With more activity from Pfizer, GSK, Novartis, Sanofi... will it be long before the others jump on the band wagon or does it only fit with certain companies?
No, I don't think all big pharma are interested in generics. But it depends on your definition of "big pharma" I suppose.
Many of the top ten pharma companies (based on market capitalisation) have portfolio's that contain major products which are at risk of patent expiry. These kind of companies ought to be interested in generics and mostly are. Whether that interest is in making branded generics themselves or something else is a matter of strategy.
But there are a good many more pharma companies that are "big" by most corporate standards who don't have the same level of interest in generics - because they are more specialised players and their portfolio is not so threatened by generics.
A few years ago, some of the companies you mention here were taking a view that generics wasn't their business and they would therefore not be interested in generics at all. Oh how a little bit of generic erosion and loss of sales growth can change things eh?
And oh dear! in terms of strategic planning?
Depends how you define BIG and INTERESTED?
All pharmacos need to think about generics - for some having a seperate generics arm is a good strategy, for others it may just be how they manage their brands post patent expiry.
An awful lot of companies have a 'tail' of patent expired products that tick over earning reasonable income for minimal investment. Building a good brand can help carry you a long way....
asacox - great question.
I was thinking of replying that we are seeing two camps emerging - those companies that are hitting the diversification trail big time (consumer health, generics etc.) such as Pfizer, Sanofi and those who are sticking to the innovation approach, e.g. AstraZeneca.
However, looking at the news this morning about the AZ generics deal with Torrent (posted on the news forum) I honestly don't think any big pharma can afford to ignore the opportunity of generics. Emerging markets is where the growth is and these markets are currently highly genericized. I also think there is a tangible benefit to the R&D side of the business in the commercial skills that working in the generics market place brings. It links in to the debate about whether FMCG skills are valuable in pharma.
I remember talking to a chap who had worked in pharma for 20 years, culminating in some very senior positions. He then went to work for a generics company and said it was like a different industry, all about speed, price / volume negotiation and managing supply chain. Skills that innovative pharma needs much more of right now.
But petewest and bigreddog also raise an important point. Even if you don't want to "do" generics you need to understand them. There are companies that work with big pharma and can help them get a lot more from tail end products rather than just give in to generics. Big pharma sometimes misses great opportunities with lifecycle brands through assuming it cannot even compete with generics, IMO.
I still think it's a questionable move on the part of large pharma, and smacks of desperation to get better control of life-cycle and to build critical mass, whilst R&D pipelines aren't flourishing. The rush to sign massive, multi-product deals also seems a bit rash, and I'm not sure how much detail has gone into the portfolio planning element of these deals. Any of us that have done these deals (typical of US generics companies) knows that there is a considerable degree of complexity and difficulty to get a whole range of products to succeed. There's a reason that Teva, Sandoz and Mylan don't do such deals ... because invariably they don't work, and you always end up having to break the agreement to be able to source some of the products from other parties.
If you're going to do it, at least I think it's a good idea to segment the business (e.g. Novartis and Sandoz) otherwise, there will be issues with competition, transfer pricing and brand devaluation. I can't believe that Pfizer are intent to sell generics under the same corporate brand as their innovative products. I think Sanofi and Novartis have the right approach.
It will be interesting to see how the large pharma mindset deals with the complex commercial, regulatory and supply channels of generics pharma, and see how they cope with surviving on relatively low margins. It could work, but they need to build scale, because they don't have the mentality or intent to operate effectively as a niche player.
I'm intrigued to see how this will pan out.
I can see the benefit of different "companies" for brand versus generics in developed markets, but in the emerging markets there is much less differentiation between brand and generics. I actually think it's quite a smart move to use the same name here so that as the branded market develops you already have your name out there.
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Isn't there long experience that in pharma "everyone does, what everyone does"? They all hired reps, fired them, invited, dined and wined, informed in CME and produced pens with company imprints ... and now go for KAM, KOLs and market acess ... and so on
Many of them at least seem to have the same consultants
Yeah, but they only do what can be reversed five to ten years later so the consultants can get their fee again!
:?
Right...so is it time to go back to reps again and local country models?
:)
I am sure all Big Pharma will fail unless they buy a generics house and leave it to run its business completely separate from the Big Pharma business. Dabbling with them, sitting on their boards, will lead to disaster.
Big Pharma should concentrate on their strengths (or at least try to resurrect them as many have lost the plot). Buying a generics house is certainly an option, but it won't get around the big elephant in the room... creativity and innovation. Most of the companies have had a go at the 'numbers in phII and PhIII game' and I think the penny has dropped with the analysts... No Big Pharma are launching or making any money in primary care. So apart from the usual cop-out of last ditch mergers (to keep the wolves from the door for 2-3 years), I hope at least one CEO will have the bravery to cut loose and re-engineer the business to focus on creative and productive innovation... (and thats not just re-branding the marketing department job titles as "Marketing Excellence" as just about all have done over the past few years).
Some good points Graham, but innovation can also be in operational innovation and branded pharma can perhaps learn a few tricks from the efficiencies required in operating a generics business too!
I totally agree Paul, learn from them... and take the learnings in to branded Pharma...but don't dabble in the generics business, as some have done with disastrous consequences!
I've always thought it to be quite an interesting marriage of businesses where pharma has branded and generic arms, e.g. Novartis and Sandoz. What happens when they end up competing with each other? They can't stop their generic arm competing because they are also competing with other generics.
Must be some interesting boardroom discussions!
If a company introduces its own branded generics it may well lead to a higher generic selling price than would be the case if they didn't. That means less erosion of profits. Simples!
After all, they have the manufacturing knowledge and technology which others would need to learn and reproduce for a start.
It may dissuade other generic companies from entering the fray, because there is less room for manoeuvre for them on price.
So, yes, their own label branded product is eroded, but they still retain a higher proportion of "rents" (to put it that way) because they are able to supply a similar quality product in a different packet at a slightly lower price.
Additionally, if a manufacturer of branded product strike up an agreement with a cut-price generic producer, let's say in a developing nation (like India, China, etc) then the joint agreement could actually serve to introduce that branded manufacturer to a very large market that they may not have a presence in. Did you see the deal between Merck and Sun in India recently? Merck have the know-how - Sun have the distribution. Nice!
That's why!
Thanks for the wise words from someone who is very experienced with the machinations of big pharma - some very valid points Pete.
I guess the old adage of "if you can't beat 'em, join 'em" stands true for generics!
Hi,
With all these big companies entering into a what is called as a Black-Hole for Blockbuster molecules, coupled with increasing R&D Costs, down-sizing European Venture capitalism, there lies no option, than to go to generics and leverage on the fact that there is serious and genuine business out of products that could be made and sold at affordable rates as well..
I've worked for and dealt with both branded and generic companies, and traditionally they are very different. For example the branded product manager looked after a single brand and its three strengths, but her generic counterpart had 300 products to worry about.
Equally generic companies react and make changes at a breakneck speed, which would frighten the pants off a branded company which is more used to well thought through decision making.
One symptom of this is the way companies use information about the retail pricing of their and their competitor's products to pharmacy and dispensing doctors.
Until 2010 branded companies were happy to look at this monthly or quarterly. Generic companies on the other hand look daily if not hourly. However this discrimination which held true until relatively recently has now begun to breakdown with branded companies beginning to think like generics, and using retail price to equalise against generics and imports.
This means I think that the firewalls which existed between brand and generic are i think beginning to fragment.
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