Mumbai, Dec. 16: Indian pharmaceutical companies may have reaped rich dividends by trying to sell generic drugs in the US market, but things are becoming challenging out there.
Para IV filings, which offer the highest returns to makers of generic drugs, have not only gone into decline, but the opportunity size of such filings has also significantly gone down from $24 billion in 2007 to $3 billion in the current calendar year.
A Para IV filing is made when the applicant believes its product does not infringe the innovator’s patent or when it feels that the patent is not valid or enforceable.
The applicant (if it obtains approval) gets a 180-day exclusivity window to market the generic drug if it is the first to file the application that is called an abbreviated new drug application (ANDA) in industry parlance. Drug makers rake in the moolah because they are able to side-step competition during this period of exclusivity.
Para-IV filings in the US have shown a decline over the past four years, which is a pointer to crimped returns. According to a report by Kotak Securities, this trend is because of the drying up of the innovator pipeline particularly for blockbuster drugs.
Krishna Prasad and Priti Arora, analysts from the brokerage, said that in addition to the decline in Para-IV filings over the past five years, the contribution of blockbuster drugs has turned negligible in the current year from a peak of $24 billion in 2007.
The number of such filings has come down from a peak of 67 in 2008 to 48 in 2011 and 19 this year. The analysts said the decline was largely because of drying up of blockbuster products or molecules with annual brand sales of over $1 billion in the US market.
The contribution of these molecules peaked in 2007 at $14 billion from $9.6 billion in 2004, but has now started to wane. A similar trend has also been observed with regard to drug brand size between $500 million and $1 billion as the opportunity size has been coming down since 2007. However, it has been only for molecules with brand size of $100 million to $500 million, that the Para-IV opportunity size has been stable.
Domestic drug makers are now expected to change their strategy and target segments such as oral contraceptives, dermatology and nasal sprays where there are a fewer number of generic players and no patent barriers (higher proportion of non-Para-IV filings).
It is also felt that the incremental filing focus may be on drugs with sales of less than $500 million.
Some of the domestic drug giants have already tweaked their strategy. Dr. Reddy’s Laboratories and Sun Pharma, which initially focussed on Para-IV filings, have in the past few years shifted focus towards products with higher complexity. On the other hand, players such as Glenmark, Cadila and Lupin are already concentrating on niche segments.