Generics are coming!

Source: "Pharmaceuticals: All together now," The Economist, July 24th 2008.

There have been a number of recent mergers, resulting in a consolidation of the industry producing generic pharmaceuticals. The mergers have veen international, affecting firms headquartered in Israel and India as well as in Europe and the United States. The generic drug market "enjoyed $72 billion in sales last year, and is growing faster than the conventional drugs business (see chart). IMS Health, an industry research firm, reckons that $130 billion of prescription pills will go off patent by 2012, creating a huge opening for generics. But that good news is tempered by two big trends: liberalisation and commoditisation."

There have long been two very different kinds of generics markets: genuinely competitive ones, like those found in America, Britain, the Netherlands and Scandinavia, and coddled ones, like those of Japan, the rest of continental Europe and much of the developing world. The competitive markets are now becoming “hyper-competitive”, in the words of Mylan’s Mr Coury. Generics make up nearly two-thirds of the American drugs market by volume, but only 13% by value. Customers, ranging from pharmacy chains to middlemen known as “pharmacy benefits managers”, are rapidly consolidating and so gaining greater power over prices.

Comment: It seems likely that these trends will make pharmaceuticals more affordable for the poor and for poor nations. That would be very good! JAD