Mike Wokasch at the Pharma Reform blog note the changing landscape with regard to generics. Generics now represent more than 70% of the volume of prescriptions written in the US and continues to increase. He notes that this happens very quickly now as 3rd party payers and the government have placed strong incentives in place to make this happen in a matter of months once a branded drug loses patent protection.
Wokasch further notes that branded makers should be able to sell their product to the market at the lower generic market price than even the generic producers can as they have already made the investment in manufacturing/improvements, supply chain, packaging & distribution, marketing/sales. All of these expenses by comparison would be new and incremental for a new generic maker of the same drug.
He asks the provocative question - Why don't branded manufacturers drop their price to generic levels once the patent life is gone? He argues this would allow them to hold market share. It would also make it easier on payers and patients if they didn't have to switch drugs they were purchasing or using. Why not? In the past, it was likely more of a real dollar and cents issue of profits being eroded too quickly as the generics took a while to take over. But now, does that still hold? This conversion takes place in weeks to months.
The biggest issue, he says, may be that innovators may see this as "throwing in the towel". To me, to a large degree it would be an admission that they weren't adding any value once the drug went generic -- and I'm not sure they are. I think the argument that most or all generic makers produce an inferior product is dubious. But, I do see a problem with an innovator diluting its brand by going generic under same brand name. I think it would be necessary to at least form a separate division ala Novartis that uses that name for innovative products and uses its Sandoz division to produce generics.
I am still of the opinion that for the bulk of the innovators -- most will end up producing generics too as they struggle with their pipelines and financial issues. Roche may remain an exception -- but will in fact be an EXCEPTION. Most companies will produce brand name products and generics -- and I think some of the generic producers will cross over the other way and make innovative products too.
So, I suspect many innovators will adopt some kind of quick conversion generic strategy where they will sell the same drug at lower prices soon after patent expiration. They will use another brand (company) name for the product (same drug name), and may also segment geographically as to where they sell the generic or perhaps by end user like government versus private sector. But I think it will happen.
Posted by Bruce Lehr March 12th 2011.