Will the “Off patent Drug List” released by USFDA Benefit Indian Generic Companies?

Soaring drug prices and cost of healthcare is a worldwide concern and availability of generic drugs have helped in making some drugs “affordable” globally.  Thus, the regulatory agencies have been encouraging use of generics. Indian Drug manufacturers have contributed significantly in this effort.

Data from the USFDA shows there has been a 50% rise in the number of approvals between January and June for Indian companies in 2017. The Indian companies, received 141 drug approvals.  This is significantly higher than the 94 approvals received during the same period last year. Considering the ongoing USFDA regulatory compliance issues faced by major Indian generic companies, the spike in approvals is commendable! The introduction of Generic Drug User Fees Act (GDUFA) in US have helped in expediting these approvals.

The first step towards lower drug prices is to have multiple generic versions of brand-name drugs to drive price competition. Thus, leading to more affordable drugs. Keeping this in mind recently the USFDA rolled out a list of drugs. The 10-page list of around 300 drugs given out by the USFDA comprises of two parts. Part I comprises of the off-patent drugs with no competition in the market, and Part II comprises of drugs where there are less than three players.  The applications for such drugs will be considered for priority approval.

Key Question is will the above move help the Indian Pharma companies?

This move by USFDA’s could aid the generic companies which may have already filed for the generic approval. At the same time, this move will also impact the companies who are currently selling drugs under low competition. As such the chances of more players entering the market increases.  For example, metoprolol succinate is in the list. Currently Dr Reddy’s is the only company selling this drug in the US market.

The USFDA drug list comprises not only of drugs in oral solid formulations but also in niche segments such as injectables, ophthalmic suspensions, nasal sprays and so on. However, there are just very few drugs with a sizeable market size.  In our view, the total market size of these 300 drugs could be in the range of (US$ 4-5 bn).  Individually most them could be as small as US$ 10 – 20 m per product. Further, they do not only have a smaller market size but some of them also require dedicated manufacturing units (which means higher investment). The availability of better therapies/substitutes being available of a given drug could further shrink the market size or commercial attractiveness. In our opinion, this much-touted list does not offer any incentive to the Indian generic players as the risk reward ratio is not favorable.

However, having said that, there is a probability of regulator coming up with more such lists of the products to increase competition. We will await to see more developments on this front.  

Another aspect which is also being discussed is the increase cost of Generic Drug User Fees Act (GDUFA II), which is expected to come into force anytime soon. Once the GDUFA II gets passed it will lead to two months shorter than the normal review period (from about 10 months to 8 months). As per the proposed fee structure, there will be shift in the fees from facilities to ANDA applicants. Thus, the cost of launching the drug would also increase. On the positive side, the approvals rate may see further improvement. But all in all, these developments will prove to be a double-edged sword for the generic players. Thus, the companies that are able to offer drugs having differentiated technologies and having higher entry barriers will be at a better position.