US patent expiries unlikely to be a big opportunity

In the next four years, drugs with sales worth $157 billion will lose patent in the US, opening the doors to generic competitors.

The refrain, therefore, has been one of optimism when it comes to Indian makers of copycat drugs. But take a closer look, and the picture is not as roseate.

Opportunities would be there, sure, says an industry veteran. “However, the benefits will be subdued because of intense competition from global giants such as Sandoz, Teva, Watson, Mylan, Apotex, Paddock, and Impax,” this person, who has worked with quite a few local and multinational firms, said. He did not want to be named.

Ranjit Kapadia, senior vice-president, institutional research, at Centrum Broking, points out that Indian firms have indeed filed a large number of abbreviated new drug applications (ANDAs), and also have US Food and Drug Administration (FDA)-approved manufacturing facilities.

But the problem is, once patents expire, the prices of drugs plunge almost 80-90%.

Therefore, good gains can be had only on blockbusters or drugs with billions of dollars in sales, said Adithya Bhat, managing director, Protiviti Consulting.

In the case of drugs having sales of just a few hundred million dollars, the likely gains for generic players will be limited.
Companies earning first-to-file, or FTF, status on a drug stand to gain more compared with those that don’t.

That’s because an FTF allows a drugmaker to sell its generic drug for 180 days in the US. No competition from another generic player is allowed.

“So, FTF holders make better gains than others as there is virtually no competition during the exclusivity period,” said Bhat.
The table above shows that though Indian drugmakers hold FTF status on several products, including some blockbusters, in most cases they are held jointly with many other firms.

“If there is a joint FTF, the potential declines considerably,” said the industry veteran, pointing out that sure, some firms have sole FTFs too, but they pertain to products having sales of less than $500 million.