Generics Bulletin Explains: US Generics Players Enjoy Calmer Waters

Historically, the US generics market tends to yo-yo between periods of intense pricing and cost pressure on suppliers that then give way to calmer periods, which allow the industry to regroup amid a slightly more favorable operating environment. And based on the latest indications from leading players, it seems that the market has lately swung back towards the latter.

A couple of years ago, things were very different, as buyer consolidation took its toll and cost savings were sought in the wake of the COVID-19 pandemic. In early 2022, current Mallinckrodt chief executive and then-Hikma CEO Siggi Olafsson outlined that “I believe – and I’ve been doing this now for just over 20 years – the pricing in the US is cyclical.”

“You usually have at maximum two challenging years, and then you usually have three to four very decent years,” he observed. “We had 2016 and 2017, which were challenging years for pricing; we had 2018, 2019 and 2020, quite good years; [and then] we had a change of the storm a little bit in 2021,” with recent years such as 2022 seeing top executives point to a pricing environment that had “intensified beyond historical norms.” (Also see "Lannett: Pricing Pressure Has ‘Intensified Beyond Historical Norms’" - Generics Bulletin, 7 Feb, 2022.)

In 2023, the industry saw signs that the tide was turning, marked by greater stability and slowing erosion for leading players. (Also see "Generics Bulletin Explains: The Changing US Generics Market" - Generics Bulletin, 29 Aug, 2023.)

And now, in 2024, we have seen further mood music from multiple leading generics operators that suggests the pricing environment has become more favorable, leading to growth trends that would have been unlikely just a couple of years ago.

Sandoz CEO Richard Saynor recently observed that, for the firm globally, “for the first time, price erosion did not impact the top line in the second quarter of 2024. And over the last four quarters, it has remained lower than what we have seen historically.” (Also see "Sandoz Shuffles Management And Sets Out Restructuring Plans" - Generics Bulletin, 9 Aug, 2024.)

Discussing price erosion globally rather than limiting his comments to the US, the chief executive said “we’ve always assumed about four basis points of price erosion,” but “over the last 18 months, two years,” it had been “nowhere near that.”

“Last year it was about 3%,” he said. And in 2024, “Q1 was probably in the 2% range and Q2 was actually flat to slightly positive.” Overall, he said, “I think we’ve seen pricing stabilize. And we don’t see any signals that that’s likely to change in the second half of this year.”

Sandoz’s North America president Keren Haruvi concurred that “I don’t anticipate to see specifically this year more price erosion,” adding that she also saw plenty of opportunity in upcoming US generics launches. (Also see "Sandoz Is ‘Not Aiming To Be A Leader’ In US Small-Molecule Generics" - Generics Bulletin, 12 Sep, 2024.)

Teva And Viatris Enjoy Growth In US

Meanwhile, another global off-patent industry giant was even more enthusiastic about the US generics market as it reported its latest sales and earnings results for the second quarter of 2024.

Teva CEO Richard Francis heralded “significant growth” for the firm’s US generics business, partly driven by its generic lenalidomide rival to top-selling multiple myeloma treatment Revlimid – a product that has provided an opportunity for multiple generics players – as well as complex generics launches such as the firm’s recent authorized generic liraglutide version of Victoza. (Also see "Teva Launches Victoza Rival In The US" - Generics Bulletin, 27 Jun, 2024.)

But essentially, Francis said, even outside of these specific product opportunities, the firm was enjoying “just an underlying good performance in our generics business” (see sidebar).

“We feel that we’re in a good place,” he summarized, pointing out that the firm was “focusing really hard on making sure we bring our high-value complex generics to the market on time more often” to offset portfolio erosion.

Viatris told a similar story. As the firm reported its second-quarter results for 2024, chief financial officer Doretta Mistras highlighted that in North America the firm had seen “continued growth in generics, which was up over 3% versus the prior year,” buoyed in particular by complex generics. (Also see "Viatris Aims To Be At The Vanguard For Mammoth GLP-1 Opportunities" - Generics Bulletin, 13 Aug, 2024.)

“It’s not just about the kind of what price you can get, but it’s about the durability of supply as well.”

And speaking at a Goldman Sachs conference in June, Mistras elaborated that a reduction in pricing pressures had been accompanied by other actors in the supply chain putting a greater value on reliable supply, at a time when the US market is still suffering from numerous generic product shortages.

Pointing to “an evolution in the industry,” Mistras said Viatris had perceived an “appreciation by our customers, etc. that it’s not just about what kind of price you can get, but it’s about the durability of supply as well. And so we have seen more of a rationalization as it comes to generics.”

“There’s a lot of factors that play into it,” she acknowledged. “It has to do with kind of that portfolio demand-supply dynamics, etc. But we continue to see kind of price erosion in that kind of mid-single-digit range, consistent generally, I think, with what the industry is seeing as well.”

Indian generics giant Lupin concurred that supply security was becoming a more significant concern for the US market as pricing pressures abated. CEO Vinita Gupta recently observed as the firm delivered its full-year financial results that “the price erosion actually has been pretty reasonable over the last 12 months, I would say. We experienced a single-digit price erosion.”

“And there still continues to be a very strong drug shortage issue in the US,” she emphasized. “So we expect that that should really keep price erosion at a reasonable level going forward, at least in the next 12 months.” 

When the root cause of drug shortages was analyzed, Gupta said, the most significant factor was that certain generics “were economically non-viable. So, companies like us have gotten out of these products because from a pricing standpoint, it didn’t make sense to continue to manufacture them.”

“So, there’s been a good amount of recognition of it, both with the customers as well as other stakeholders [like] the US government, US Food and Drug Administration and Federal Trade Commission. There has been concern across the board in the US on drug shortages and the cause for these.”

“There is a good amount of scrutiny on the market dynamics causing companies to exit products and hopefully, that will bring some level of balance in the marketplace,” Gupta noted (see sidebar).

The structural examination had also led to a stabilization of generic drug prices “to some level, and we are going to hopefully continue to see this going forward.”

“It’s better than before. It was unsustainable in 2016, 2017, 2018, 2019 and 2020, painful years. And manufacturers cannot just keep lowering prices.”

Amneal co-CEO Chirag Patel was also clear about seeing a markedly positive evolution in the recent pricing environment for generics, as the firm’s generics segment grew by 14% in the first half of 2024. (Also see "‘Inhalation Is A New Vector Of Growth’ For Amneal As Albuterol Goal Date Gets Closer" - Generics Bulletin, 16 Aug, 2024.)

“It’s better than before,” Patel said. “It was unsustainable in 2016, 2017, 2018, 2019 and 2020, painful years. And manufacturers cannot just keep lowering prices. We have obligations to patients. We have obligations to quality systems. We have obligations to the government of the US as well.”

“This is an essential industry [that] fills 92% of prescriptions. It is much needed. It has to be a sustainable and a robust industry,” Patel emphasized. “It’s a critical industry and I hope we start getting the respect that we deserve and pricing that we deserve.”

And Hikma CEO Riad Mishlawi also indicated calmer waters in recent quarters for the US generics business. “As far as the pricing, I don’t think there’s a dramatic change from where we were [with] single digit [erosion],” he observed. “I don’t think there has been a lot of change.” (Also see "‘It’s Not Going To Be An Easy Market’ – Hikma Talks Strategy For US Biosimilars" - Generics Bulletin, 14 Aug, 2024.)

Indian Players Enjoy US Generics Growth

Several other leading Indian players also weighed in on the current US generics environment, with Dr Reddy’s CEO Erez Israeli noting that “most of the growth is from the base business” as the firm’s US revenues increased in its financial first quarter that ended 30 June (see sidebar).

While new launches had provided “healthy growth,” he acknowledged, “the lion’s share of the growth came from products that we had before.”

Israeli was asked during the firm’s results call whether the $450m or so in annual sales, based on an annualized run rate, was now the company’s baseline in the US, and what the next couple of quarters would look alike given current price erosion trends.

“What I’m expecting from the US is to continue to grow,” Israeli underlined. “We have the capability – and I’m excluding even lenalidomide – to grow in single-digit, but we need to compensate for any price erosion on year-to-year basis.”

“Right now, it looks like our North America activity should continue to grow throughout the year. Quarter-to-quarter, it’s hard to tell, it’s always fluctuating. So, I cannot guide on quarters. But I can absolutely say that we’re planning to continue to grow throughout the year also.”

Sun Pharma also indicated that, excluding its lenalidomide Revlimid generic, “the US generics business has shown growth.” (Also see "Sun Drops Suggestion That Halol Reinspection Request May Be Close" - Generics Bulletin, 6 Aug, 2024.)

And Alkem CEO Vikas Gupta concurred with other firms that “the US [generics market] is seeing a single-digit price erosion. That trend continues even for this quarter. So, we are seeing that kind of price erosion in our US business as well.”

Small-Molecule LOE Opportunities Are Still Out There

Overall, the US generics industry continues to play an increasingly significant role in the country’s healthcare system, despite relatively low spending compared to other product categories. The US Association for Accessible Medicines recently pointed to generics and biosimilars saving the country $445bn last year alone, with biosimilars playing a growing part. (Also see "Generics And Biosimilars Saved US $445bn In 2023, But Industry Stands At ‘Critical Crossroads’" - Generics Bulletin, 12 Sep, 2024.)

But despite many of the largest loss-of-exclusivity opportunities now coming from biologic brands, the opportunities are still out there in small-molecule generics, as firms look for new launches that will help them to offset erosion among the more mature products in their portfolios.

Lupin and Zydus have both this year launched generic versions of blockbuster brand Myrbetriq (mirabegron) in the US. (Also see "Lupin Launches Higher Mirabegron Dose ‘At-Risk’" - Generics Bulletin, 10 Sep, 2024.) Meanwhile, Emflaza (deflazacort) faced its first generic rival just a few months ago. (Also see "Cranbury Forms From Tris Pharma, With First Generic DMD Treatment Deflazacort" - Generics Bulletin, 17 Jun, 2024.)

Victoza is expected to face further multi-source competition before the end of this year, after Teva’s initial authorized generic launch. (Also see "Viatris Aims To Be At The Vanguard For Mammoth GLP-1 Opportunities" - Generics Bulletin, 13 Aug, 2024.)

And Canadian giant Apotex recently launched US generic versions of both Oxtellar XR (oxcarbazepine) and $1.45bn brand Sprycel (dasatinib), coming first to the market with both. (Also see "Apotex Secures Two Firsts With US Sprycel And Oxtellar ER Rivals" - Generics Bulletin, 9 Sep, 2024.)