The Growth of Generic Drug Market of the USA - Essay Example

Generic drugs under the US Food and Drug Administration should benefit greatly in terms of their prices. They usually cost a small proportion of the total cost of its brand name drugs as far as 80% to 85% concerning the policy. For instance, Glucotrol being a drug used by doctors in the treatment of diabetes, represent a monthly cost of between 42 and 84 dollars per 10mg tablets. On the other hand, the generic version of the drug, Glipizide costs ten times less at between $4 and $8 every month. These, therefore, indicate that Glucotrol is ten times more expensive (Palmeter and Mavroidis 120).

Both generic and brand-name drugs fall under the same governance thus calling for adherence to the set standards to ensure that uniformity in quality is put into focus. In a situation where the brand-name drugs are off-patent, the market will otherwise open up to generic versions. The role of patents is to protect the intellectual rights of a drug for up to a period not exceeding 20 years. The patent’s effectiveness from the clinical trial stage, the drug may take fewer years to be on the market. After the expiry of the patent pharmaceutical companies take advantage and increase the prices of their generic drugs thus bringing about the competition that otherwise emerged from its competitors from the lesser expensive generic counterparts (Rodriguez 142).

Based on the industry analysis, drugs coming off patents in 2014 will cause a loss of $136 billion. Generics help government spend less on healthcare. The generic market is faced with two opposing trends driving force being the global downturn. The demand for generic drugs is gradually increasing with it cost-effective and adoption has increased consumption in the market where branded prescribing was dominant.
The challenge, on the other hand, the reduced prices of generic drugs have led to overspending on the government. The government is forced to reduce the prices of generic drugs though the cost of production is too high.

Value of products at risk to generic competition 2010 to 2014
To make a sound estimate of the market potential of a product takes more than simply reading its sales figures. Marketing strategists like to use price elasticity to measure the sensitivity of demand to change in price. Price elasticity is obtained by constructing a demand curve to illustrate the relationship between prices and quantity sold (or revenue). Demand curves are typically downward sloping; demand would go up if prices were lowered and vice versa in a pure competition market (Palmeter and Mavroidis 109). The demand curve may be elastic or inelastic. Demand is elastic when the slope of the demand curve is negative, while demand is inelastic when the slope is positive. Inelasticity usually occurs when the seller has little competition in the market or the product is prestigious.

There are expiration dates for the new drug patents. Generic companies always want to be the first to file for product approval after patent expiry because there is a government incentive that gives the first filer a marking exclusivity for six months when the price is usually higher.

In the next five years, market exclusivity of brand-name drugs worth more than $100 billion will be expired. Hence, there will be a great opportunity opened to the generic drug industry. Furthermore, the development of advanced manufacturing in developing countries has created new opportunities for generic manufacturers (Rodriguez 122). With healthcare providers and governments ever watchful of healthcare costs in the US, it is a golden time for generic companies to gain more market shares by providing cost-effective generic drug products over the next five years. At the same time, more US generic companies are collaborating and investing in India; then looking at the USA. Read More