Novartis CEO predicts generic industry fallout as quality takes center stage

Novartis CEO Joe Jimenez

Usually, it's the smaller drugmakers that jump in and take advantage of opportunities that present themselves when manufacturing problems at another company arise. But Novartis CEO Joe Jimenez is not above trying to drum up some business for his Sandoz generic drug unit by pointing out problems with some of the big drugmakers in India.

Sandoz has the resources to add the newest technology to its plants, but some others will be unable to keep up, he told Reuters. As a result, he is predicting a shakeout in the generic drugmaking part of the industry.

"Some generic companies with lower margins are going to have a hard time building the quality into their systems," Jimenez told Reuters in an interview. "You're talking about an industry where scale is going to become more important. ... I see this as a competitive advantage for a company like Novartis."

Jimenez acknowledged to the news service that Novartis ($NVS) and its Big Pharma peers are not immune to quality lapses. They just have more money to face and fix them. "I think it is going to become very, very hard to be a small, sub-scale generics company because they are going to have to invest disproportionately in quality assurance assets that significantly change their cost structure and they may not become competitive on price."

Novartis in fact has had huge problems at its OTC plant in Lincoln, NE, which it had to close for remediation after many recalls of many of its key consumer products. But the drugmaker also had the wherewithal to invest in the facility to overcome FDA concerns and the plant is again open and shipping products. In December, the drugmaker also had to recall 42 batches of children's liquid cough and cold products in the U.K. because of a manufacturing issue reported by a contractor.

Some of India's largest generic drugmakers are facing huge regulatory issues right now, with key plants banned from shipping to the U.S. because of issues uncovered by the FDA, like faking drug analytics to indicate that products met standards when they didn't. Ranbaxy Laboratories, Wockhardt and Sun Pharmaceuticals all have plants on the FDA import alert list.

- read the Reuters story

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