At the Conference of Generic Drugs in Asia (CGDA) 2011 held in Taipei, Taiwan last weekend, Dr. Vinod Shah of the US Food and Drug Administration (FDA) showed how strict the FDA is in approving the sale of generic drugs in the US. See my earlier discussion about it here, Generic Drugs Asia 1: CGDA Notes 1. Essentially, the approval process requires these four tests:
1. Bioequivalence studies
2. Pharmacokinetic studies
(these two clinical studies are to ensure efficacy of the new generic drugs to be marketed soon)
3. Manufacturing controls (getting a certificate of Good Manufacturing Practices or cGMP), and
4. In Vitro dissolution
These are technical terms in pharmacy and pharmacology and I won't attempt to position myself, not even a half- or quarter-expert, on these topics. Suffice it to say that the strict regulations and approval process in the US and other rich countries can assure the public of the high quality of generic drugs that are available in their drugstores and pharmacies.
Given the high quality regulations issued by the US FDA, is public confidence of generic drugs in the US high? This chart from Mr. Tamotsu Fujino, Director for International Affairs of the Japan Generic Medicines Association (JGMA) in his presentation also at the CGDA says the answer is both Yes and No. In terms of volume, Yes, US consumers' patronage of generic drugs is high, 73 percent of total pharma market in 2010. But in terms of value, it's NO, only 16 percent of total value. Meaning 84 percent of total value is still occupied by the innovator drugs from innovator and R&D companies.
I do not have the soft copy of Mr. Fujino's presentation, I just took the photo of his slides in the hard copy of the conference proceedings.
The other selected country figures, 2010, are (numbers in volume and value share, respectively):
1. Canada, 63%, 29%
2. UK, 65%, 27%
3. Japan, 23%, 6%
4. S. Korea, 61%, 42%
5. India, 73%, 71%
There are many factors why Japanese people have little patronage of generic drugs despite the equally strict approval process for generics. Among these, the high presence of many innovator Japanese pharma companies, and the little support for generics by the government health authorities.
The next chart is from Mr. Roy Fan, General Manager of Standard Chemical and Pharmaceutical Co., Ltd., in his presentation also at the CGDA. This shows some slightly different data from a different primary source. I am thankful to him for sharing me his powerpoint paper and giving me permission to use it for this blog article.
Those with more than 50 percent total market share for "protected brands" in 2010 aside from the US were Canada, Germany, UK, France and Spain. And those with 20 to 23 percent market share in Asia are India and Korea.
Another chart from Mr. Fan, showing high share by volume of generic drugs in rich countries like the US, Canada, Germany, UK and France, but in terms of value, the percentage share is low in those countries.
I think the main explanation for this wide divergence between percentage share by volume vs. by value is that generics is used for common diseases like flu, headache, ordinary infection, etc. But in terms of treating more complex or emerging diseases, or lifestyle related ones, medical and health professionals tend to prescribe the new and innovator drugs.
There is no question or doubt that the share of generic drugs to total pharma market in many countries and worldwide trend, will increase through time. This is because the pool of off-patent molecules keep rising and the number of generic manufacturers and their respective research and marketing capability also rises. So as more generic drugs enter the various countries and global markets, the consumers and patients will benefit as they will have more options and choices from more players and competing drug manufacturers.
The pressure on FDAs in many countries to ensure that only safe and efficacious generic drugs will be allowed -- as effective and interchangeable as the innovator brands at a lesser price -- will be rising. This is one important function of government to protect public health.
In countries though with relatively weak and over-worked FDAs like that in the Philippines, I think one alternative is to encourage corporate branding (or "unibranding"). Manufacturers and traders can explicitly and confidently declare, "Our brand and name is our guarantee. If you see any substandard or fake drug from any of our products, you can distrust all our other products, even hail us to court." This way, consumers can be confident of the quality of the generic products from established manufacturers. And the FDA can focus its resources and energy on checking products from less known or newly established producers and manufacturers.
Finally, as I pointed out in my presentation at the CGDA, "Drug innovation + generics complement each other in protecting the public." As new diseases emerge or re-emerge with mutant strains, the need for new and innovator drugs will remain as vital as before. Most generic drugs are not capable of coping with new or more complex strain of diseases as the generics were developed to cope with old and existing diseases, not the new and evolving ones.
The role of government in this situation is to encourage, or simply leave them alone and not over-tax or over-regulate them, both generic and innovator companies. The government has the last card in enforcing the rule of law, the law against producing substandard and/or counterfeit drugs that do not cure or kill diseases. The certainty of conviction if caught, and the severity of the penalty is enough deterrence against potential manufacturers of such undesirable drugs that can harm the public, if not kill people.
See also Generic Drugs Asia 2: My presentation at CGDA 2011, November 23, 2011.
"only 16 percent of total value. Meaning 84 percent of total value is still occupied by the innovator drugs from innovator and R&D companies"
This isn't surprising. As you pointed out, the FDA guidelines are extremely strict. Some would say to a fault. While in nearly all cases we can guarantee a generic on the shelves is safe, the approval process is often riskier than the drugs them selves, in the sense that forcing people to wait for affordable medication is equally dangerous.
In spite of our strict approval process, more drugs than ever are being recalled (http://eng.am/uPoD3T) making it a very volatile environment for competitors to enter.
Thanks Jesse for this information. High incidence of drug recall is indeed an indicator of a volatile business environment. And I assume that this affects both innovator and generic drugs. High volatility means high risks and hence, drug producers, innovator or generics, will have to price their products higher to give allowance for future losses and drug recalls. While US patients will be given more assurance of high drug quality in their drugstores, they will have to endure higher prices.
Meanwhile, are you aware how much are US government taxes for medicines? Here in the Philippines it's close to 20 percent (3-5% import tax + 12% VAT + local govt taxes). Taiwan and Malaysian governments do not tax medicines.
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