Generics at a crossroads

Drug Store News, Feb 15, 1999 by Al Heller

The fast-evolving $8 billion industry is wearing a new competitive face in its battle against brands

The turn of the century will mark a crossroad for the generic drug industry, which has surged to a 42 percent share of the nation's dispensed prescriptions but is facing major scientific and legislative challenges. Branded pharmaceutical suppliers are employing new strategies to fend off generic encroachment. They're using science that's more difficult to replicate, and they're active on Capitol Hill, aiming to re-open debate on the landmark Waxman-Hatch Act of 1984.

Assuming the generic sector can hold its own on these fronts, it faces bright prospects for growth. Blockbuster drugs such as Prozac and Claritin are coming off patent soon, creating massive sales opportunities. Generics houses are building more profit into their prices, and they're aligning with each other for greater clout in the market place. Third party copays favor generics more than ever.

Drug Store News probed the presidents of three leading generics trade associations for their views of where the industry is heading: Alice Till, Ph.D., Generic Pharmaceutical Industry Association; Bob Milanese, National Association of Pharmaceutical Manufacturers; and Christina Sizemore, National Pharmaceutical Alliance. Their candid responses yield great insight into the potential and problems their members face.

Drug Store News: What is the prospect for generics growth at U.S. retail pharmacies over the next two years? What are the major factors behind these trends?

Alice Till, Ph.D., president, Generic Pharmaceutical Industry Association: A number of factors will influence the growth of generic sales over the next two, five and even 10 years. No. 1 is the more than $40 billion in brand name drugs that will be coming off patent in the next decade. Growth opportunities for the generic industry will be immense, as blockbusters such as Claritin and Prozac become available for competition. Another important factor is the graying of America. If the U.S. Department of Commerce is correct when it predicts that 69.8 percent of the U.S. population will be over age 65 by the year 2030, you can imagine how important a role affordable drug therapies will play in the coming millennium. Over the years, the generic industry has saved consumers billions of dollars. This especially applies to the elderly who rely on generic equivalents to make ends meet. No one in this country should have to make the terrible choice between eating and taking medicines.

Bob Milanese, president, National Association of Pharmaceutical Manufacturers: The generic drug industry exists for one reason: to provide quality pharmaceuticals at more affordable prices than branded drugs going off patent. The drive to increase generic utilization comes from more drugs going off-patent and being more expensive than ever before. The price difference between brands and generics has been and continues to be quite dramatic. Our industry is also highly competitive with many suppliers, making it a great challenge to turn a good profit and almost creating a sense that a generic drug is a commodity item.

Christina Sizemore, president, National Pharmaceutical Alliance: NPA is confident the generic drug industry will continue its remarkable pace of growth. Today, almost half of all prescriptions are filled with generic drugs, which generally enter the market at 30 percent below the price of innovator drugs. A July 1998 Congressional Budget Office Report concluded that consumers saved $8 billion to $10 billion in 1994 alone by substituting generics for brand drugs. As more and more drugs come off patent, and as pharmacists and patients become more familiar with the cost-saving benefits of generic substitution, generic drugs will continue to erode the market share of brand drugs.

DrSN: Many branded drugs are coming off patent by the year 2002. What impact will this have on the generics marketplace? How will U.S. retail pharmacies have to respond to this?

Till: With changing demographics, increased cost-containment measures by third parties and the likelihood of a pharmacy benefit being included in Medicare, increased use of generic medicines is inevitable. The pharmacist can and should play a significant role in educating consumers and physicians about the safety, efficacy, quality and-above all-therapeutic equivalence of AB-rated generic drug products. This will facilitate acceptance.

Because of the intensive coursework and training in pharmacology, pharmaceutics, bioavailability/bioequivalence and more, it is the pharmacist who is best equipped to understand and explain the scientific basis for determining therapeutic equivalency of generic drug products to other healthcare professionals and consumers. Pharmacy curricula devote more hours to the understanding of pharmacological therapies than the curricula of any other healthcare profession. This has always been the case. Unfortunately, when I was a practicing pharmacist, the pharmacist wasn't permitted to "educate" his or her customers about their prescription drugs. Today, the pharmacist has the opportunity and the responsibility to do so.