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Generics in the Animal Health Industry
Informa Healthcare, Jan 2006, Pages: 138
This report examines the latest developments in the animal health industry relating to ‘generics’ - the term traditionally used to differentiate non-proprietary drugs from the original, branded versions.
Since the first emergence of generics in the veterinary sector there has been a significant change in the way manufacturers handle their business. Today, there are both local and international manufacturers selling large quantities of inexpensive, quality products... so, what does the future hold for this important, but controversial sector?
This report examines in detail the future prospects for this area and provides useful case studies, which profile todays market leaders.
This report examines the latest development in the animal health market with regard to ‘generic’ products. The term has traditionally been used to differentiate non-proprietary drugs from the original, branded version. More specifically, it describes a product that has the same qualitative and quantitative composition of the original product and that is equivalent to it regarding safety and efficacy.
From the time of the first emergence of generics in the veterinary sector until today’s animal health landscape there has been a significant change in the way generics manufacturers handle their business. Today, there are both locally and globally operating generics manufacturers selling large quantities of inexpensive, quality products. The traditional attitudes to generic drugs used to be very much black and white, the negative side being represented by the ethical, R&D-based companies and the positive side by the generics manufacturers. However, the borderline between the two camps has become very blurred with researching companies being increasingly involved in the marketing of generics, and generics companies doing more and more own research work, eg on new formulations. The different strategies pursued by various types of companies involved in generic animal health products are increasingly complex, covering various aspects of manufacture, marketing and trade.
Besides their registration as a medicinal product, the most obvious legal mechanism involving generics is patent law. The viability of researching pharmaceutical companies - and therefore arguably of the veterinary industry as a whole - is governed by the protection of its intellectual property. Without this protection the industry as such would hardly progress. Whatever the definition of a generic product, it usually implies that the original substance is out of patent protection. A patent for an invention is granted by the government of the country were it has been applied for, and might also be valid for other countries if they are part of a treaty. International organizations such as the World Intellectual Property Organisation, WIPO, have campaigned for all countries to adopt a standard patent protection period of 20 years in the effort to harmonize the patenting procedures over the world and to create a global patent policy.
Increased regulatory demands have in recent years eroded the time span in which an original product can be marketed exclusively. In recognition of this, various countries have introduced legislations that offer extended protection to certain products. In the EU, the Supplementary Protection Certificate was introduced, allowing up to five years of additional marketing exclusivity for the patent holder. In the US, the so-called Hatch-Waxman legislation was introduced in 1984, enabling drug patents to be extended by up to five years, if there had been delays during the review phase of the patenting process. Japan followed the same route as the US, allowing patent extension by up to five years, providing that obtaining approval was delayed by at least two years.
The registration of generic products as medicines is much easier than it was for the original product, since all of the costly work necessary to achieve original patents and clinical development has already been carried out. The EU allows for abridged application procedures for generics in certain cases. Following the principle of a generic having the same quantitative and qualitative composition as a reference product and is bioequivalent to it, an applicant does not need to repeat the generation of certain pharmacological and toxicological data already known to the licensing authority. The legal situation in this respect has only recently been refined and simplified. In the US, legislation is in place that allows an applicant to file a generic copy of an animal drug product that has been previously approved and has been shown to be safe and effective when used in accordance with the labelling. This procedure is called Abbreviated New Animal Drug Applications.
Generic products had a share of 45% - ie $7.2 billion - of the total global sales of animal health products in 2004 with the prospect of becoming the dominant factor before the end of the decade. Generic animal health products are very prevalent in the developing regions of the world, such as certain Latin American, African and Asian countries. In these regions, their market share is in the region of two thirds or more. Compared to that, generic products in the developed regions, such as North America and the EU, only have a share of approximately one third.
In recent years, the structure of the world animal health market has altered dramatically and the industry has increasingly been forced to adapt to the generic challenge. Generics companies continually improve the quality of their products along with their marketing and communication skills. At the same time, the researching companies try their best to show that their innovative pharmaceutical products on the one hand are superior to older, off-patent products that are now available in a generic form. On the other hand, they need to demonstrate why their own brands of off-patent products are preferable to generic versions of the same products.
In order to defend against generics competitors, the basic strategic options for the originators of a product coming off patent are: to prolong the life of patents where possible or to extend the family of patents; to develop and commercialize related compounds; to strengthen the brand name; and to develop innovative formulations and delivery methods. However, the same strategic moves are - in principle - available to generic manufacturers, once a substance has come off patent.
Generics formulators always need to be close to the market in order to be able to study ways to improve on an existing product. For them, the ability to react swiftly to new market opportunities is essential, and being first to the market with a generic product is crucial in order to gain and maintain new business. Many traditional generics suppliers involved in developing their own formulations have started to undertake their own R&D, which has resulted in the creation of original, patentable products. Areas that can be addressed by generics producers cover the basic substitution of branded products, contract manufacturing, the re-introduction of patent-expired products under the company’s own brand, and the development of improved forms of a previously successful product.
The generic availability of an ever-increasing number of superlative veterinary active ingredients - highly effective and potent endectocides, anthelmintics, anti-infectives and specialities - represents an important factor that will further shape the landscape of the animal health industry. The established R&D companies will hold their share for a while, due to patented formulations, but profits will move continuously to manufacturers of ‘branded generics’ in developed markets, and to bulk producers, many of which are situated in India or China.
The generics sector within the animal health market in future will be transformed by the fact that the demarcation between R&D-based and generics-related activities is increasingly becoming blurred. A trend can be noticed towards hybrid generics companies that engage in market-specific R&D activities that build on off-patent products. These companies strive to cut costs, add value to existing products, improve customer service, and provide a highly effective after-sales service.
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