In the haste to focus on the latest technological advance for increasingly tiny patient populations, something's been lost by the pharmaceutical industry - the desire to improve treatments for the many millions of patients who take mainstream, older medications. This is where value added medicines, one of the rising sources of industry innovation and value growth, comes in.
In this paper, we analyse the drivers behind the sector, its challenges and what the future holds for value added medicines.
A SECTOR UNDER PRESSURE
Over the past five years, global generics volume has decelerated, and not only in developed markets but for emerging economies as well. The projected 3% of future global generics growth is only marginally faster than growth driven by the shifts in demographics alone.
Recent small molecule loss of exclusivity (LOE) events have generally had lower peak sales and lower volumes than those seen in 2012, when atorvastatin’s patent expired. As innovation specialises and moves definitively away from massmarket small molecules, the business model for traditional generics manufacturers has to change. The generic pipe has changed, and the emerging market opportunities are not as strong as they could be.
Moreover, this innovation shift means that the majority of treated patients, those taking generic medicines, are not benefitting from potential improvements to their therapies due to a lack of incentives to innovate in major therapy areas which are largely generic, like hypertension, depression, or pain.
In developed countries, a greater number of manufacturers in the market, payer consolidation and a focus on cost containment have driven prices down. This is especially problematic as the US has long been seen as a principal source of return on investment.
In emerging economies, the dynamics are similar. Intense competition, cost-reduction policies and a saturation of generics usage has slowed down volume growth in recent years. This trend does not look like it will slow anytime soon as payer mechanisms, such as China’s volume-based purchasing, are set to expand.
This leaves generics manufacturers stuck between a rock and a hard place. Traditionally they have sought growth by moving into new markets to seek volume expansion or refreshing their portfolio to be first movers in new LOE opportunities. The reality is that increased competition, payer pressure and sluggish volume has meant troubled companies are discarding assets, primarily from large western companies to eastern ones able to operate at a lower cost base, such as Aurobindo’s acquisition of US dermatology from Sandoz.
Globally, four of every five medicines consumed in 2017 were generics. As generics of the current standard of care become available, cost-conscious payers tend to adopt a ‘good enough’ mindset, where budgetary concerns drive procurement of the least costly product. This can, however, be a false economy.
Patients value greater convenience when taking their medicines. Increasing administration convenience is a large factor in addressing adherence, a major source of healthcare inefficiency. For example, a 2012 meta-analysis2 on avoidable costs from suboptimal medical use showed that non-adherence contributed $105bn (57% of total avoidable costs, $269bn) in the US alone.
The potential of these medicines are not limited to adherence. Improvements in other metrics such as safety and tolerability also offer opportunities to enhance caregiving using smarter therapy design.
If companies wish to compete effectively in the small molecule market, they need to change their business models to address the opportunities brought by unmet needs that remain.