Make absolutely no mistake as to what is the real competition to the branded pharmaceutical industry. Generic drugs now almost completely control the pharmaceutical market. Take a look at the Huffington Post piece that talks about the recently released IMS report on the generic industry. Last year 80% of all prescriptions were filled with generic drugs and this year the number will be around 85%.
Note the way the generic companies talk about their success. They stress the fact that generics save our country now about $1 billion a day and have saved $1 trillion over the last decade in drug costs. They talk about the value they deliver rather than their own success. They point out that their 80% of the business accounts for just 27% of the drug spend in our country because of the low prices they charge the consumer. They also point out that when given the choice between a generic and a brand drug 94% of the time the patient will choose the generic alternative. They definitely make it look like they are the real patient advocates in the world of pharmaceuticals.
Last week I had a chance to talk with one of my marketing mentors who now works a few days a month as a pharmacist. The first thing he pointed out is that he hardly ever dispenses brand name drugs any longer. This is not because he wants to make more money, as is often talked about by those who knock generics, but because the consumer is demanding generics. He said it seems like 95% of all prescriptions he dispenses in his store are generics and consumers become angry when there is no generic available. Think about how this is a 180 degree reversal from a decade or so ago when patients fought hard against the generics.
Take some time to really dig into this issue. Look at the website GPhA that is the generic industry’s equivalent of PhRMA and observe the tone and the overall positive story they tell. Note in their review of the study that they are continuing to push for reforms that will drive their share even higher. The generic companies want faster FDA approvals, continued “pay for delay” opportunities and approval of biosimilars. Click on the “savings” picture to get the full IMS report.
How should the branded side of the prescription world fight back? I took a look at the PhRMA website and saw that they put out a press release on the generic study and noted that it seemed pretty weak. Perhaps their main point is that without our innovation the generic companies couldn’t produce their drugs. They then go on to show how the cost of drugs are small relative to other healthcare costs and these costs are not rising. Of course, this merely supports the fact that the generics are driving the costs down so that the overall picture looks pretty good. We need to do a better job on the branded side or this battle will be completely lost.
How could it get worse? Take a look at the slow uptake of product launches. Perhaps the world is severely delaying the use of new products, waiting out their patent lives and then will make extensive use of the chemical entities once they are off patent. The branded side just seems to have given up the fight to protect their share of the business.
Generics have a place in the world and they serve a useful purpose in healthcare, but they are not the entire drug industry. The line that bothered me more than any other was the first conclusion in the IMS report where they talk about the sustainability of healthcare. I agree with their point on cost containment but I feel they have in some ways set up the challenge to the branded side. Healthcare will be sustained mainly through innovation and that is why our industry exists. Let’s stop ignoring the generic challenge, crank up our innovation in marketing, pricing strategy, drug discovery and business strategy and let the competition really begin again. The patient really deserves strong competition from both the generic and the branded sides of the business.