Generic pharmaceutical market set for bumper year

"We anticipate that the generics industry will experience considerable growth in the coming year, after the average 11% growth we saw locally in 2011," said Paul Anley, CEO of Pharma Dynamics, whose 42% annual growth makes it the fastest-growing pharmaceutical company in SA.Anley said the expected gains in the coming year could be ascribed to the spiralling cost of healthcare and the expiry of a number of patents."There is now tremendous pressure on medical aids, and the need to cut costs is higher than ever. This need to contain costs will inevitably lead to a move towards generic alternatives from expensive originator drugs," he said.A number of products coming off patent, especially in the cardiovascular category, mean that more new generic medicines will be coming onto the market, and these more affordable treatments are likely to be an attractive option for medical aids and patients alike.Another factor favouring the growth of the generic industry was globalisation.Historically, originator companies have operated globally, while generic manufacturers were domestic in nature."We are now seeing an accelerated rate of consolidation and globalisation as companies are looking to expand their geography to attain global reach, in particular in emerging markets."The growth of the middle classes in developing countries has a direct impact on the growth of the generics market," Anley said.In middle-income settings, people often cannot afford originator medicines and generics are the obvious choice. Employed people are also much more likely to purchase affordable generics than to approach state hospitals and wait in line for medicines.According to Anley, as the market share of generics grows, originators will face decline."Originator companies facing patent expiry and hence sales reduction and a fairly significant hit to profitability are seeking to consolidate and merge."The strategy is defensive as well as aggressive, in that originators either get into existing generic companies, or buy their own in order to expand their sales base," he commented.SA was one of the world's fastest growing pharmaceutical markets, generating nearly R24 billion in pharmaceutical sales last year, and although pharmaceutical sales in SA only accounts for 1% of the global pharmaceutical market, it is growing rapidly and has moved into the top 20 markets since 2005.This explosive growth is due to changing demographics, rising incomes, modernisation of health systems and an increase in the treatment of chronic diseases, which creates a greater demand for medicines.Anley warned that continued regulatory delays were hampering the effective launch of new products in the SA market, which meant that competition was reduced and pricing was uncompetitive."Additionally, government has yet to sternly address the practice by some originators of patent ever-greening and the development of pseudo generics."Unless government intervenes, we will see this trend continuing, and impacting on the ability of generics companies to enter new products onto the market. Again, competition is reduced and prices remain inflated," he said.