Economics and structure of the generic pharmaceutical industry

Abstract

Objective: To review key economic trends of the generic medication market and analyze the changing structure of the generic medication industry.

Data sources: Articles were indexed initially using terms such as generic medications, generic drugs, multisource medications, and multisource drugs. These terms were used to search indexing services such as MEDLINE, International Pharmaceutical Abstracts, CINAHL (a database of nursing and allied health literature), Science Citation Index, Psychological Abstracts, and Wilson Indexes to Journal Articles.

Study selection: Performed by the authors.

Data extraction: Not applicable.

Data synthesis: The generic pharmaceutical market has the potential to play an important role in containing drug costs, although the amount that could be saved through the use of generic medications is not easy to measure. If estimates for the future growth in the use of generic products prove correct, the proportion of pharmaceutical sales attributable to generic products will remain in the 9% to 10% range through the first decade of the 21st century. The generic pharmaceutical industry includes several categories of companies based on business strategies. Further consolidation is expected as more resources are needed to address patent challenges stimulated by the Drug Price Competition and Patent Restoration Act. Companies are also entering into partnerships with research manufacturers to share profits from proprietary products. Future growth of the generic market will require more than increased use of generic products. Therapeutic interchange, involving switching from single-source, patent-protected products to products within the therapeutic class for which there are generic equivalents, represents a major growth opportunity for generic drug manufacturers because the savings potential is more significant than that for straightforward substitution of generic for brandname products.

Conclusion: As it responds to challenges and opportunities, the generic pharmaceutical industry will continue to be a major force shaping the economics of medication use.