Locals go FTF to break Big Pharma hold on generics

Despite making a significant dent, Indian drug makers have been lagging the multinational players in the lucrative US market, but all that is set to change with a lot of off-patent opportunities coming up and companies increasingly going for the first-to-file (FTF) status.

FTF is the status accorded to a drug maker for being the first to have successfully challenged the patent and grants a six-month period of exclusivity in the US before the market is thrown open for other generics.

While many drugs are going off-patent, multinational majors such as Teva continue to hold the FTF status on several drugs, ensuring their domination in the market.

For instance, in the $8-billion generic Liptor market, except Ranbaxy, most of the market is still in the hands of the likes of Watson Pharma, Mylan, Sandoz and Pfizer. Similarly, in the $6.8 billion generic Plavix market, Teva and Mylan continue to be the major players.

However, analysts are optimistic about Indian drug companies increasing their share in the FTF category. In fact, the patent expiries on blockbuster drugs in the US are aiding the Indian drug makers.

Dr Reddy’s Laboratories, Aurobindo Pharma and Lupin are among the companies that are raking in a decent share post the patent expiry and exclusivity period of several key drugs, a Morgan Stanley report said.

The US is a key market for Indian drug makers, as last year over a third of the 431 abbreviated new drug application, or ANDA, approvals by the US FDA that are needed to get generics into the market were by Indian firms.

Murali Nair, partner at Ernst & Young, said FTF no doubt provides maximum opportunity post expiry of a patent.

“FTFs have better growth opportunities as post exclusivity the competition is intense,” said Nilesh Gupta, group president and executive director, Lupin, adding that the company has around 23 FTFs. Lupin’s business in the US is worth $500 million approximately and Gupta expects it to grow by 25-30% per year.

Dr Reddy’s, for instance, has about seven FTFs and is currently focusing on various generics that involve complex manufacturing process.

“Once the exclusivity period is over, it is seen that other firms which enter the market can meet only reasonable success and garner only limited share,” said an analyst from a brokerage.

Despite getting notable market shares in the off-patent market, Indian pharma companies still seem to be keeping fingers crossed over their future in the regulated markets.

“Several multinational firms, which otherwise were innovators with blockbuster drugs in their portfolio, are now engaged with the Indian majors for manufacturing. This is likely to become an entry barrier for the Indian majors to tap the off-patent market of these blockbuster drugs since they continue to have control over sales and distribution of the products,” a senior official of a pharma major said.

On the other hand, the MNCs also have sales and distribution agreements for several drugs in emerging markets, the official said, adding, except for a select group of Indian pharma companies not many are able to break the barriers that are being erected by the MNCs in the form of sales and distribution agreements.