Abstract
After underperforming in the last 3 years, the Indian Nifty generic pharma stocks have recently shown a good return. One of the reasons for the rally has been the 15% depreciation in the Indian Rupee to the US dollar. Some observers believe that the USA generic price erosion will stay down in single figures. Others believe this may be a temporary blip. Some generic companies are rationalising their USA portfolio and 548 ANDAs have been withdrawn in the last year from the USA market. This is double the number of withdrawals recorded in the previous 2 years. However, some generic companies are specifically not following this strategy like Hikma and others are using this as an opportunity to extend their USA presence. Indeed, Aurobindo has acquired a range of USA ANDAs for $900 m at less than 1× sales. Aurobindo now claims to be the second largest generic company in the USA by prescriptions. Competition in the USA continues to rise with a record 96 ANDAs receiving final approval by the FDA in the month of July 2018. This is the highest monthly number of generic approvals under the GDUFA era since 2012. The USA Administration has urged the Department of Justice to target opioid makers with legal actions and litigation has been launched against some of the major pharmacy chains. The FDA says it is working on a proposal to be submitted to the International Council on Harmonisation (ICH) on how to better harmonize technical standards for generic drugs. This would have the aim of enabling a single drug development program to gain simultaneous approval in multiple markets. A welcome move. However about 40 generic companies are being sued by the US Insurance giant Humana for price fixing. There are already civil cases based on the same matter by 47 USA States, Washington DC and Puerto Rico as well as another case brought by the USA grocery chains lead by Kroger.
On the biosimilar front the price reductions in biosimilars and off patent biologics is much greater than was forecast. Many generic companies that have heavily invested in development clinical costs are now finding it difficult to justify these development costs. Some companies are withdrawing from further investment like Sandoz and some financial investors have lost interest in this segment. The new USA-Mexico-Canada trade agreement makes the situation worse as it includes 10 years of data protection for biologic products. This will probably reduce biosimilar competition, generate a windfall for big pharma and stifle patient access to biosimilar medicines. Perhaps the attractive biosimilar story has been overdone in the past few years.
Following the sartan impurity issue in China and the subsequent drug formulation product withdrawals around the world, there is a growing bounce back in the Indian API industry at the expense of the Chinese API manufacturers.
The shift in focus to the complex generics and the difficult to manufacture generic products continues. Together with a strong move to speciality products including those products capable of being switched into the OTC consumer segment.
The non-promoted trade generics segment in India now represents 21% of Cipla sales by value and around half by volume. A surprising success. This sector is similar to the commodity generics market of the USA/EU except the products continue to have an alternative Indian brand name. The EBITDA margin for trade generics in India is similar to the branded generic segment despite lower gross margins as the overhead costs are much lower. For instance, a team of seven sales people can manage the whole of India for the trade generics versus a four-figure field force of salesmen for the branded products. Most of the manufacturing for trade generics is outsourced.
In this issue, we continue with our global footprint of manuscripts with contributions from the USA, South Korea and Europe.