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Drugmakers waking up to potential value of branded generics Posted 01/12/2017

Pharma companies are making a move into what may become a lucrative sector – branded generics. The concept is simple – take a generic drug, repackage it and add marketing and hey presto you have a branded generic.

The latest company to go down this pathway is Abbott, with the launch of its laxative gummy bears, Duphabears. But other major players in the market include Sandoz the generic drug arm of Novartis, Valeant Pharmaceuticals and India’s Sun Pharmaceutical Industries.

Branded generics do not require lots of expensive research and development like for patented prescription drugs. Abbott and others can tweak things like how the medicine is delivered – for instance, in liquid form or as a gel capsule – for a relatively small investment.

In many cases, these branded generics are aimed at fast-growing markets like Eastern Europe, the Middle East and Latin America. In the case of Abbott’s Duphabears, they have been developed exclusively for Russia, Eastern Europe, the Middle East and Africa. Asia is also a large consumer of branded generics. In India, branded generics accounted for about 63% of all drug sales by value in 2015 compared to only 11% in the US.

The sector is not one of Big Pharma’s highest-profile businesses, but things may be changing. Quintiles IMS, a market intelligence firm, expects sales of branded generics to grow at an annual rate of 9−12% over the next five years, compared to only 3−6% for both patented drugs and unbranded generics.

Profits are also higher for branded generics than for unbranded generics and the market is increasing. Abbott made an operating margin of 18.7% on its branded generics business in 2016, according to Wall Street Journal calculations. By 2021, Quintiles IMS expects the branded generics market to be worth around US$323 billion, compared with around US$823 billion for patented drugs and only US$176 billion for unbranded generics. 

Abbott has made branded generics a priority since slimming down four years ago. In 2013, it spun off its patented medicines business into what is now AbbVie and two years later it sold its developed market generics business to Mylan. But Abbott has not stopped making acquisitions, just one of its latest purchases was CFR Pharmaceuticals (CFR), which it bought in 2014 in order to expand its branded generics presence in Latin America [1].

The only possible downside to the increasing market for branded generics appears to be the fact that many expect governments around the world to raise regulatory standards, adding to costs, while local competition is forecast to increase.

Related article
Abbott to buy Russian generics firm

Reference
1. GaBI Online - Generics and Biosimilars Initiative. Abbott expands generics business in Latin America [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2017 Dec 1]. Available from: www.gabionline.net/Pharma-News/Abbott-expands-generics-business-in-Latin-America

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