Branded drugmakers weren't the only ones working through a tumultuous 2016. Generics companies faced pricing pressure, too. And while branded companies suffer pricing pain on costly cutting-edge therapies, generics outfits feel the pinch with already-thin margins, making pressure all the more agonizing.
How is the industry responding? By consolidating and hoping to save money, for one. Take a look at FiercePharma's 2014 ranking, and it's clear that some companies have made leaps too big to depend on organic growth alone.
Take Mylan, which topped the 2016 list, up from No. 4 in 2014. It wrapped up a big deal last year, a $7.2 billion buyout of Sweden’s Meda, which helped it bulk up in over-the-counter drug offerings and win a presence in some emerging markets new to the U.S.-based company. That acquisition followed a series of others in recent years, and Mylan is now working to cut loose up to 3,500 employees as it aims to reap savings from that deal spree.
And in the biggest M&A move in recent history for the generics industry, Israeli drug giant Teva swallowed Allergan’s unbranded offerings for $40.5 billion last year, with the deal closing in August. The massive move will continue to reverberate in the generics industry for years to come—but it wasn't enough to help Teva retain its spot as industry champion. The company dropped to third place for 2016, from first in 2014.
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Coming in second behind Mylan’s $9.4 billion in 2016 generic sales was Novartis, whose Sandoz unit tallied $9 billion in off-brand sales for the year, according to Evaluate. Teva's third-place generics revenue amounted to $8.8 billion.
From there, the industry saw a bit of a dropoff: Pfizer came in fourth with $4.6 billion, while Allergan, which officially offloaded its generics assets in August, rounded out the top 5 with $4.5 billion. Other names in the top 15 are familiar to industry watchers: Sun Pharmaceutical Industries, Fresenius, Endo International, Lupin, Sanofi, Aspen Pharmacare, Aurobindo, Cipla, Apotex and Dr. Reddy’s Laboratories.
If pricing pressure alone was not enough of a challenge for the generics industry, multiple top players are also embroiled in a pricing collusion probe at the Department of Justice, an issue that could weigh on the sector going forward. Several have been slapped by the FDA for manufacturing violations that continue to weigh on their ability to supply key meds.
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But amid the industry’s turmoil lies a silver lining. Generic drugmakers are well-positioned to take advantage of the pricing pressure in the U.S. The industry’s lobbying group has already rebranded itself as the Association for Affordable Medicines to drill in on the message, and legislation is pending in Congress that would speed certain generics applications through FDA review.
Generic drugs make up 89% of prescriptions but only 27% of drug costs, according to the industry, something the sector will continue to hammer as lawmakers look to reduce drug costs in the U.S.
Despite the lingering challenges, life science commercial intelligence firm Evaluate recently predicted that generics will continue on a steady growth path to $115 billion in 2022, up from $80 billion in 2016. The sales data used to arrive at these rankings were compiled on a fiscal-year basis, in some cases from reported data and in some from Evaluate's internal estimates. We have identified the numbers that are based on estimates, and whether the companies have fiscal years that vary from the calendar year. Questions, comments? As always, please get in touch. And if you're interested in making comparisons to our 2014 report, here's where to find it. — Eric Sagonowsky