Thinking about the overseas path of China's generic drug enterprises

According to a report released by IMS in 2019, generic drugs account for 29% of the global market, and the market size is about $400 billion, which is indeed an extremely large market
.
However, the $400 billion market is scattered in more than 200 countries and regions, and objectively understanding the market, selectively entering the market they are good at, and establishing a grounded special product package according to the market situation is the key to the success of the generic drug business
.

The United States is the largest generic drug market, but because of efficient generic drug substitution, the price competition of generic drugs is very fierce, and the general generic drug price has been unprofitable
.
As the United States has been pursuing price competition for generic drugs, the generic drug market has shrunk year by year since 2015, and the market size is now about 68 billion US dollars (factory price), which has shrunk by nearly 20%
from the peak in 2015.
In order to combat price shocks, generic drug giants generally use differentiated methods to avoid competition
.

If China's generic drug companies intend to lay out the US market, they should think about
two aspects.
On the one hand, the US generic drug market is large enough, and the market mechanism is simple, and it is relatively easy for generic drugs to enter the US market; On the other hand, generic drugs in the United States are too competitive, and ordinary products are unprofitable, unless the production cost can face the PK
of Indian companies.
Therefore, the layout of the US market should be differentiated, carefully study the supply and demand of the US market, and lay out characteristic varieties, high-threshold approvals, first imitation varieties or profitable varieties
.
In addition, conventional oral preparations have the greatest competitive pressure, and other dosage forms are relatively moderate, so injections may be a slightly better choice
than conventional oral preparations.
But it should also be noted that the US injectable market is small, in the $68 billion generic drug market, only about 9 billion are injections, not suitable for a rush
.

Due to the shrinking market in the United States, Europe has become the world's largest market for
generic drugs.
However, the $70 billion (factory price) generic drug market is fragmented and scattered in about 50 different countries, which have huge differences in language and culture, political orientation and drug policies, which bring great challenges
to the product access and market operation of multinational generic drug companies.
Although Germany, France, Italy, Britain, Spain and other top 5 countries concentrate 50%-60% of the European market, few multinational generic drug giants can establish a far leading advantage
in three or more countries in five countries at the same time.
There are differences in politics, economy, culture, language, and policy, and it is difficult for generic drug companies to "take all"; Second, the access method, the access environment and pricing mechanism are different, and need to be treated differently; Although all three implement centralized procurement, the method and scope of procurement are also very different, requiring a large-scale operation team
.
Germany only implements procurement at the retail end, the United Kingdom only implements procurement at the hospital end, few national hospitals and retail end at the same time, and the coverage of the procurement, the contract agreed time is different
.
There are 6 recruitment areas in the UK alone, and each winning bid lasts only a few months to ten months, and rarely exceeds 2 years
.
In addition, only 25% of generic drug sales in the UK come from hospitals, and the amount of bids won by companies is very chicken
.
Since there is no unified procurement mechanism at the retail end in the UK, and the retail end accounts for 75% of the market, it is relatively difficult to develop the market, and the market structure is extremely scattered
.
The German retail side occupies almost 90% of the market, and the implementation of procurement at the retail end greatly simplifies the complexity of the market, so the market structure is more concentrated and the competition is very fierce
.

In the entire European market, Germany, France, Italy, and Spain have relatively concentrated procurement mechanisms, so the competition for generic drugs is more fierce and the market concentration is relatively high
.
In addition to the top 5, the market environment is more complicated, and among Indian generic drug companies, only Arabindo and INTAS have established a dominant position
in Europe.
The reason for Arabindu's success is that it adopted a strategy of double reporting in the United States and Europe at the beginning, accumulating a large number of European generic drug approvals, but it was only after acquiring the operation teams of Actavis and APOTEX that the European generic drug market
was gradually opened.
Although India has become the American generic drug room, Indian generic drug companies provide almost 40% of the generic drugs for the United States, but Europe is less than 10%.

In addition, 190,000 people in Europe are engaged in the research and development and production of generic drugs, and some countries have a tendency to
protect domestic industries.
Although the competitive pressure of generic drugs in Eastern Europe is lower than that in Western Europe, the generic drug giants in Europe are mainly concentrated in Eastern Europe
.

From another point of view, although the European market is trivial, but this trivial market also effectively disperses competition, and the price is relatively high, China wants to develop the European market of generic drug enterprises can selectively enter some countries
according to their own advantages and long-term development strategies.
Overall, generic drug prices in Europe are still higher than in the United States, substitution rates have not been maximized, and European countries have begun to focus on balancing medical spending, corporate profits and government budgets, and the European market will continue to grow
at a low rate for the next five to ten years.

In Asia, Japan is the fastest growing market in recent years, due to Japan's vigorous promotion of generic drug popularization and substitution, the size of the generic drug market has increased by 8-9 times in just 20 years, reaching 17.
5 billion US dollars (reimbursement price) in 2020, but due to the Japanese government's frequent control of drug prices in recent years, generic drugs have become unprofitable
。 On the one hand, Japan's price negotiation and price reduction mechanism have made the price of branded drugs almost the lowest among developed countries, while the pricing of generic drugs is based on 40%-50% of branded drugs as the ceiling, and there are price reduction requirements every year; On the other hand, Japan does not have a unified procurement mechanism, and generic drugs also need academic promotion, and they cannot be sold if they are produced like in Europe and the United States
.
Because of many characteristic reasons of the Japanese market, international generic drug giants have not opened the Japanese market, and there is a trend of
flight.
For Japanese local generic drug companies, the flight of multinational giants may be good news, but frequent drug price control has also made their profits continue to decline, forcing them to go overseas to explore new markets
.

For developed or relatively developed drug markets, the development of generic drugs is for substitution and cost control, while for economically underdeveloped countries, the main significance of generic drugs is to improve the accessibility of drugs
.
Due to the high accessibility of original drugs in developed countries, there is almost no problem of drug accessibility, but the development of economy and industry has serious imbalances, and most countries have or have the problem
of "lack of medical treatment and lack of medicine" in a certain historical period.
In countries with "underserved medicines" or specific historical periods of "underserved medicines", governments often develop policies that favor the development of generic drugs to rapidly improve access to
medicines.
Throughout the world today, there are still 3-4 billion people who lack medical care and medicine, and some countries do not have their own regulatory systems, and even in the era
of small workshops producing medicines.

Based on the above, according to the maturity of the generic drug market, it can be divided into four categories
: developed market, standardized market, non-standardized market and non-regulatory market.
1) Developed markets (such as the United States, Germany, the United Kingdom, Japan) have perfect regulatory systems and mature market mechanisms, and have basically realized the substitution of generic drugs; 2) The regulatory system of the regulated market (such as China, South Korea, India, and Pakistan) is perfect, the market mechanism is relatively mature, and the conditions for preparing generic drug substitution or the substitution of generic drugs are being implemented; 3) The regulatory system of non-regulated markets (such as most countries in Latin America and Asia) is relatively perfect, but the market mechanism is immature, there is still a certain lack of medical treatment, and there are no conditions for the substitution of generic drugs; 4) The non-regulatory market (some countries in Africa and Asia) does not have an independent regulatory system, there is a serious shortage of medical and small drugs, and it is usually necessary to use the certification system of developed countries or WHO to control the quality of drugs, and some countries are even in the era
of small workshops producing drugs.

In developed markets, the generic drug industry has excess resources, competition is extremely fierce, the average drug price has been in the downward range, the United States because the proportion of generic drug prescriptions has reached the limit and the market has gradually shrunk, Britain, Germany, Canada, Spain, Italy, Japan, Australia and other countries due to policy reasons The competitive pressure has eased slightly, and the generic drug substitution rate has not reached the bottleneck, in the short term (such as 5 years), there is still room for
slow growth.
In the regulated market, the market scale will gradually expand in the medium and long term (5-10 years) due to the vigorous development of generic drug substitution in various countries, but the price of drugs will also decline
rapidly due to the gradual increase in the level of substitution.
South Korea, India, China, Russia and Brazil will be the growth poles of generic drug sales in the next 10 years, of which China and Brazil may have market fluctuations due to cost control, but may soon "bottom out" and then enter a continuous growth range
.
In addition, there are 3-4 billion people living in non-regulated and non-regulated markets, who have more or less access to
medicines.
So far, the FDA has approved 2,000 new molecular entities, excluding decommissioned varieties and new compound preparations, the number of varieties sold in most developed countries is between 1800-2500, if the number of varieties on sale in a country is less than 1500, there may be a problem of insufficient access to drugs, but a large part of the world's
low- and middle-income countries have less than 800 varieties on the market.
For these countries, they need to move from "addressing drug access" to achieving "generic drug substitution", which will be the vision of the
future generic drug market.

How to choose the road for generic drug companies to go abroad?