Analyst Expects Slow Growth for Generics in 2005

Fewer generic drug approvals combined with increased competition from authorized generics and foreign drugmakers will limit growth in the U.S. generics industry in 2005, a Wall Street analyst predicted at a recent industry event.

David Maris, managing director and senior research analyst for Banc of America Securities, expects 2005 to be a light year for generic drug approvals, which will likely mean flat profits for generic firms, he told attendees at the Generic Pharmaceutical Association's (GPhA) recent annual meeting in Boca Raton, Fla. However, Maris said this trend will change dramatically in 2006 and 2007, which are expected to be "very crowded years" for generic product launches. He estimated that brand drugs accounting for more than $50 billion in revenues are expected to come off patent in 2006 and 2007.

Another challenge generic firms will face this year is the increasing prevalence of authorized generic products from brand firms, Maris said. "Authorized generics are here to stay," he said. "Any fix would force large drug companies to launch their own generics. In the future you may see multiple authorized generics on the same drug."

Maris also predicted that brand drugmakers will continue to take advantage of the FDA's citizen's petition process to delay the entry of generic drugs. In fact, Maris said that generic firms should anticipate that the petitions will become more frequent and "even better crafted."

Increased competition from foreign drugmakers is also expected to affect the U.S. generics industry this year, and even more so in 2006 and 2007, Maris said. The rise of foreign generics firms, particularly in India, Latin America and China, will continue to put added pricing pressure on U.S. companies, he noted.