jbog
"The way things sit right now would you think that the major generics will experience a high growth rate considering ourr aging population, insurance co-pays and the medicare program?"
Yes, I think generic drug use will grow steadily over time.
America's healthcare system is and will continue to be under significant economic pressure. The percentage of Americans over 60 is growing dramatically, and this demographic consumes a disproportionate share of our overall healthcare dollars, representing roughly one out of every three health care dollars. The cost of providing healthcare products to this population is large enough to have broad implications for our overall economy.
Also, it's been estimated that up to 20% of Americans are either uninsured or underinsured. The cost of adequately insuring these people virtually mandates heavy use of generics.
If you trend pharmaceutical prescriptions over time from 2000 to 2007 for branded drugs versus generic drugs, you would see a line moving steadily up and to the right for generic TRx's and steadily down and to the right for branded drugs TRx's. In other words, generic drug prescriptions are increasing while branded prescriptions are simultaneously declining. This is no accident, and is due to many factors.
First, I think somewhere around $100 billion of brand drugs will be exposed to generic competition between 2004 to 2010.
Second, our system has evolved to create relatively strong alignment among all constituents where they now care about cost. Although prescription medications probably only account for somewhere around 15% of our total healthcare costs, it is the fastest growing component. Those who pay for the drugs figured out years ago that they needed to make patients part of the solution for this increasing cost, and they've done that through ever-widening gaps in the co-pays. As recently as 2000, the average difference between the co-pay for the preferred brand and the generic was about $6.00 (i.e., $13.00 co-pay for a preferred brand versus $7.00 for a generic). By the end of 2006, that gap widened to just a hair under $20.00, and it's continuing to grow.
You could also see the effect of the above in total TRx's. From 1999 to 2002, the percentage ot total scripts that were brand to generic were about 53% brand versus 47% generic. That started to change in 2003, and by mid 2006, only 37% of scripts were for branded drugs versus 63% for generic drugs. By the end of the decade, it will probably be a 25% brand / 75% generic split.
Also, managed care is becoming more and more aggressive, and for the first time when Zocor went generic, you saw a concerted effort by managed care to force therapeutic substitution of simvastatin for Lipitor.
Other healthcare systems (i.e., most of Europe with the notable exception of the UK and the Netherlands) still operate on a physician-based medicine systems versus our pharmacy-based medicine system. I think economic pressures will force those systems to evolve to more of a pharmacy-based system that will foster greater generic utilization.
Add to the above the whole generic biologic issue, which in my view was not the "failure" many think it was in 2007. In late 2006 and early 2007, virtually no one thought there was a snowball's chance in hell of getting a bill out of committee in the US Senate to provided a pathway for generic biologics. The fact that was accomplished in 2007 was a major success, and though I don't think anything will have on the legislative front in 2008 since it will be an election year, virtually everyone is now resigned that generic biologics cannot be ignored and the system needs them. It's now a question of when; not if. The 12 year exclusivity will probably be reduced to 10 years, and some compromise on evergreening will be accomplished.
So I don't think there's any doubt that generic substitution and utilization will continue.
You're right that Pfizer can afford to buy any company, but unless they bought every company, they would still see their drug genericized. A market as large and as profitable as the US attracts a lot of new enrants, and I think most would be surprised to see how large the tail is of small generics outfits there are out there. The barriers to entry are really quite small. Here's a quick illustration of what I'm talking about...
There's a company called Nostrum Laboratories, Inc. If you go to their home page on the web, their mission statement reads:
“Our Vision is to become the greatest pharmaceutical firm by offering Simply Better Medicines”
Pretty lofty ambition...the "greatest pharmaceutical firm".
They have a grand total of 2 generic drugs for sale!
Regards
AI
Market Data 
Markets 
