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Global and United States Market Generic Drug Survey

During the period of 2006-2016, sales and sales of generic drugs in various regional markets around the world have improved to varying degrees. In 2017, the total size of generic imitation prescription drugs reached 84 billion U.S. dollars. It is expected that this figure will continue to grow at a compound annual growth rate of 6.5 percent in the next five years, and the overall size will reach 112 billion U.S. dollars in 2022.

From 2008 to 2017, the total size of the US pharmaceutical market continued to grow. Despite the slowdown in growth in recent years, the size of the US pharmaceutical market in 2017 exceeded US$450 billion, reaching US$452.6 billion (in invoices), an increase of 1.4% year-on-year.
The share of generic drugs further declined to 23.2%, branded generics accounted for 10.1%, and non-branded generics accounted for 13.1%. If the offsetting factors such as discounts and rebates in the circulation of the pharmaceutical industry in the United States are deducted, the overall pharmaceutical market in the United States in 2017 will be 324.4 billion U.S. dollars, an increase of 0.6% year-on-year.
It is expected that the US pharmaceutical market will continue to expand in the next five years, with the average growth rate of invoices and net prices reaching 4%-7% and 2%-5%, respectively.

In 2008-2017, the share of prescriptions in the US market for generic drugs (including branded generics and non-branded generics) rose steadily from 72% to 90%. The total prescription of generic drugs in the United States in 2017 was 4.467 billion, which was basically the same as that of the previous year, of which the proportion of non-branded generic drugs had reached the highest historically 86%.

From the total amount of prescriptions in each dosage form, the total volume of prescriptions for oral solid formulations in 2017 reached 3.707 billion, accounting for 83% of the total prescriptions in the US pharmaceutical market, ranking first. Among them, generics contributed 90.8% of them. Prescriptions for dermatology medicines, inhalants, oral liquids, etc., were ranked sequentially. In terms of the proportion of generic drugs, the proportion of inhalants was the lowest, only 20.6%. The proportion of generic drugs in nasal medicines was the highest, reaching 96%.

From the sales of various formulations, the top two tablets and injections, respectively, reached 204.3 billion US dollars and 1,633 US dollars, far ahead of other formulations, the two types of generic pharmaceutical income is also ranked in the top two. The income of generic drugs in nasal medicines reached 56.2%, ranking first.

Between 2007 and 2016, generic medicines saved US$1.67 trillion in expenditure on the U.S. healthcare system, of which generic drugs listed after 2007 helped save US$785 billion.

India generics export profile

India’s preparations exports have now covered more than 200 countries around the world, contributed nearly 20% of total global exports by sales volume, and have become the world’s largest exporter of generic drugs. It is expected that the exports of Indian preparations will continue to grow in the next three years. The compound growth rate will be between 11% and 13% for 2015-2020, and the total export value will reach US$20 billion.

The United States is India’s largest overseas market. India’s generic drugs account for approximately 30% of the entire US generic market, with sales accounting for approximately 10%. The Indian Legion’s advancement into the United States can be traced back to the 1980s. The first generation of gold diggers represented by Cipla first embarked on fertile ground in the United States.
Afterwards, the younger brothers of various groups responded in succession and the scale of the group continued to grow. Sun, 20 years ago, Lupin 15 years ago, Alkem 10 years ago, Alembic 3 years ago, and Mankind 1 year ago, the former Indian forces interpreted the attachment and belief in the land of the United States.

Fifteen years ago was the period when the Indian Legion entered the United States. Lupin, Glenmark, Torrent and many other companies took advantage of this time to complete the initial puzzle of the Indian Army’s corps.
“The rapid development of their own + accurate acquisition assistance”, “absolute cost advantage + high level of R & D”, “top declaration speed + large-scale production capacity”, a series of exclusive labels allow us to witness the power of India’s strength.

Judging from the proportion of prescriptions by companies in the non-brand generics market in the United States, the top 20 companies accounted for 76.1% of the total non-branded generic prescriptions, and the top 10 companies accounted for 56.1%. In the TOP20, Indian companies headed by Aurobindo accounted for 9 of them, showing strong strength.

From the proportion of sales of non-branded generic drug companies in the United States, the top 20 companies accounted for 75.2% of the total prescriptions for generic drugs, and the top 10 companies also accounted for 56.1%. In the TOP20, the Indian Legion was shortlisted for five, with the highest ranked Sun ranking sixth.

Changes in the United States’ generic drugs market and its response

In the past year, the United States generics market has been surging, and the price drop has dropped and the competition is heating up.
The days of the Indian legions are not easy, and the relative advantage of cost can only be powerless in the face of absolute low prices. The multiple factors from the government, the market and the generic pharmaceutical companies work together to create a situation in which the generic drug environment continues to be weak.

1. Accelerated ANDA review

In fiscal 2017, the FDA continued to accelerate the review of generic drugs ANDA.
A total of 1306 ANDA applications were received in the year, and 767 ANDA were approved, setting a record high.
The number of generic drugs approved and the price of generic drugs are shifting. This shows a clear corresponding relationship.
In 2017, a total of 47 new generic pharmaceutical companies entered the US market, and the market space was further compressed.
Judging from the types of products approved, the vast majority of ANDA products are old products that have been marketed by generic drugs. The proportion of brand-new generic drugs is still at a significant disadvantage, market prices have been continuously lowered by newcomers, and competition has intensified.

2. Further integration of distributor resources

Through continuous mergers and acquisitions, AmerisourceBergen, Cardinal Health and McKesson, the three largest distributors in the U.S. market, have continued to expand in size. In 2016, the total distribution revenue of the three companies has exceeded 400 billion U.S. dollars, accounting for 90% of the total U.S. distribution market revenue.

Cardinal and CVS’s Redoak already accounted for 32% of US generics procurement share. AmerisourceBergen’s combined share with strategic partner Walgreen and newly joined Ecodisc has reached 35%, plus the McKesson/Wal-Mart Alliance, which holds 23% of the shares. The overall procurement share of the big purchasing coalition in the US generic market has reached 90%.
The consolidation of procurement group resources has further intensified the price of generic drugs, and relatively weak generic pharmaceutical companies can only reduce prices as much as possible.

3. Government price reduction policy

The price of generic drugs in the United States has been declining in 2017, and the decline has ranged from a high single digit to a low double digit.
In addition to the aforementioned increase in competition through accelerating the ANDA review, the U.S. government has been brewing a follow-up series of practical measures to reduce drug prices.
Whether it was the “2019 US Budget proposal” released in February this year or the “U.S. patient priority plan” that was just proposed in May, Trump’s determination to try to lower the price of prescription drugs has never changed.
Although a series of plans such as revising the 180-day exclusivity period seems difficult to implement in the industry, it will be difficult for the bill to be written into the bill to pass the bill, but the attitude of the government still determines the further decline in the prices of generic drugs in the future.

In order to cope with the current unfavorable situation in the US generic drug market, the majority of generic pharmaceutical companies represented by the Indian Army began to take countermeasures in various aspects, gradually reducing the impact of the environment on their own development and profitability.

1. Improve the efficiency of ANDA filing, speed up the introduction of external products, and promote the launch of new products

Between 2008 and 2017, the US FDA formally approved 5,020 ANDAs and another 1,184 temporary approvals.
Among them, 1695 ANDAs in India were officially approved, and the number of provisional approvals reached 455, which accounted for 35% of all approvals.
According to Singh & Associates, the FDA officially approved 847 ANDA in 2017. Among them, Indian companies (including their subsidiaries) occupy 314 of them, accounting for 37% of the total.
At the same time, 66 of the 175 tentatively approved ANDAs came from the Indian Legion.

Each of Zydus and Aurobindo has 77 and 51 ANDAs officially approved, leading all 26 Indian companies that have been approved by ANDA.
Each of Aurobindo and Sun had 11 and 9 ANDAs for temporary approval, ranking among the top two Indian companies that had ANDA temporarily approved. The approval of a large number of ANDA guarantees the continuity of the product line. The listing of some new products eases some of the adverse effects brought about by price pressures to some extent.
In addition to the active application of ANDA through its own R&D, it has become a common trend in generic drug companies to accelerate the expansion of product lines by acquiring or authorizing the introduction of external end-of-end R&D and declared ANDA products, and to increase the efficiency of new product launches.

2. Optimize product mix, and develop high value-added products such as complex generic drugs, brand specialty drugs and biosimilars

With the intensification of competition in the US generics market, the profitability of ordinary low threshold generics has been minimal.
At the same time, with the increase in R&D strength and supplements acquired through acquisitions, the competition in the field of non-solid oral dosage forms such as injections that seem to have certain thresholds has quietly intensified, and low competition can only be relative.
Take Palonosetron Hydrochloride hydrochloride, which was just launched in the United States in the end of March this year, the number of companies that have initially challenged the patent has approached 20. At the end of March, Teva took the lead in first-in-kind listing. Under Teva’s trigger, DRL and Sandoz, which had been settled by Infineon and had 180 days of exclusive rights, triggered the advance-listed generics clause under the agreement.
The original research found that two Indian brothers, Cipla and Accord, simultaneously listed their authorized generic drugs, together with Fresenius and Exela who were approved to change their prescriptions through the 505(b)(2) method of listing, and only had the first 180 days of exclusivity. Nearly 10 companies sold the product at the beginning.
And after 180 days, it will usher in the second wave of multiple competitors who have not challenged the first-chance visit and established a settlement. The fierce competition is evident, let alone in the patent period.

In the face of cruel reality, many Indian companies have gradually increased their input in the fields of complex generic drugs, branded specialty drugs, and biosimilars at a higher threshold, and strive to achieve product profitability through high added value under low competition.
The threshold is high, and higher requirements are placed on R&D strength and financial support.
There is no strength to be able to do without light, and there is no money to be able to do.
What’s more important is that the transition cannot be achieved overnight. Many times it is not lost to the opponent but lost to time.
It should be said that the transformation from ordinary generic drugs is a natural change after the expansion of pharmaceutical companies, but for many companies of relatively small size, this path cannot be completely copied.
How to more flexibly exert its own advantages and optimize the product structure within the limits of its capabilities is particularly important for small and medium-sized competitors.

3. Sales transformation, reduce the middle part of drug circulation, maximize profits

As the concentration of resources in the distribution and circulation of pharmaceuticals gradually increases, the pressure on generic pharmaceutical companies from procurement channels is also increasing. How to use limited resources to make sales is particularly important for foreign Indian legions.

The current sales model of Indian companies in the United States is mainly divided into three categories:
The large companies represented by Sun and DRL have taken root for many years and their sales system is relatively complete. The self-production and self-selling model has effectively controlled the costs in the circulation of medicines.
The Otaku-type companies represented by Gland and Natco have devoted more energy to production and R&D. Through sales force of partners, they have realized sales without going abroad, and have obtained profit sharing.
Although the investment in sales can be saved and the partners can use their respective advantages to improve their efficiency, whether the partners are able to directly influence the effectiveness of the agency sales model.
Small sales companies can focus more on selling their products, but the types and quantity of products are relatively limited, and they do not have the advantages of the group in the process of negotiations with buyers.
Large sales companies have a wide range of products, but how to ensure that the investment in the sales of cooperative products is sometimes a problem.

In order to better find a balance to solve this problem, some Indian companies represented by Gland have adopted a number of non-exclusive sales companies in recent years to integrate their respective advantages and ensure that the overall profit of sales is maximized.
For example, Gland’s oxaliplatin injection has entered the market with nearly 10 companies in the market.
In response to fierce competition, prices on the one hand were appropriately reduced, and Breckenridge, Alvogen and Athenex were used on the other.
The third category is between the aforementioned two models, self-selling and partner co-exist, sell different products separately, and sell more profitable products with relatively limited resources.
Such a hybrid sales model is more suitable for companies that have a sales force but whose scale and strength are not yet fully mature, and which can be used as an option to transition to a completely self-sufficient transition period.
It should be said that reducing the cost of sales by self-produced sales teams has become a trend for future generic pharmaceutical companies to cope with competition, especially in the case of relatively low resource requirements for generic drug sales in the United States. It is reported that Gland has plans to set up a sales team in the future to bid farewell to the current status of leaving home.

4. Rational allocation, effective use of resources, and efforts to reduce operating costs

In order to save costs, the general practice of big brothers is to cut jobs and shut down factories in order to reduce operating costs on a global scale. This is, to some extent, a road of experience in optimizing the cost base and improving efficiency, but it is more suitable for large-scale, large-scale shops with large companies.
For most Indian pharmaceutical companies, whether it is manpower or production capacity far from the surplus, more should be from the rational allocation of resources, to maximize the use of limited resources to save costs.
At the end of 2017, Unichem and Strides respectively sold their respective Indian branded generics business to Torrent and Eric Lifescience. In the future, they will turn their energies into the US-led overseas markets. By transferring the bottlenecks into the bottleneck business, the two companies have gained more space for resources, and then invested in the U.S. market with greater profit potential in the future.
After Cipla took office, Cipla changed its strategy and gradually reduced the proportion of expensive biosimilar pharmaceutical research and development, and then added resources to the current development of complex generic drugs and brand specialty drugs, focusing on the premise of not affecting the overall direction of the company. Local adjustment of resources.
These are the representative cases where generic pharmaceutical companies strive to rationalize the allocation of resources. It is the best for themselves.

5. Strengthen product quality construction and focus on solving FDA warning letter related issues

During the last five fiscal years from 2013 to 2017, the number of warning letters issued by the FDA showed a clear upward trend. The total number of warning letters in fiscal year 2017 was 114, setting a record high.
In the past five FDA fiscal years, India became the largest number of regions outside the United States that received warning letters, ranking first in the total number of 46, accounting for 32% of the total.
Of the 14 warning letters it received in FY17, India triggered the United States import ban 10 times.

The US market has gradually become the largest overseas company for many Indian companies, accounting for more than 40%.
Among the companies that have been warned, there are no shortages of Sun, DRL, and Lupin.
Warning letters and import bans will directly affect the income of the US market, which will cause a series of chain reactions to other markets.
In many cases, many competitors come in handy, and even if problems are solved in the future, it is difficult to quickly recover the lost market share in the short term.

In recent years, the frequency and intensity of FDA inspections have been gradually strengthened. Indian pharmaceutical companies that have experienced repeated setbacks have also begun to reflect on them, and through a series of joint efforts of various industries.
Indian pharmaceutical companies are striving to create a new “compliance ecosystem” fundamentally, and to promote individual change with the improvement of the environment.
Whether it is the “starting from the top level” of the DRL or the fundamental restart of Lupin, or Zydus’ “Quality and Culture First”, each one has begun to exert efforts to strengthen its own quality construction and achieved certain results.
However, the change in the quality of pharmaceuticals in India is undoubtedly a long and arduous process. Better late than never, fierce competition in the market has not allowed quality problems.

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