Generics executives look ahead to 2009

August 11, 2008

Traditionally, generics industry executives are tight-lipped about their business plans. But Drug Topics managed to corral five industry leaders who opened up about their hopes, fears, and challenges:

Traditionally, generics industry executives are tight-lipped about their business plans. But Drug Topics managed to corral five industry leaders who opened up about their hopes, fears, and challenges:

Paul Bisaro CEOWatson Pharmaceuticals

Pending average manufacturer price (AMP) legislation has the potential to impact the way generics prices are set in ways that people haven't really thought about. Say 12 people get approval on any particular drug. Some number of those 12 are going to sell the product below their cost of manufacture, then stop selling the product. But there is no recognition of that in the current legislation. You have an AMP that is set below the cost of manufacture. That was not what was intended but could be the impact. It's of concern to us.

Most larger generics companies also have a brand business. The brand and generics sides are very synergistic. You sell the products differently, but everything else is quite similar.

You have a clinical operations group that runs clinical studies. That's terrific for your brand business, but a number of generics products require some clinical study as well. You give it to your clinical guys. Likewise, your brand products sometimes require bioavailability or bioequivalence, so you give it to your generics guys. The formulators can formulate branded products. The sales force, particularly when it comes to biologics, where there may not be a true AB rating, will be selling these products. It's more of a synergistic play now than ever before.

Douglas BootheExecutive Vice PresidentActavis Inc.

Everyone is talking about a [regulatory] pathway to bring generic equivalents to biologics to the United States.

Another issue is industry consolidation. The big three wholesalers continue to get bigger, and the larger buyers are getting bigger. If there are fewer people to sell to, the balance of power gets out of kilter.

The U.S. generics space is still a very attractive market, but that is under challenge. People who filed ANDAs (abbreviated new drug applications), thinking it's an easy road to make money, are finding it's a lot more challenging.

Patent expirations are not a recipe for success for true generics companies. If you wait for the patent to expire, you are probably 97th in line. A key for us and our good competitors is challenging patents or getting a good formulation through a noninfringement route. But the easy stuff has already been picked over.

In the longer term, our pipeline is the brand pipeline. Right now, a lot of the brand activity is around biologics. Roughly two-thirds of the new NMEs (new molecular entities) filed recently have been biologics. To the extent to which there is not a biogenerics pathway, that pipeline will dry up. We're a long way from that, but it's a very real threat.