Ethiopian Review

Sourcing, procurement, and supply-chain professionals from the pharmaceutical industry and their suppliers are gathering this week in New York City at DCAT Week, an annual event of educational programs and business-networking opportunities organized by the Drug, Chemical and Associated Technologies Association. (DCAT). The first day of the event kicked off on Monday with an educational program addressing the impact of changing market fundamentals on innovator-drug and generic-drug companies.

The program outlined how market dynamics are shifting the strategies of innovator-drug and generic-drug companies. The “patent cliff,” so named because of the expected revenue fall of major drug companies as they face patent expiration of key drugs, the decline in new product introductions, ongoing cost-containment efforts in healthcare expenditures in established markets in the US and Western Europe, and pharmaceutical industry growth in emerging markets, have laid the foundation for the pharmaceutical majors to reevaluate their diversification strategies, position in generic drugs, and approach—from a cost and revenue perspective—on how to capitalize on growth in emerging markets. At the same time, the major generic-drug companies have to decide how to best avail themselves of the large opportunity resulting from the wave of patent expiries as well as their own diversification into new drug development.

For innovator drug companies, one consequence of these changing market fundamentals is the strategic tide toward diversification is returning. During the last two decades or so, several pharmaceutical majors divested noncore assets in areas such as agricultural chemicals, consumer healthcare products, nutritional products, and animal-health businesses to strengthen their strategic emphasis as pure-play human healthcare companies focused on new drug development. The pendulum is shifting somewhat again, and one way is which this trend is evident is how innovator-drug companies are more focused on creating a strategy for established products, including generic drugs. These strategies by innovator-drug companies are no being longer shaped exclusively by traditional approaches in generic-drug defense or product life-cycle management, but are inclusive of the role that established products (i.e., drugs late in the product life cycle or generic drugs) play in the overall market, especially in emerging markets. At the same time, the opportunity for drug companies for established drugs is broadening to include not only small-molecule solid-dosage forms but also injectables and biosimilars.

Several publicly announced deals between Big-Pharma companies and drug/manufacturing companies in emerging markets reflect this trend. For example, last week, AstraZeneca signed a license and supply agreement with the Indian drug company and manufacturer Torrent Pharmaceuticals, under which Torrent will supply to AstraZeneca a portfolio of generic medicines for emerging markets. In 2009, GlaxoSmithline (GSK) partnered with India’s Dr. Reddy Laboratories under which Dr. Reddy will manufacture and supply drugs to GSK, which will license and comarket the drugs in various countries in Africa, the Middle East, Asia-Pacific, and Latin America. In December 2009, GSK extended its strategic relationship and acquired a 19% stake in the South African pharmaceutical company Aspen PharmaCare to serve emerging markets.

Earlier this year, Pfizer formed a collaboration with India’s Strides Arcolab under which Pfizer will commercialize off-patent sterile injectable and oral products in the US. The finished dosage-form products will be licensed and supplied by Strides, Onco Laboratories, and Onco Therapies, two joint ventures between Strides and Aspen PharmaCare. And in 2009, Pfizer partnered with two Indian pharmaceutical manufacturers: Aurobindo Pharma and Claris Lifesciences. Under the deal with Aurobindo, Pfizer acquired the rights to 55 solid oral-dose products and five sterile injectables in 70 emerging markets and will commercialize those products. Pfizer also acquired the rights to 15 generic injectables from Claris Lifesciences.

Also, sanofi-aventis enhanced its generic-drug portfolio and position in in emerging markets during the last two years with several acquisitions of generic-drug companies: Zentiva (Czech Republic), Kendrick (Mexico), and Medley (Brazil). In 2009, Sandoz, the generics arm of Novartis, added to its generic-drug portfolio by acquiring the generic oncology injectables business of EBEWE for EUR 925 million ($1.3 billion).

So what is the takeaway? Continue to watch how innovator-drug companies’ models for established products shape their strategies in product life-cycle management and emerging markets.

- Patricia Van Arnum