Increasing patent expirations, Asia's aging population and the need for less expensive drugs is fuelling the growth of generics market in the region. However, there are some challenges to be met in order to sustain the growth.
Generic drugs are a proven cost-effective strategy for containing drug expenditure.
- WHO’s Medicines Strategy: Framework for action in Essential Drugs & Medicines Policy 2000-2003.
World Health Organization (WHO) is actively encouraging development of drug policies based on the promotion of generic medicines of assured quality. Even as the TRIPS agreement is implemented by WTO Members around the world, there are TRIPS–consistent means of promoting generic competition. This can be done through the use of compulsory licenses, Government use and other measures that are allowed under the TRIPS provisions.
Generic drugs are now an important aspect in all major pharmaceutical markets and the growth rate in this segment is much higher than the branded formulations. The major drivers in the generics market are:
The business model of generics market is a ‘low price, high volume’ system. Unlike branded drugs whose main competitive factor is through drug efficacy and low side effects profile, the overwhelming principal competitive effect in the generics market is price. Not only the price difference between competing generic drugs but also between the branded drugs and their generic equivalents is a significant factor.
Asia is one of the fastest growing healthcare markets in the world. Asian markets have recovered from the economic crisis of the 1990s and are moving ahead with renewed vigor. The major changes experienced in the Asian markets are national healthcare reforms, maturing national health insurance systems and increasing coverage of population by medical insurance and the growing IT infrastructure.
Asia’s rapidly growing aging population and limited purchasing power is fuelling demand for less expensive drugs.
As of now 25% of Asian population is above 55 years and this expanding population will boost the demand for pharmaceutical drugs, and the relative affordability of generic pharmaceuticals in comparison to their branded drugs augments their uptake. Majority of Asian countries has inadequate governmental coverage for health insurance, a majority of the population is shouldering their burden of healthcare costs.
The low purchasing power of a majority of the population in developing Asian countries creates a situation for increased uptake of low-priced generic pharmaceuticals.
The forthcoming patent expirations will force generic manufacturers to replenish product pipelines with new generic versions to expand markets. Generic business model is a ‘low price, high volume‘ system and high volume is the biggest attraction of Asia.
Most importantly, in majority of Asian countries the respective governments are the largest purchasers of pharmaceutical products and high quality generic drugs with cost advantage will expand the market.
The generic market will grow to a situation where it will have Specialty Generics, Super Generics and Generic versions of Biologicals.
In Japan and China, the respective governments are taking efforts to encourage purchases of less expensive drugs by making changes in the healthcare-spending regulations.
Malaysia is going ahead with implementation of the ASEAN Free Trade Area (AFTA) agreement, which will pave way for the signatory countries to be free from tariff barriers. The flow of branded pharmaceuticals and generics from neighboring countries is expected to increase.
In Philippines, generic drugs have a market share of 31%, which is fast expanding. Only 3 to 4 companies control this whole market.
Singapore has only 10% share from generic drugs and the market is expected to grow rapidly as Singapore has more retired and aging population.
Taiwan – Bureau of National Health Insurance (BNHI) policies has a great bearing in the Taiwan pharma industry. BNHI has already proposed fixed annual drug spending budget for government hospitals. Hence, hospitals there opt for less expensive drugs.
India – Because of patent expirations of blockbuster drugs, Indian firms are expected to actively participate in the production of generic version of these products. Indian companies are also ready with generic version of biotech drugs. Therefore, India will be able to maintain a large generic market.
Local companies dominate the generics market in each country (understanding local conditions gives the competitive edge).
Stiff competition by the local players with good manufacturing capabilities is one of the biggest challenges. The real challenge would be in identifying niche market sectors, developing products in less competitive therapeutic areas, understanding and grasping valuable market opportunities, identifying products for elderly population, launching specialty drugs to capture untapped hospitals market and establishing a strong and omni present sales force for better market penetration.