and regulatory changes in generic planning
are further factors in the generic-ethical drug fight.
Growth in the Generic Market
The generics industry is experiencing unprecedented
growth. Nine of the top 10 fastest growing pharma
companies are generic and have a growth rate of over
12%. Of the 10,375 drugs listed in the FDA’s Orange
Book, 7,602 have generic counterparts. Generics
companies are capitalising on patent expiry
opportunities offered by year 2005 on drugs with
revenues of $100 billion. Many are evolving into fullyfledged,
R&D-based, pharmaceutical companies. The
Big Pharmas are also concerned about Medicare
support to generic drugs.
“Without an authorised generic product, a generic firm
with 180-day exclusivity could reap a 1,000 percent
ROI. With an authorised generic product on the
market, the ROI declines by about half to
approximately 500 percent.
Reducing Gaps in Generic and Patent Oriented
Companies
With Big Pharmas companies like Novartis, Abbott
Laboratories, and Merck resorting to more branded generic
products, the gap between generic and patented drugs will
be reduced. The big players will acquire generic companies
to replace their original product lines, and offset their losses
by replacing the generic product with a better priced, more
innovative and effective formulation drug.
The generics market was recently affected by the failure of
R&D molecules in advanced stages of development by
Ranbaxy and Dr Reddy's Laboratories, increasing
competition, price erosion in generic drugs in international
markets, and comparatively rich stock market valuations.
Several generic drug companies like Watson
Pharmaceuticals, Barr Pharmaceuticals, Ranbaxy, and Dr.
Reddy’s are now developing patented medicines.
Brand Equalisation
Pharma companies are engaging in brand equalisation to
reach a larger number of people through pharmacies. They
are offering higher incentives to pharmacists to overcome
competition from generic drugs.
Strategic Analysis of the Pharma Market, Future Revenue Models and Key Players 35