IMS Health Reports Annual Global Generics Prescription Sales Growth of 3.6 Percent, to $78 Billion
Growth Slows from Double-Digit Pace in 2007; U.S. Generics Market Volume Rises as Value Declines through September 2008
"The global generics market has posted double-digit gains in recent years. But in 2008, despite robust volume increases, we are seeing the first significant decline in sales growth as manufacturers increasingly compete in fierce price battles within most of the world's major markets," said Murray Aitken, senior vice president, Healthcare Insight, IMS. "This trend is very apparent in markets like the U.S. and U.K. as generics companies contend with aggressive competition and cost-containment measures enforced by both private and government payers."
The top eight global markets - the U.S., Germany, France, the U.K., Canada, Italy, Spain and Japan - today account for 84 percent of total generics sales. The U.S., the world's largest generics market with 42 percent of global sales, has experienced a 2.7 percent sales decline in the twelve months ending September 2008 while volume increased 5.4 percent during the same period. Generics products now account for 63.7 percent of the total U.S. pharmaceutical market volume. The U.S. generics market is currently valued at $33 billion, compared with $34 billion last year, reflecting declining prices and fewer blockbusters losing patent protection in 2008. However, generics sales rose 10.2 percent in Japan, 16.9 percent in France, 12.5 percent in Italy and 10.5 percent in Spain in the twelve months through September.
The top 10 generics companies currently hold a 47 percent share of the generics market worldwide. The three leading generics manufacturers are Teva with 11 percent market share, Sandoz with 9 percent, and Mylan with 8 percent.
"Through this decade and next, we expect the distinction between R&D-based pharmaceutical manufacturers and generics companies to blur," noted Alan Sheppard, director, Generics, IMS. "Many of the largest R&D companies have stated their intention to expand their generics businesses to compensate for slower growth in the branded sector. At the same time, large generics manufacturers are looking to capitalize on their development expertise and technology to produce new chemical entities and establish their own R&D businesses. This will give leading generics companies an advantage in building market share over many smaller local manufacturers."
The IMS 2008 Global Generics Perspective report identifies the following key market dynamics:
- Consolidation and expansion. Smaller generics producers are experiencing significant margin pressure in this environment. At the same time, large companies are consolidating their operations in established markets or expanding into emerging ones through local acquisitions or partnerships. As a result, the generics industry is becoming more divided between large, high-performing companies extending their global footprint and smaller, local producers.
- Dependence on branded blockbusters. Generics companies will benefit as products generating $139 billion in branded sales in the top eight world markets lose their patent protection through 2012. However, in the longer term, the slowing growth in large branded blockbusters being developed by R&D-based manufacturers ultimately will lead to fewer opportunities for generics companies.
- Vertical integration in distribution. Wholesalers are extending their reach into new markets and expanding their role in supplying generics products. This is especially the case in Europe, where wholesalers increasingly are sourcing generics products for private-label supply, and expanding their ownership of pharmacies as governments liberalize pharmacy ownership rules.
- New distribution models. The direct-to-pharmacy distribution strategies used by major pharmaceutical companies in Europe potentially could restrict wholesaler business opportunities, which ultimately may lead to wholesalers charging a fee for service for generics drugs shipped to retail pharmacies. That, in turn, could reduce the incentive for pharmacies to promote the use of generics, shifting the economics of distributing and selling these products.
- Centralized contracting and the increasing role of payers. A trend toward centralized contracting will benefit those generics manufacturers with a broad portfolio and low-cost manufacturing base. Companies with the breadth and scale to fulfill high-volume contracts by payers are most likely to succeed in this environment. Payers are turning to contracting as a way to encourage price competition. For example, in Germany, 68 percent of generics sales are now covered by payer contracts. The Netherlands has adopted a similar system that has led to steep discounts for generics, ranging from 55 to 93 percent. In Canada, Ontario also is considering adoption of a contracting model.
- Emerging competition from biosimilars. As biotech products lose their patent exclusivity, they will more likely face competition from biosimilars, lower-cost versions of brand-name biotech drugs. Germany is at the forefront of the evolving biosimilars market, where there is growing acceptance of these products. In the U.S., the regulatory approval process for biosimilars still remains subject to legislative action and implementation by the Food and Drug Administration, but resolution is expected in the near-term.
"The global generics industry is about to embark on a decade of seismic change, and the impact to both patients and healthcare systems cannot be overstated," Aitken added. "Over time, scientific innovation flows from the originator to generics manufacturers, increasing patient access to low-cost, effective therapies following the loss of patent exclusivity of branded products. This advances the quality of life for consumers - particularly those with chronic diseases - and also enables healthcare systems to reallocate funds for investments in the next generation of innovative products."
About the IMS 2008 Global Generics Perspective
The IMS Global Generics Perspective, an annual report summarizing sales performance of generics medicines and major therapeutic classes, highlights the key market dynamics that are expected to impact future growth. The report is developed by IMS's team of generics experts - supported by the company's robust global information assets, advanced analytics and consulting capabilities. All sales information in this report is based on IMS Health MIDAS Market Segmentation, the global standard for measuring and analyzing the generics market segment, and for understanding market opportunities and the performance of products beyond patent expiration. IMS Health MIDAS Market Segmentation enables pharmaceutical and generics manufacturers to define the underlying performance of their product portfolios by characterizing in a timely and consistent manner the dynamics of the generics market and patent protection status of the total market. The unaudited market is not estimated within the IMS MIDAS database. Sales are in U.S. dollars at the ex-manufacturer price level. All growth rates used in this report are calculated using constant exchange rates. Volume is based on Standard Unit Measures. All 2008 growth rates are for the twelve-month period through September 2008.
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