Global Warming for Generics

J0400621Lately the environment for generic drugs has grown much warmer.

Consider, last week the FDA/CDER proposed a speedier process for considering approval of generics.

Walmart, one of the biggest retail chains in the country, announced it would sell many generics for $4  in Florida and is now expanding the program to 14 statesTarget attempted to match suit

And lots and lots of big named brand drugs are headed to the ends of their patents.  According to the Wall Street Journal, $30 billion worth of drugs are about to go off patent. 

At the same time, pharmaceutical prices are reported to be about to rise another 12%. by the end of the year, which will make generics even more attractive. 

In short, the overall environment for generic drugs has warmed up quite a bit lately. But you couldn’t tell this by their stock prices. 

I’m not a stock analyst by any means, but I was curious to see if this increasingly rosy outlook for generics was having an impact on the companies that make them.  So I went to the remarkable Google Finance page and compared some of the bigs in the industry – Barr, Mylan, Teva and Watson to see if their stock prices had increased as a result.  But instead, every one of the big ones suffered declines in their stock prices since the beginning of the year, save for one – Mylan which was up almost 5%.  I realize there are complex factors at work, but thought it interesting nonetheless. 

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2 Responses to Global Warming for Generics

  1. Adam J. Fein says:

    True, the generics market is growing. But the bigger profits go the intermediaries (wholesalers, retailers, and PBMs) that control market access, which is the scarcer resource.
    Generics are a commodity, so (1) the channel has more power and (2) more competitors = lower prices. See http://www.fda.gov/cder/ogd/generic_competition.htm
    This market is the opposite of branded drugs, which are sole-sourced unique, patent-protected products.

  2. Vincent S. Venturella says:

    Your first sentence about the 3 stakeholders who profit more is flawed. With retailers (in this case pharmacists), the insurance companies or the HMOs and PBMs control the discount they demand off the AWP, and the pharmacist receives the same filling fee. So, the percentage of profit they receive may,theoretically be more, but the actual money changing hands does not! Would you have the pharmacist reduce the already meager filling fee to 1/2 or 1/3 of that received for a branded drug?