The Challenges and Opportunities for Generic Drug Makers


According to EvaluatePharma, $215 billion in major drug sales could be lost from patent expirations between 2015-2020 and $31 billion were at risk in 2018 alone. Once a brand-name drug patent expires after 20 years of exclusivity, the floodgates open for generics to join the fray. 

And, once the manufacture of generic alternatives becomes anyone’s fair game, the entire population wins. Generics break the monopoly held by any one company. To understand the danger of monopolies, you only have to look at the backlash around the EpiPen, a life-saving allergy treatment. The drug’s maker, Mylan raised its price by up to 400 percent, simply because there was no alternative. Today, there are two generic versions of EpiPen, including one from the original manufacturer, Mylan, so there is competitive pressure to keep the price from skyrocketing. 

The federal government has taken notice of the dangers of single-provider control and is working hard to change it. In 2018 the FDA approved a record number of generic drugs – 971 in total. The FDA also recently announced several steps to further encourage generic competition, including reducing the ability of brand-name manufacturers to delay generic drug entries, and simplifying the approval process for complex generics.

Along with patent expirations and regulatory reform, generic drug makers are being fueled by the Affordable Care Act, which is spurring the need for cheaper drugs; and globalization, which broadens the market opportunities and enables cheaper sourcing alternatives.

Brand-Name Drugs Give a Jumpstart to Generics

Pharma firms can spend upwards of one billion dollars on each drug’s development – from discovery through commercialization (yet only about 1 in 5,000 ever become patented). Generic drug manufacturers can capitalize on this investment. Once the drugs are off-patent, generic makers are able to leverage brand-name manufacturers’ efforts and skip those costly and resource-intensive steps, leap-frogging ahead to raw materials sourcing; and conducting basic biostudies (of typically only 10-to-12 people to prove biological equivalents); and then filing their Abbreviated New Drug Application (ANDA).  These costs typically average in the 1 million to 2 million dollar range instead of the billion-dollar range. 

Despite the Opportunities, Challenges Remain for Generics

It’s clear that generic drug manufacturers have major opportunities to succeed today, but their journey comes with several key challenges, such as bringing products to market as quickly as possible; differentiating offerings in a crowded and noisy marketplace; and providing cost-effective generics while remaining profitable. Consider the following:

Speed is the name of the game.  Once a brand-name drug goes off-patent, the race is on for generics to claim a share of the market as quickly as possible. Because of this, speed and quality of raw materials are essential, along with the ability to quickly communicate the benefits and effectiveness of your offering. The effectiveness of a solid new product launch will likely greatly determine the new drug’s success – and when many generics competitors, often including the maker of the brand-name drug – are touting the benefits of their solutions, those first out of the gate get the most attention.

Giving it a new spin is essential. The generic drug manufacturer must ensure that the drug it is producing contains the same active pharmaceutical ingredients (APIs) as the brand-name product, in the same dosage form, at the same dose or concentration. The generic drug, however, may differ in color, shape, taste, inactive ingredients, preservatives and packaging – and this is where generics can add a new twist to an old drug.  In the generics market there is a constant struggle to differentiate your offerings and grab greater market share, while maintaining the same formulation, and this is often accomplished by providing different delivery mechanisms, such as intravenous-delivered medications or a controlled release dosage form.

Beating the competition in cost is the ultimate goal. According to a MarketWatch article, most generic drugs, when they first hit the market, are priced at around 60 percent of the brand-name drug, yet as competitors enter the market, prices decrease even further, to about 20 percent of the brand price. The whole purpose of generics is to provide a less expensive, yet equally as effective alternative to brand-name drugs. Even so, it can be a challenge to provide quality, affordable drugs while remaining profitable. 

This can be accomplished through strategic sourcing, often from India or China, where raw materials are often less costly, and by forming strong partnerships with suppliers. It’s also accomplished with leaner marketing activities. While brand-name drug makers have the resources to conduct extensive marketing promotions and ad campaigns, generics must work hard to communicate their product’s capabilities and unique qualities in much more cost-effective ways, to keep down costs. 

Despite effective sourcing strategies and operating a lean organization, the fact of the matter is that there really are no other ways to cut corners, since generics must contain the same chemical composition and effectiveness as the branded products. The end result is that generics simply must make up with market share what they lose in lower costs, and because of this, they almost always reap less profits than the brand-name makers. 

Despite the hurdles of delivering generics to the marketplace, there are huge opportunities, not only for manufacturers, but for patients as well.  In a marketplace where manufacturers must differentiate themselves in order to compete for market share, the end result is almost always greater innovation and reduced costs – a winning mix all the way around.

For more information on generic drug manufacturing check out: Generic Drug Makers Continue to Face Hurdles in Race to Make Drugs More Affordable; or Manufacturing Generic Versions of Controlled Substances.