Emerging Markets Play Key Role in Branded Generic Drug Sales

Branded generic drugs are seeing a strong push by pharmaceutical companies as more brand-name drugs come off patent in the foreseeable future.  The New York Times reported that although the loss of patent protection on a brand-name prescription drug can lead to a sharp decline of sales for that product in the United States, emerging markets have stepped in to fill the economic void, especially in regards to branded generics.

Abbott Laboratories recently reported that one of its fastest growing business lines last year was that of established pharmaceuticals, or “branded generics.” Sales of such products, which include branded generics outside the United States, were up nearly 20 percent to $5.4 billion last year, the company said in a news release.

This is not a new development, as an older US Commodity Futures Trading Commission and University of Texas report noted back in 2005 it was estimated that for a branded product with $110 million in domestic annual sales in the early 1990s (approximately the average sales for the drugs examined in the report), postponing the entry of generic competitors by one year would increase the branded firm’s after-tax profits by about $12 million.  It seems natural that a pharmaceutical would offer a branded generic version of its drugs.

In addition, the patent expirations of well-known drugs like Pfizer’s cholesterol pill, Lipitor, has given manufacturers an opportunity to continue  to win brand equity in these emerging markets, where regulations on generic substitution of brands may not be as strong.

Abbott and other drug makers see older brands as important in countries like India and China, where the economies are growing stronger but access to safe prescription medicines, particularly generics, remains a safety issue.  Doctors are looking for something that is older and reliable; in India, for example, branded generics make up “70 to 80 percent of the retail market,” according to an October 2010 report by McKinsey & Company on India’s emerging pharmaceutical market.

India is one of the most significant emerging markets for the global pharmaceutical industry.  The nation is expected to join the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with the total value reaching US$ 50 billion, according to a report by PricewaterhouseCoopers.