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Rapidly Changing Generic Industry is Challenging Lifecycle Planning

Putnam Associates reports on pressures felt by innovators from globalizing generic companies

Burlington, MA, February 1, 2008 -- Putnam Associates, a Boston-based strategy consulting firm serving the biotechnology and pharmaceutical industries globally, released today a report on how innovators are increasingly feeling constrained by the generic industry well in advance of their products' patent expiry due to a variety of challenges that threaten to shorten the branded lifecycle. Furthermore, generic manufacturers are making copies of complex products whose technical challenges previously presented high barriers to entry. Consequently, lifecycle planning has become more complex for a wide range of pharmaceutical products.

The very presence of a generic within a therapeutic area can affect access, pricing, reimbursement, and degree of substitution. Regulatory and payer initiatives frame these changes, but at the heart is a sophisticated, rapidly globalizing, well-capitalized, and aggressive generic industry.

As the generic industry has expanded, it has globalized. Geographic diversification has been driven by low-cost development and manufacturing in countries such as India, China, and other high skill/economical locations, a drive for global scale, and a desire to limit exposure in any one national market. The benefits of "offshoring" manufacturing are compelling — an Indian scientist or chemist usually costs approximately 20-30% of a U.S. counterpart, and plant and equipment, about 25%. In the face of such economics, generic companies can sell their products at large discounts to the branded price and still make a profit.

Inter-generic competition has fueled extremely low pricing in many major markets. Three strategies pursued by generic manufacturers that seek to limit the competitive intensity they face include:

  • Successfully challenge the patent for a branded product to obtain 180 days of market exclusivity in the U.S.
  • Focus on branded products considered unlikely targets in order to escape the competition associated with "commodity" generic products
  • Invest in internal drug discovery and development, as well as R&D alliances, to achieve higher-margin proprietary revenue streams

"Understanding the challenges posed by today's generic competitors can help brands avoid unexpected surprises. Generic companies which can innovate, develop, promote and are backed by a low cost structure, as well as a culture of generic efficiency, will realize success on a broad scale," states John Baskey, PhD, Principal at Putnam Associates.

To download a copy of "Not Your Father's Generics: How a Rapidly Changing Global Generic Industry is Challenging Lifecycle Planning," visit http://www.putassoc.com/company/pub_generics.html

For more information contact John Baskey, PhD, at 781.273.5480 or jbaskey@putassoc.com.