Up ANDA way: Generics execs size up the challenges ahead
As with the rest of the pharmacy business, the generics category has been changing — particularly as the Food and Drug Administration pursues its plan to speed up the approval process to drive competition.
As a result, generics makers are having to adapt to a new marketplace alongside their efforts to deliver on patient needs and developing products that will
have an impact.
Drug Store News assembled a virtual roundtable of executives from generics companies to discuss the state of the industry and the challenges ahead, and how their companies plan to tackle them.
Drug Store News: Can you outline the challenges that generic companies are currently facing?
Andy Boyer: Among the challenges is significant price erosion, leading to discontinuation of inline products and reduction in pipeline development of traditional products that may have had value in the past. Also, reduced commercialization of product approvals that were anticipated to be of value when development began in prior years, and the unpredictability of NPL approvals.
John Dillaway: There are many challenges that generic manufacturers face in today’s market. In no particular order, these include: the increasing costs and availability of Key Starting Materials used to produce APIs, the overall availability of API, and the resulting increase of costs in finished goods.
Additional challenges include the high level of competition prevalent on each molecule, resulting in very low margins, an increasing regulatory environment, and an increasing number of social initiatives that are looking to all pharma companies to fund. These include returns programs, opioid programs and others.
Jennifer Colvin: Generic companies are facing challenging market conditions and an increase in competition. In 2017, the Food and Drug Administration approved a record number of abbreviated new drug applications. While this is positive news in terms of overall activity, it also means that the U.S. market is growing even more competitive, with continued downward pressure on pricing, though we are starting to see some signs of price stabilization. As a result of this pricing pressure, some generics may not be able to stay on the market.
Armando Kellum: There are many challenges, including maintaining the high-quality standards mandated by Food and Drug Administration and other regulatory agencies, a very competitive environment and a shrinking base of customers.
DSN: As the market becomes more complex, how can generic companies adapt and change in order to survive?
Kellum: As the market becomes more complex and fluid, it is very important to keep the basics of the business in mind, with a focus on the ultimate customer, the patient. This means ensuring that quality of product is always most important, constantly working to insure a strong supply chain and service level to wholesalers, pharmacies and, ultimately, patients who depend on the product. This may be “back to the basics,” but we believe generic companies that lose sight of these very basic tenets of the business will not do well in the long run.
Boyer: Companies can adapt, in part, by continuing to invest in higher-barrier R&D projects that reduce the cost of health care and still allow a generic company to make a fair margin and generate cash flow to continue to invest in R&D. They also can pursue the right size of manufacturing capacity to market needs where there is still product value. Additionally, they can discontinue products that drain quality, regulatory, manufacturing and commercial resources that no longer have profitability.
Dillaway: Companies will need to become stronger in producing products that are less likely to have so many competitors.
Just as hospitals and medicine are becoming more specialized in urban areas, where one hospital will specialize in cardiac treatments and another orthopedic care, generic companies may need to do the same by specializing in different therapeutic categories. The investment costs to develop and produce the same items being developed and produced by a dozen other companies will not be cost effective longer term.
Colvin: In order to thrive in today’s market, generic companies need to find ways to continuously adapt to an evolving competitive and regulatory environment. One way is to develop and commercialize generic drugs faster and at a lower cost. At the same time, it also is critically important that we consistently deliver high-quality pharmaceutical products that meet patients’ needs.
In addition to focusing on these important priorities, we remain committed to supporting programs and initiatives that help add value and create a sense of community between our company, pharmacies and the people who rely on our therapies. Upsher-Smith has a long history of working with independent and community pharmacists, and is proud to sponsor awards annually recognizing leaders in the field.
DSN: How do you analyze the level of risk in developing generics?
Boyer: Every company must evaluate based upon capabilities. Most important are legal, regulatory and operational risks followed by anticipated commercial market at the time of launch.
Dillaway: Many factors come into play, including the scientific expertise of a company, the potential for failure versus the cost to move ahead, and the complexity of the molecule, which may dictate the volume of competitors.
Colvin: There are a number of factors that we take into account, such as the overall competitive landscape; return on investment; is there a clear pathway to establish bioequivalence; the complexity of manufacturing required; availability of API; and access to the reference listed drug.
Kellum: This really depends on the technical nature of the product and any legal and/or regulatory hurdles that may exist. There is not a simple answer, but the risk may lie in any of these categories when reviewing a product launch.
DSN: What are the opportunities and roadblocks for the generics industry?
Colvin: Because of increasing competition and downward pressure on pricing, some manufacturers have begun to reduce production capacity, remove products from the market, and close plants. This leaves other players better positioned within the industry. The FDA has committed to reducing the time it takes for a new generic drug to gain approval. Companies with a high number of expected ANDAs will benefit from this new opportunity to get generics to market more quickly. The spirit at the FDA to approve more complex generics also is improving.
Finally, in the current administration’s “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs” that was released in May, patients, generic companies and PBMs with transparent models that provide rebates and negotiated discounts back to plan sponsors stand to benefit, while branded specialty pharma companies and traditional PBMs will be impacted negatively.
Boyer: Uncertainty is our biggest challenge. FDA, government regulations and marketplace dynamics are forcing companies to reevaluate risk tolerance and make very different decisions than we have in the past. Net impact will not be known for several years, but we are likely to see more product approvals, but less product launches.
Dillaway: With many companies exiting older molecules due to high competition and low prices, these molecules may be opportunities for other companies, while the consolidation that has occurred in the wholesale and retail markets threaten to be potential roadblocks as so much market share is consolidated into very few customers.
Kellum: With an aging population, there will continue to be a greater need for lower-cost alternatives for patients, which represents an opportunity for generic companies. The increasing size of some customer-buying groups can present a challenge for any single manufacturer to supply consistently.
DSN: Are biosimilars the way forward?
Kellum: Biosimilars should be hugely important and beneficial to patients. The market still is in its early stages. For Alembic, biosimilars are not our current focus, and we believe there will be strong demand for traditional medications, as well, which serve a very important role for health care in the United States.
Boyer: The biosimilars market is going to be a market that’s going to open up, but it will take some time. It needs to be attached to a generics business because it’s going to be competitive. Product selection will be important, while leveraging sales, marketing and R&D capabilities.
Colvin: Biosimilars clearly have the potential to offer safe and effective treatment at a lower cost than a reference biologic. But despite great anticipation, biosimilars have seen relatively slow growth in the U.S. market. As of July 2018, 12 biosimilars have been approved by the FDA, yet only four have entered the market.
Dillaway: Maybe, but it may be too soon to say. Very few of these have come to market, and the regulatory environment is still developing, and the financial resources needed to enter is very high.
DSN: What does the future hold, in terms of product launches and other factors?
Dillaway: In the near term, things should remain fairly status quo; companies already have made investments in pipelines of products that most likely will launch. At the end of the day however, all of these generic companies need to be profitable like any other business in order to continue as a going concern. The way companies respond to and change with the increasing complexity of the business will dictate their survival.
Colvin: Succeeding in the U.S. environment will require Upsher-Smith to diversify its product portfolio, and to launch even more products at a faster pace. For this reason, we continue to invest in our portfolio and plan to launch a number of products in 2018, and even more in 2019. We are committed to significantly increasing our pipeline of products to include new dosage forms, as well as more traditional and specialty products. Today, we are pleased to have a development portfolio with more products than ever before, and a pipeline that includes a diversity of dosage forms.
Boyer: As noted above, there will be challenges to overcome due to more competitor approvals and pricing dynamics.
Kellum: Product launches will continue to be a focus for generic companies including ourselves. One big question that many people are asking is “How will the marketplace evolve? Will there be more of a direct-to-consumer model that disrupts the current business model?” This will be interesting as we move forward in the future.
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