By Vasudha Bal, Industry Manager, Healthcare Practice, Asia Pacific

Published 17 January 2006

Biogenerics is the new buzzword in the biotech industry and is all set to create a revolution in the next couple of years. Biotech companies are hoping to reap the same levels of success as the large pharma generic players. Many of the patented biopharmaceuticals are going off patent in 2006 itself, paving way for the boom in the biogenerics market. Biogenerics are likely to expand the usage of biotech based medications in a big way as the high prices of the original biotech drugs restricted their reach even in emergency care like cancer and renal failures.

Biotech companies in Asia are set for growth as they are experts in making copies of patented drugs and make these products available at hugely discounted prices. Generic versions of products like recombinant insulin, erythropoetin and hepatitis B vaccines are already available in countries in Asia which do not recognize product patents. However, there is some amount of uncertainty in this market as regulations are not yet in place and it is not sure when the United States would open the doors to biogeneric drugs.

U.S. and Europe are the leaders in this biogenerics followed by Asia. India stands out as one of the largest players followed by countries such as China, Japan, Korea and Taiwan. The expected world market for biogenerics is estimated to be $2 billion by 2008.

Some of the biopharmaceutical drugs that will go off patent in the next five years are shown in Figure 1 below:

Figure 1: List of biopharmaceuticals, which will go off patent in 2006

The trends

Biogenerics definitely has a huge potential as cost containment is on the rise world over. With the Medicare Modernization Act being passed in the U.S., pricing will be an important discriminating factor world over.

The development of processes for the biogeneric drug approval looks like the biggest challenge at the moment. Also, standards need to be developed for explaining the bioequivalence of the biogeneric drugs.

The main players in Biogenerics market are Sandoz, Cangene, LG Chemicals, Rhein Biotech, PCGen, Wockhardt, Microbix, GeneMedix, Stada, DSM Biologicals, and Amgen. The generic companies which are likely to pose stiff competition are Pliva, Merck, Ivax, Teva, Dr. Reddy’s, and Ranbaxy.

Countries in Asia have a more flexible environment when compared to those in the U.S. and Europe. This is mainly due to the presence of relaxed regulatory regimes and absence of product patent laws. This in turn has led to the production of drugs with lesser amounts of quality check resulting in rejection of these drugs in the west despite lower prices. Hence the governments in Asia are trying hard to implement strict quality control standards like GMPs and USFDA approved manufacturing plants to ensure world standards in quality.

Will the patent holders react?

It remains to be seen how the patent holders of biotech drugs will react to the entry of biogenerics. Some of the strategies that they could use are:

• 1. Lawsuits: Pharmaceutical companies are famed for the lawsuits they pose against generic manufacturers in a bid to buy time. The biotech biggies with strong financial muscle could also use this route to delay the introduction of biogenerics and possibly ward off the smaller fish in the biotech industry that do not have the financial power to withstand such high costs.
• 2. Launch of authorized generics: This is a fairly new tactic taken up by patent holders. One of the most striking examples has been Abbott’s stand with clarithromycin. Abbott launched its generic version of clarithromycin – Dava, a week before the drug was to go off patent. This resulted in Dava gaining 60% market share and the generic company which got its ANDA – Ranbaxy to get a mere 3% of the share within 3 weeks of the patent expiry. By launching authorized generics, parent companies are flooding distributors with stock, capturing substantial market share and reducing the scope for "real generics".
• 3. Withdrawal of the patent date days before the scheduled expiry date: Merck’s simvastatin is one such example. This results in loss of the 180-day exclusivity and a huge surge of generic players with very low profit margins.
• 4. Launch of combination drugs by patent holder around the time of patent expiry

These combat strategies are shown in Chart 1 below:

Essential items in the checklist of Biogeneric players:

Opportunities are galore for biotech companies in Asia. The acceptance of biogenerics by the EC and the clearance of generic version of hGH by Sandoz in Australia will spur the growth of this market, followed by the opening of the US market by 2009-2010. However, biogeneric companies need to remember some key things in order to survive in this market and be profitable:

• Remain lean: Essential as profitability is one of the most difficult things to achieve in the generic space
• Do a situation analysis before forecasting sales: With litigations and delays being common, this is an absolute must
• Have the legal experts opine on the length of litigations if any
• Look at alternate channels if bargaining power with distributors is weak: Especially true in the U.S. where the distributors are consolidated and have good clout over manufacturers
• Manage operations smoothly: Managing of complexities across product-markets. Supply chain management is critical. Equally important is good inventory management and low cost of manufacturing
• Diversify risks: Operate in multiple countries, have multiple product offerings and different product forms – tablets, capsules, inhalers and topicals

This article was originally published by Frost and Sullivan

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