Drug Firms Apply Brand to Generics

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Dit sluit enigzins aan bij mijn mail 'In Secret, Nations Work Toward
Crackdown on Piracy'

De markt voor generics laat echter ook een andere kant zien van de
ontwikkeling van nieuwe medicijnen.
Het is technisch nog nooit zo gemakkelijk geweest om nieuwe medicijnen
te ontwikkelen met alle technologische en wetenschappelijke mogelijkheden.
En de evolutie van die trend gaat alleen maar sneller in de toekomst.

Kennelijk zijn de pharmaceutical companies tevreden met de roofbouw die
nu gepleegd wordt.

Dit wordt natuurlijk gefaciliteerd door de USA-markt. Afgeschermd voor
importen.

Groet / Cees

February 16, 2010
Drug Firms Apply Brand to Generics
http://www.nytimes.com/2010/02/16/business/16generic.html
By NATASHA SINGER

Some prestigious brand-name pharmaceutical companies that once looked
askance at the high-volume, low-cost business of generic drugs are now
becoming major purveyors of generic medicines.

Just don’t call them no-name drugs.

Giants like Sanofi-Aventis and GlaxoSmithKline are not looking to enter
the commodity generics market in the United States, where chain
pharmacies often determine which generics they offer based on the lowest
available price — and where consumers often view generic makers as
interchangeable.

Instead, the big drug makers are pursuing a growing consumer base in
emerging markets like Eastern Europe, Asia and Latin America where many
people pay out of pocket for their medicines but often cannot afford
expensive brand-name drugs.

And, in some emerging markets, where the fear of counterfeit drugs or
low-quality medicines runs high, consumers who can afford it are willing
to pay a premium for generics from well-known makers, industry analysts
said. These products are known as company-branded generics, or branded
generics. They carry the name of a trusted local or foreign drug maker
stamped on the package, seen as a sign of authenticity and quality control.

“We are able to create different tiers of products at prices they
haven’t previously seen with our stamp of approval,” said Andrew P.
Witty, the chief executive of GlaxoSmithKline.

Last year, Glaxo bought a stake in Aspen, a generic maker in South
Africa, and signed agreements with Dr. Reddy’s, an Indian generic firm,
to sell their products in emerging markets.

Under the distribution agreement, the Dr. Reddy’s products are subject
to Glaxo quality control checks and, eventually, will carry a Glaxo
logo, a company spokeswoman said.

Until recently, many brand-name drug makers invested the bulk of their
research and marketing dollars in the development of blockbuster drugs,
only to cede their intellectual property and market share to
lower-priced generic competitors once patents expired. But now, with an
estimated $89 billion in brand-name drug sales in the United States at
risk to generic competition over the next five years, according to IMS
Health, some drug makers are selling generics to offset revenue declines
— as well as wring some post-patent profits from the innovative drugs
they developed.

It is a topic sure to be discussed at the Generic Pharmaceutical
Association’s annual meeting, which begins Tuesday in Naples, Fla.

“It definitely represents a change in thinking,” said David Simmons, the
president of Pfizer’s established products business unit.

That recently started division sells off-patent brand-name Pfizer
products like the antidepressant Zoloft. It also markets generic
versions of those off-patent drugs under its own Greenstone label, and
distributes a number of generic drugs licensed from a few other producers.

In the last year, Pfizer signed licensing deals with three India-based
generic makers to sell those companies’ pills and injectable drugs in
the United States and other markets, adding more than 200 products to
the company’s generic portfolio. Pfizer said its Greenstone generic
subsidiary had become the world’s seventh-largest purveyor of generic
medicines, as measured by number of prescriptions dispensed.

While drug sales in developed markets like North America have low
single-digit annual growth, emerging markets, including India, China,
Russia and Brazil, have growth in the midteens, said Doug Long, vice
president for industry relations at IMS Health, a health information firm.

As a result, some drug makers are pursuing a two-tiered strategy in
developing markets: selling their own lines of more expensive name-brand
products to the more affluent, as well as offering midpriced branded
generic lines that include prescription and over-the-counter medicines
for the broader market.

Branded generics can give prominent drug makers a way to capitalize on
those markets without having to compete with no-name generic producers
whose selling point is rock-bottom pricing. Company-branded generics can
charge more for the promise of quality.

“It’s an economic opportunity for Watson and Pfizer and Sanofi and
Teva,” said Paul M. Bisaro, the chief executive of Watson
Pharmaceuticals, a leading generic maker. “They have a reputation that
says, ‘You can count on us.’ ”

Watson itself had primarily been focused on the United States market,
but last year the company spent $1.75 billion in cash and stock to
acquire Arrow, a generic maker that operates in 20 countries, Mr. Bisaro
said.

And in markets that may need antibiotics and antifungal drugs more than
quality-of-life drugs like sleep aids or erectile dysfunction pills,
there is a logic to branded drug makers’ acquiring local generic makers
or licensing generic products to tailor their product portfolios to the
local market.

Last year, for example, Sanofi-Aventis spent more than 1.5 billion euros
to buy Zentiva, a leading Czech generic maker; Medley, the leading
producer of generics in Brazil; and Laboratorios Kendrick, a generic
producer in Mexico. Sanofi is now the world’s 11th-biggest generics
player in terms of sales, the company said.

“For me, the interest in Medley, Kendrick and Zentiva is to acquire a
portfolio of affordable medicines, recognizing that outside of the
United States and Europe people are really paying for medicines out of
their own pocket,” said Christopher A. Viehbacher, the chief executive
of Sanofi-Aventis. “Therefore you have to have medicines that fit the
pocketbook and, to me, generics really fit the bill.”

Medley even has its own generic brand identity, Mr. Viehbacher said,
which includes mint-green packaging that is a visible logo on pharmacy
shelves.

The Swiss drug maker Novartis, which unified its generic business in
2003 under the name Sandoz, recognized the consumer interest and
business opportunity in generic drugs early on.

“In the beginning, of course, especially other pharmaceutical companies
were very skeptical about it,” said Dr. Daniel Vasella, the chairman of
the board and former chief executive of Novartis. “Some competitors said
that this was not right to enter a field that was competing with our own.”

Now, with organic growth and the acquisition of branded generics like
the German maker Hexal, Sandoz is the world’s second-largest purveyor of
generic drugs, after Teva.

Branded generics may appeal to leading drug makers because they
represent a hybrid of the generic and name-brand models — allowing drug
makers to use their existing commercial distribution system and
marketing skills to sell premium-priced generics as if they were
brand-name drugs, said Ronny Gal, an analyst at Sanford C. Bernstein &
Company.

Under this approach, manufacturers or distributors advertise branded
generics. Company sales representatives visit doctors and pharmacists to
market them. And, in emerging markets where government health coverage
and private insurance are less common, consumers who pay out of pocket
for their own medicines would rather spend on names they can trust, Mr.
Gal said in an interview last month.

“Patients prefer brands,” he wrote in a note to investors last year,
“and as long as they are the main payers, they will continue to use
branded generics.”

Still, branded generics may not be a diversification strategy for the
long term.

Some companies are moving into branded generics as a short-term tactic
to make up for revenue shortfalls and capture near-term growth in
emerging markets, Mr. Gal said.

But as government health care programs and health insurers in emerging
markets develop further, consumers could be encouraged or required to
switch from midpriced branded generics to low-cost no-name generics, he
said. He estimated that it would take at least a decade for that to happen.

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