Switzerland - How will the government’s cost-containment plans affect the generics market?

The generics market will benefit from upcoming patent expiries, but further price controls may hinder growth in money terms.

The Swiss government is keen to contain costs in the healthcare sector, and a number of specific measures have been taken to rein in costs. The promotion of generics has been at the forefront, with spectacular success since 2001, when generic substitution was introduced.

The first price control on generic drugs was implemented in 2005; new generics had to be priced at least 30% below the level of the corresponding original drug in order to qualify for reimbursement. In 2008, this was reduced further to 40%. This is likely to boost generic use by volume, but will serve to hinder growth in value terms. The major companies in the market have been able to cope with previous price cuts by increasing volume sales, although the decreasing amount of ‘slack’ in the market may make growth harder to maintain in 2010. Patent expiries will become a far more significant source of growth.

By international standards the Swiss generics market remains uncompetitive. Over 70% of generic sales are made by two companies; Mepha, acquired by Cephalon in April 2010, and Sandoz. A more competitive environment would almost certainly lead to lower price levels. However, the government’s policy of period price reductions may prove counterproductive in this regard, by making the market less attractive for new players and further solidifying the position of the existing manufacturers. A few other companies, notably Teva, Actavis and sanofi-aventis (through Winthrop), are active in the market, but to date have not gained much market share. It is noticeable that, in stark contrast to the other leading markets of Western Europe, no Indian or central European companies have yet shown much interest in Switzerland.

Further reading - An in-depth analysis of the Swiss pharmaceutical market is available from Espicom: The Pharmaceutical Market: Switzerland (published May 2010)

Key Developments in Latin America and Europe

Regulatory developments in Latin America

There have been several pharmaceutical regulatory developments in Latin America this week. In Mexico, the renewal registration process is affecting smaller pharmaceutical producers, while in Peru, the new regulation for pharmaceuticals is expected to increase the quality of drugs approved in the country. In Colombia, Abbott has finally decided to comply with the national pricing commission and reduce the price of one of its antiretrovirals sold in the country.

Manufacturing developments in Europe

There have also been interesting developments in Europe. In Germany, the race to acquire ratiopharm is coming closer to an end, with two leading generic producers, Teva and Actavis, interested in the acquisition. In Ireland, Taro Pharmaceuticals has announced that it is to close its manufacturing facility by the end of March. Meanwhile, Medis International has opened a new packaging plant in Czech Republic and a local biologic producer, Philogen, has acquired a manufacturing site from Bayer in Italy.

Further reading - Detailed reports on these pharmaceutical markets are available from Espicom: Mexico, Peru, Colombia, Germany, Ireland, Czech Republic and Italy.

Japan - How will Japan’s ageing population affect the pharmaceutical market?

The Japanese government is actively pursuing generic promotion, along with changes in the OTC market, in order to cope with its ageing population.

With 26% of the Japanese population projected to be aged over 65 in 2015, the government has a number of obstacles to overcome in order to keep health expenditure to a minimum, and the pharmaceutical market will play a part in this. Although the generic market is currently small and fragmented, it has opened up recently to foreign companies such as Teva, indeed this company could well be the national leader in the near future. Recent JV’s in the generic market, such as Teva-Kowa, have highlighted that the key to success is for foreign companies to have a local partner. Despite all this, the MHLW’s target for generics to make up 30% of the market by 2012 appears unattainable at present.

Another cost-containment measure is biennially price cuts for pharmaceutical products, although these can sometimes take place annually. Annual price cuts will likely increase in the future. In view of this, a number of Japanese companies are seeking to acquire rights to foreign companies R&D lines, in order to guarantee sales outside of the Japanese market. An example of this is Takeda’s recent acquisition of Amylin’s anti-obesity pipeline, in a deal which could eventually reach US$1 billion.

Further reading - An in-depth review of the Japanese pharmaceutical market is available from Espicom: The Pharmaceutical Market: Japan (published January 2010)

Mexico - How are biologics & biosimilars regulated in Mexico?

In September 2009, the regulatory reform for the sale and production of biologic and biosimilar medicines was enforced.

The new regulation establishes the requirements to launch ‘biocomparables’, which is the term chosen in Mexico to define off-patent biologics ‘comparable’ with innovative biologics; other terms such as ‘biosimilars’, ‘biogenerics’ or ‘non original biologics’ are rejected. The new regulation also sets out the creation of a Committee of New Molecules and a Subcommittee of Biologic Medicines to determine, on a case-by-case basis, the clinical or in vitro studies necessary for market registration, depending on the medical use of the product. Once marketed, a pharmacovigilance system will assess these products.

The new regulation represents sizeable opportunities for both local and foreign producers. Local producers such as Probiomed, Silanes and Landsteiner Scientific already produce biologic medicines in Mexico. Competition, however, is expected to arise from foreign producers such as Roche, Amgen, GlaxoSmithKline, Sandoz, Teva and Ranbaxy. On a patient level, the new regulation provides more safety and availability, as the sector had grown in the country without any legal framework.

Further reading - A detailed analysis of the Mexican pharmaceutical market is available from Espicom: The Pharmaceutical Market: Mexico (published January 2010)

Switzerland - How will the government’s cost-containment plans affect the generics market?

The generics market will benefit from upcoming patent expiries, but further price controls may hinder growth in money terms.

The Swiss government is keen to contain costs in the healthcare sector, and a number of specific measures have been taken to rein in costs. The promotion of generics has been at the forefront, with spectacular success since 2001, when generic substitution was introduced.

The first price control on generic drugs was implemented in 2005; new generics had to be priced at least 30% below the level of the corresponding original drug in order to qualify for reimbursement. In 2008, this was reduced further to 40%. This is likely to boost generic use by volume, but will serve to hinder growth in money terms. The major companies in the market have been able to cope with previous price cuts by increasing volume sales, although the decreasing amount of ‘slack’ in the market may make growth harder to maintain in 2010. Patent expiries will become a far more significant source of growth.

By international standards the Swiss generics market remains uncompetitive. Over 70% of generic sales are made by two companies; Mepha and Sandoz. A more competitive environment would almost certainly lead to lower price levels. However, the government’s policy of period price reductions may prove counterproductive in this regard, by making the market less attractive for new players and further solidifying the position of the existing manufacturers. A few other companies, notably Teva, Actavis and sanofi-aventis (through Winthrop), are active in the market, but to date have not gained much market share. It is noticeable that, in stark contrast to the other leading markets of Western Europe, no Indian or central European companies have yet shown much interest in Switzerland.

Further reading - An in-depth analysis of the Swiss pharmaceutical market is available from Espicom: The Pharmaceutical Market: Switzerland (published January 2010)

EU - EU Commission Raids Pharmaceutical Companies Suspected of Anti-Competitive Behaviour

The EU Commission carried out raids at several pharmaceutical companies on 6th October 2009, as part of its investigation into anti-competitive behaviour within the industry.

Surprise inspections were confirmed at sanofi-aventis, Teva, Novartis and Ranbaxy Laboratories.

This is the third time that the EU Commission has carried out raids. In January 2008, the EU Commission raided the offices of GlaxoSmithKline, AstraZeneca, sanofi-aventis and several generic competitors, and in November 2008, Teva, Servier and Krka Group were all raided.

In a statement the EU Commission said, “The Commission has reason to believe that the provisions of the EC Treaty prohibiting restrictive business practices and/or the abuse of a dominant market position... may have been infringed.”

However the regulators stressed, “The fact that the European Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself.”

The raids follow an 18-month inquiry into anti-competitive practices within the pharmaceutical industry, the findings of which were released in July 2009 (see EU - Competition Inquiry Findings Released). The inquiry found that at least 200 settlement agreements between generic and originator companies were known, and that many of these were formed to restrict generic entry onto the market.

The European Commission is already investigating Servier and some generic firms on suspicion of blocking a generic copy of the cardiovascular drug perindopril from entering the market.

Further reading - Pharmaceutical market profiles for all European countries are available from Espicom: Pharmaceutical Market Reports; Europe

Ireland - Teva to Cut 315 Jobs in Waterford

Teva is cutting 315 jobs at its plant in Waterford, Ireland, it was announced in September 2009.

The plant, which currently has 730 employees, manufactures tablets and inhalers, but following the job losses the production of tablets will be relocated to a factory in Hungary. It is expected that tablet production at the site will cease within 12 months.

Further reading - An in-depth analysis of the Irish pharmaceutical market is available from Espicom: The Pharmaceutical Market: Ireland (published June 2009)

EU – Competition Inquiry Findings Released

The results of the EU Commission’s 18-month long inquiry into anti-competitive conditions in the pharmaceutical industry were released on 8th July 2009.

The inquiry, launched in January 2008, found that generic medicines take too long to reach the market, and this is often due to drug companies using a variety of techniques to extend the commercial life of their products. Between 2000 and 2007, consumers waited an average of seven months for a cheaper generic medicine once the patent had expired, costing 20% in extra spending. The EU Commission called upon member states to do more to boost the uptake of generic medicines, but will also scrutinise the sector more closely and prosecute any companies which violate the competition law.

The first settlement agreement to be investigated is between French-based Servier and a number of generic companies including Teva, Krka, Lupin, Mylan’s Matrix subsidiary and Unichem’s Niche Generics unit, over “possibly restrictive” practices which may have hindered the entry of the generic versions of Servier’s cardiovascular drug perindopril.

The EU Commission is expected to review around 200 such agreements in the coming months.

The inquiry also found that fewer innovative medicines are reaching the market, and that certain drug company’s practices may be contributing to this. The EU Commission said it will monitor the situation closely to identify the factors contributing to the decline in innovation.

The inquiry also concluded that there is an urgent need for an EU patent and patent-litigation system, which will reduce costs and improve efficiency. It will also reduce uncertainty for drug companies, because at present, 30% of patent court cases are conducted in parallel in several member states, and in 11% of cases national courts reach conflicting judgements.

Further reading - Pharmaceutical market profiles are available for all European countries from Espicom: Pharmaceutical Market Reports; Europe