Statin suggestion puts spotlight on generic drug business
Lipitor tablets sit in a tray at a pharmacy.
The market for certain cholesterol-lowering drugs may be about to double. The American Heart Association and the American College of Cardiology have come out with new guidelines for Americans taking statins, suggesting more people could benefit from the drugs.
With the market for statins expected to grow to around 70 million Americans, the generic drug market could get a boost.
“There are certainly some generic statins, which are very effective, that are being sold only as generics right now,” says Vivian Ho, a health economist at Rice University’s Baker Institute.
She says the market for generic drugs even attracts some of the same companies that make the patented brands.
“The brand-name drug makers produce those because they realize that there are some customers who are only going to purchase generics,” Ho says. “So they compete in that market as well.”
For the companies that only make generic drugs, size matters.
“It’s going to be the largest generic makers who already have the facilities and the contracts in place to work with pharmacy benefit managers who are going to be benefiting the most from increased use of these generic drugs,” says Ho.
Generic drug-makers could see a bump in sales, but that may not mean a lot of extra profits.
“One of the really amazing features of the generic drug industry is how much competition there is -- how much price competition in particular,” says economics professor Fiona Scott Morton, who follows the pharmaceutical industry at the Yale School of Management.
Your local pharmacy has a lot of influence here, too. There may be 10 or 15 versions of a generic drug, but the pharmacy only needs to stock one. That gives the pharmacy a role in determining which generic drug companies succeed.
“The pharmacy will talk to different wholesalers and manufacturers, depending on the size of the pharmacy, and see what the best deal is that it can get,” says Morton.
Over time, Morton says the market will adjust to the increased number of consumers taking statins. More generic drug-makers will devote factories and machines to making the drugs, increasing competition. So, in the long run, generic drug prices are not expected to rise significantly.