Pharma sector changes as generic market grows

Deutsche Welle, 10 April 2013

Medicine can save lives if you can get it and afford it. But now, generics are a cheaper alternative to more expensive brand name drugs.

Generics no longer only play a major role in developing and emerging countries. In industrialized countries, healthcare costs continue to spiral. Generics are a way of reducing those costs - they can be up to 90 percent cheaper than a brand name drug. In recent years, many pharmaceutical companies have lost the exclusive rights to produce some of their most popular drugs, which generated billions in revenue. Now that the drugs can be made more cheaply as generics, healthcare systems and patients are saving money.

The generics drugs industry recently scored a major victory in India. The country highest court decided that Indian manufacturers can continue making generic versions of Novartis' Gleevec, a drug that has been effective in treating some forms of leukemia.

New markets for the pharmaceutical industry

While older markets shrink, drug makers will have to tap into new markets so that they can continue to make a profit. And there is evidence that the pharmaceutical industry is more global than it was. Most of the medication which was only available in developed countries is now being sold worldwide.

"We are observing that multinational pharmaceutical companies in recent years have increasingly been seeking markets in developing and emerging countries," says Christian Wagner-Ahlfs of the BUKO-Pharmakampagne in Bielefeld. The independent campaign has been examining the role of major pharmaceuticals for more than 30 years, especially insofar as the industry's business practices have affected developing countries.

Now, a middle and upper class that is willingly to pay for drugs is growing in developing and emerging economies.

"They are of course interesting customers, because they can also afford expensive medication," Wagner-Ahlfs says.

The line between generic and brand
 drugs is becoming greyer," says
Christian Wagner-Ahlf

Even the increasing numbers in poorer classes need to be supplied with cheap generic drugs. And because every cent counts, it might be worth producing the drugs locally. But that doesn't always apply, says Wagner-Ahlfs: "In that case, referring to the list of the WHO's essential medicines makes total sense."

Same agents, different name

The World Health Organization regularly makes a list of the most important drugs around the world. At the moment, 340 chemical agents can be used to treat 90 percent of all diseases. In Germany, some 2,400 agents and around 90,000 drugs are authorized, according to the Federal Institute for Drugs and Medical Devices (BfArM). Most of the drugs authorized in Germany are generics. It doesn't make a difference for patients.

"The line between generic and brand drugs is becoming greyer," says Wagner-Ahlf: today, most major pharmaceuticals produce one or more generics as well as their branded products.

"Around 80 percent of the agents are made in India or China. It doesn't matter whether that product is for a generic manufacturer or a multinational brand drug maker," he adds.

It's no surprise that these countries dominate the market: production facilities are up to 40 percent cheaper in India than in European countries. Labor costs are also lower and there are also trained personnel that the pharmaceutical industry needs.

The end production of the drug, by a registered company that guarantees it with its reputation, can take place anywhere in the world where production standards are adhered to. The WHO has very strict regulations on hygiene and authorization standards, control mechanisms and quality assurance.

Local pharmatical industry

Christoph Bonsmann is a board
 member of a charity that helps the
 pharma sector in developing countries

It is still very difficult for many developing countries to fulfill the WHO's conditions. But local drug production could definitely help improve medical provision in those countries.

"I see there especially the advantage of availability above everything else," says Christoph Bonsmann, pharmacist and board member of German Medical Aid Organisation action medeor. The organization supports efforts to build local drug production in Africa.

Local production doesn't necessarily have to be cheaper than imports, says Bonsmann. But reliable drug supply for diseases like TB, malaria, HIV-AIDS or some of the new global diseases like high blood pressure and diabetes is still lacking in many developing countries. A local pharmaceutical industry with a well-developed distribution system could considerably improve drug supplies, especially in rural areas.

But Bonsmann cautions, "With local production, you have to be sure that people don't justify poor quality for political reasons." Local pharmaceutical production is often seen as a showcase project. "I see the main deficit in the lack of consistent and continuous conrol by the authorities," says Bonsmann.

Drugs on the black market

In many countries, illegally produced, sometimes smuggled drugs are flooding the informal market. If the drugs are bought from traders on the market, there is neither specialist advice nor a guarantee that the drug has been tested.

"That is the major challenge because the authorities are usually understaffed, they are often not properly motivated and underpaid," says Bonsmann.

For eight years, Susanne Held headed the pharmacy of Saint Bendict's Hospital in Ndanda, south Tanzania. She had good experiences with both imported and locally made drugs. But the hospital only bought its drugs from wholesalers with a good reputation.

"There were no complaints from patients that medicines didn't work properly, and the doctors in the hospital also didn't complain. So I suspect that we were very lucky the whole time." she says.

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