US R&D FIRMS' ENTRY INTO THE GENERICS MARKET

12 June 1994

The drug industry has come full circle in the last 20 years, according to Nicholas Hall, whose company was a cosponsor of the Global Generics Explosion meeting (see also page 11). 20 years ago, companies needed to be conglomerates to succeed, but they have now sold off their non-drug businesses to become pure drug houses, he said.

Generics, over-the-counter drugs and managed-care influences make this an era of vertical integration, he said, wondering if drug firms will also want to become wholesalers and retailers in the near future. This reaction to cost containment and government intervention has come five years too late, with companies making mistakes at the expense of the industry and themselves. It is now fashionable and safe to be part of the generics industry, but he hoped the companies acquired by large, brand-name firms are not saddled with corporate mentalities and overheads.

The potential exists to double the value of generics sold in the USA, said Max Fern, president of US healthcare Consultants, but genericizing of brand-name drugs could dilute the market. Cutting a brand-name drug's price once it comes off patent lowers the entry price for generics. He said the dollar volume for generics could hit $10.5 billion by the year 2000, and prescriptions filled by generics will grow from four out of 10 now to seven. This $10.5 billion figure will be 13% of the total drug market by value, but could account for 50% of prescriptions filled.

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