WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 1
Chemical reaction: Generic operators are expected to explore new product lines, boosting industry demand
This report was provided to Autobahn Consultants (2134210691) by IBISWorld on 27 October 2019 in accordance with their license agreement with IBISWorld
IBISWorld Industry Report 32541b Generic Pharmaceutical Manufacturing in the US May 2019 Dan Spitzer
2 About this Industry 17 International Trade 34 Technology and Systems 2 Industry Definition 20 Business Locations 35 Revenue Volatility 2 Main Activities 36 Regulation and Policy 2 Similar Industries 22 Competitive Landscape 37 Industry Assistance 3 Additional Resources 22 Market Share Concentration 22 Key Success Factors 39 Key Statistics 4 Industry at a Glance 23 Cost Structure Benchmarks 39 Industry Data 25 Basis of Competition 39 Annual Change 5 Industry Performance 26 Barriers to Entry 39 Key Ratios 5 Executive Summary 27 Industry Globalization 40 Industry Financial Ratios 5 Key External Drivers 7 Current Performance 28 Major Companies 41 Jargon & Glossary 9 Industry Outlook 28 Sandoz Ltd. 11 Industry Life Cycle 29 Mylan Inc. 30 Teva Pharmaceutical Industries Ltd. 13 Products and Markets 32 Sun Pharmaceutical Industries Ltd 13 Supply Chain 32 Greenstone LLC 13 Products and Services 15 Demand Determinants 33 Operating Conditions 16 Major Markets 33 Capital Intensity www.ibisworld.com | 1-800-330-3772 | [email protected] WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 2 About this Industry
Industry Definition Generic pharmaceutical and medicine protection, and industry operators are manufacturers develop prescription and not significantly engaged in the research over-the-counter drug products that are and development of new drugs. The used to prevent or treat illnesses in industry does not include manufacturers humans or animals. Generic drugs are of nutritional supplements or cosmetic produced and distributed without patent beauty products.
Main Activities The primary activities of this industry are Developing and producing generic drugs Marketing and distributing generic drugs Gaining regulatory approval for generic drugs
The major products and services in this industry are Antibacterials Cardiovascular disease Diabetes Mental health and central nervous system Pain Other
Similar Industries 32541a Brand Name Pharmaceutical Manufacturing in the US This industry develops drugs that are protected by patent. Companies invest significantly in research and development.
32562 Cosmetic & Beauty Products Manufacturing in the US This industry develops perfumes, shaving preparations, hair preparations, face creams, lotions (including sunscreens) and other cosmetic preparations.
42421 Drug, Cosmetic & Toiletry Wholesaling in the US These wholesalers sell medical and pharmaceutical products to hospitals and private medical practices, supermarkets, mass merchandisers and pharmacies.
44611 Pharmacies & Drug Stores in the US Pharmacies and drug stores retail medicines and drugs to consumers.
54171 Scientific Research & Development in the US Companies in this industry conduct research and development in the physical, engineering or life sciences.
NN001 Biotechnology in the US Biotechnology applies science and technology to living organisms to alter living or nonliving materials for the purpose of knowledge and to produce biotechnology products and services.
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 3
About this Industry
Additional Resources For additional information on this industry www.ama-assn.org American Medical Association www.apha.org American Public Health Association www.accessiblemeds.org Association for Accessible Medicines www.iqvia.com IQVIA www.nih.gov National Institutes of Health www.webmd.com WebMD
IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 4 Industry at a Glance Generic Pharmaceutical Manufacturing in 2019
Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24 Snapshot $64.5bn 1.4% 2.3% Profit Exports Businesses $7.8bn $13.6bn 1,135
Revenue vs. employment growth Federal funding for medicare and medicaid Market Share Sandoz Ltd. 15 15 5.8% 10 10 Mylan Inc. 5 5.0% 5 0
Teva % change % change 0 Pharmaceutical -5 Industries Ltd. -5 -10 3.3% Year 11 13 15 17 19 21 23 25 Year 12 14 16 18 20 22 24 Revenue Employment SOURCE: WWW.IBISWORLD.COM p. 28 Products and services segmentation (2019) 5.6% Antibacterials Key External Drivers 7.3% Federal funding for Diabetes Medicare and Medicaid Number of people with 36.1% 10.0% Cardiovascular disease private health insurance Pain Research and development expenditure Trade-weighted index Median age of population 14.7% Mental health and central nervous system
p. 5 26.3% Other SOURCE: WWW.IBISWORLD.COM
Industry Structure Life Cycle Stage Mature Regulation Level Heavy Revenue Volatility Medium Technology Change High Capital Intensity Medium Barriers to Entry High Industry Assistance Medium Industry Globalization High Concentration Level Low Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 39
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 5 Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
Executive Summary The Generic Pharmaceutical for new product development enticed Manufacturing industry is expanding at a new entrants to the industry over the past steady pace, with revenue expected to five years. Some of this growth represents increase at an annualized rate of 1.4% to brand name pharmaceutical companies $64.5 billion over the five years to 2019, entering the generics industry in an including a 3.0% rise in 2019 alone. attempt to maintain market share as Increasing access to health insurance, their key blockbuster products lose rising total health expenditure and efforts patent protection. to control prescription medication costs Over the five years to 2024, generic benefited generic manufacturers. The manufacturers are expected to lobby for increasing use of generic and biosimilar policies that encourage cost savings and products has already resulted in trillions access to affordable medicines. of dollars in savings for employers, health Furthermore, as a growing number of plans, patients and the government, patents are set to expire over the coming years, generic manufacturers are expected to have robust product High profitability and increased opportunities pipelines. As of 2013, there were more for new product development enticed new than 900 biologics targeting an estimated 100 diseases under development in the entrants to the industry over the past five years United States, according to the Biosimilar Council. IBISWorld expects these trends according to the Association for to continue over the next five years, with Accessible Medicines. Increasing price revenue slated to grow an annualized scrutiny of branded prescriptions has 2.3% to reach $72.3 billion over the five enabled generic manufacturers to take years to 2024. During the outlook period, advantage of pricing pressures and generic operators are expected to explore improve patient access to medicine. new product lines, including biosimilars, While operators in this industry and expand into new and emerging typically have slimmer profit margins markets where consumers can only afford compared with companies in the Brand generics. Domestically, the increasingly Name Pharmaceutical Manufacturers insured population will likely further industry (IBISWorld report 32541a), benefit the industry through expanded average profit margins for the industry insurance coverage for prescription are relatively high and have remained drugs, an improved generic drug stable over the five years to 2019. High approval process and an established profitability and increased opportunities approval pathway for biosimilars.
Key External Drivers Federal funding for Medicare representing a potential opportunity for and Medicaid the industry. When Medicare and Medicaid receive more funding from the US government, Number of people with more consumers gain prescription drug private health insurance coverage, making them better able to Prescription drug coverage through afford the industry’s products and private health insurance reduces the increasing industry demand. Federal out-of-pocket costs of pharmaceuticals funding for Medicare and Medicaid is and can increase demand. However, as expected to increase in 2019, more consumers qualify for private
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Industry Performance
Key External Drivers health insurance, these organizations against the currencies of its major trading continued gain greater negotiating power on drug partners. An increase in the TWI prices, which can hurt industry profit. indicates that the dollar is appreciating Private health insurance coverage is relative to those currencies, making expected to increase in 2019. industry exports relatively more expensive in foreign markets, causing Research and development expenditure international demand for US-made Government and private policies that products to decline. The TWI is expected encourage research and development to increase in 2019, posing a potential (R&D) of new medicines ultimately threat to the industry. benefit generic drug manufacturers because R&D is necessary for generic Median age of population drug development. Moreover, R&D According to the Agency for Healthcare efforts that create new brand name drugs Research and Quality, more than eventually drive downstream demand for 90.0% of seniors and 58.0% of generics as patents expire. In 2019, total nonelderly adults rely on regular R&D expenditure is expected to increase. prescription medication. As the population ages, more people demand Trade-weighted index industry products. The median age of The trade-weighted index (TWI) the population is expected to increase measures the strength of the US dollar slightly in 2019.
Federal funding for Medicare and Medicaid Number of people with private health insurance 15 4
10 3
5 2
0 1 % change % change
-5 0
-10 -1 Year 12 14 16 18 20 22 24 Year 12 14 16 18 20 22 24
SOURCE: WWW.IBISWORLD.COM
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 7
Industry Performance
The Generic Pharmaceutical Current Manufacturing industry has expanded Industry revenue steadily over the five years to 2019. Performance 12 According to data from IQVIA, generic drug spending in the United States 9
increased $7.9 billion in 2015, partly 6 driven by the launch of generic celecoxib and valsartan in 2014. Since then, generic 3
operators have benefited from the patent % change 0 expiration of several blockbuster drugs, including Pfizer Inc.’s Viagra and Lyrica, -3 among many others. Over the five years -6 to 2019, industry revenue is expected to Year 11 13 15 17 19 21 23 25 increase an annualized 1.4% to $64.5 billion, including 3.0% growth in 2019, as SOURCE: WWW.IBISWORLD.COM generic manufacturers continue to benefit from branded drugs losing their interest and taxes, for an industry patent exclusivity, as well as help from operator is expected to reach 12.1% of the US Food and Drug Administration revenue in 2019, down slightly from (FDA). However, the average profit 12.7% in 2014, as increased competition margin, measured as earnings before continues to drive down profit margins.
Brand name and According to the FDA, generic drugs are channeled resources into generics generic any pharmaceutical preparation that is development, namely biosimilar product identical to a brand name drug in dosage development (drugs developed from organic form, safety, strength, route of origins such as antibodies). Moreover, administration, quality, performance Novartis, which owns major player Sandoz characteristics and intended use. Until Ltd., allocated 19.0% of its total revenue in recently, manufacturers of generic and 2018 toward R&D, although this figure branded drugs operated in two different includes both brand name and generic worlds, driven by separate research and pharmaceutical R&D expenses. development (R&D) efforts. Generic Brand name manufacturers are companies tend to invest relatively little entering the Generic Pharmaceutical in R&D compared with branded Manufacturing industry for two main companies because generic drug makers reasons. Firstly, many branded only needing to demonstrate that their companies lost major patents over the product is bioequivalent to brand name past five years and were forced to decide drugs. However, since Novartis between keeping volumes of expired International AG (Novartis), a major patent drugs and divesting them. player in the Brand Name Additionally, some of these companies Pharmaceutical Manufacturing industry manufacture generic forms of their own (IBISWorld report 32541a), entered the brand name drugs at a lower price to generics market a decade ago, the R&D maintain market share. Secondly, spending gap between the branded and emerging markets have increasingly generic industries has become become a reliable source of increasingly narrow as many brand name pharmaceutical company revenue and companies, such as Pfizer Inc., have generics provide an affordable entry into
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Industry Performance
Brand name and these markets. As brand name solely on their brand name operations. generic continued manufacturers have expanded into the For example, in 2016, Allergan PLC’s industry in recent years, several global generics business, Actavis, industry companies have taken the divested and sold its generics segment opposite path. Some pharmaceutical to Teva Pharmaceutical Industries Ltd. manufacturers have divested their (Teva) for $33.4 billion in cash and generic operations altogether to focus 100.0 million shares of Teva stock.
New opportunities Over the past five years, growing demand for generic pharmaceuticals and Emerging markets offer the affordable prescriptions encouraged new industry another kind of operators to enter the industry. As a result, during the current period, the new opportunity number of industry enterprises is expected to increase an annualized 2.5% manufacturers have capitalized on to 1,135 companies, many of which are negative press involving rising drug increasingly focused on producing prices, particularly insulin which is generic biologic drugs, known as heavily used in diabetic patients. biosimilars. While traditional Emerging markets offer the industry pharmaceuticals are developed and another kind of new opportunity. Most produced through chemical processes, industry operators are pursuing new biosimilars are produced with substances consumer bases in markets in eastern made from living organisms or processes Europe, Asia and Latin America, where that generally involve recombinant DNA consumers typically cannot afford technologies. The degree of technical skill expensive brand name drugs and tend to required to engineer and produce pay out-of-pocket for their medicines. In biosimilars has driven many industry some emerging markets, where the fear of companies to hire highly paid and counterfeit or low-quality drugs runs high, educated bioengineers; consequently, consumers are willing to pay a premium for employment is expected to rise at an generics from well-known makers such as annualized rate of 1.7% to 71,281 Teva and Mylan Inc. As a result, exports employees during the current period. are estimated to continue being a large Though the path to manufacturing source of revenue at $13.6 billion in 2019 biosimilars has been difficult and despite decreasing slightly at an annualized expensive, many players have entered rate of 0.4% during the five-year period to this market because biosimilars can 2019. Comparatively, imports have also command higher prices than traditional increased as more pharmaceutical small-molecule chemical drugs, manufacturers set up production providing an opportunity for companies operations abroad; over the five years to to boost their profit margins. On a more 2019, imports are expected to grow at an traditional front, some generic annualized rate of 5.1% to $32.9 billion.
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Industry Performance
The Generic Pharmaceutical internal competition is expected to pose Industry Manufacturing industry is forecast to a challenge for operators. The total Outlook continue growing over the five years to number of industry enterprises is 2024, with revenue expected to increase projected to rise as expected patent an annualized 2.3% to reach $72.3 expirations expand generic product billion. Although the rapidly aging pipelines and entice new operators to population, increasing prevalence of enter the industry. Still, many major chronic illness and growing pressure biologic products are scheduled to lose from insurance companies to cut patent protection over the next five healthcare costs will likely benefit the years, providing an opportunity for industry, intensifying external and operators to produce biosimilars.
Consumer preference for generic drugs Research and development will likely continue to increase over the Revenue is projected to grow five years to 2024, particularly due to as patent expirations provide some significant patent expirations that additional opportunities for have occurred recently. Popular drugs, including Abilify (used to treat generic product manufacturers schizophrenia and bipolar disorders), Copaxone (multiple sclerosis) and in some therapeutic areas due to Crestor (blood pressure, cholesterol and shareholder pressure to increase heart disease), lost patent protection in dividends and competitive pressures 2015 and 2016; accordingly, industry from generics. For example, many revenue is expected to grow as these pharmaceutical giants have placed their patent expirations provide additional antibiotic and antiviral assets under opportunities for generic product review. In addition, many brand name manufacturers. More recently, the operators have shifted R&D expenditures expiration of patent protection for to rare diseases or specialty drugs that blockbuster drugs such as Viagra and carry Orphan Drug Exclusivity and Lyrica has also presented opportunities longer patent protection than standard for generic manufacturers. pharmaceuticals. While slowing drug Major brand name pharmaceutical development in blockbuster drugs may manufacturers, such as Pfizer Inc., Merck reduce the number of new generic and Company Inc. and AstraZeneca PLC, options in the long run, in the short to are expected to continue to reduce medium term, generic manufacturers are research and development (R&D) expected to benefit from a wave of expenditures during the outlook period blockbuster patent expirations.
Biosimilars In addition, the increasing prevalence of are generally more commercially biologic products in brand name R&D successful and are expected to account pipelines is expected to provide for a larger share of industry products opportunities for industry operators, over the next five years. According to which then create biosimilars of biologics EvaluatePharma, the global sales that have been approved by the US Food contribution from biologic drugs is and Drug Administration. These drugs forecast to jump from 23.0% in 2014 to
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Industry Performance
Biosimilars continued 27.0% in 2020. As a result, the versions. Many major biologic drugs, biosimilars market is expected to further including Lantus, Novolog, Rituxan and expand over the next five years. This Remicade, are scheduled to lose patent market will likely attract specialists and protection over the next few years. large pharmaceutical companies with Consequently, biosimilars will be a expertise in biologic products seeking to long-term investment as the market develop slightly differentiated generic continues to expand.
Industry landscape Emerging markets, such as India and Brazil, represent an important source of Emerging markets future business for the industry. represent an important According to IQVIA, emerging markets source of future business are anticipated to experience double-digit growth over the next five years. The for the industry affordability of medicines is one of the many barriers preventing people from to stagnate at an annualized rate of 2.0% accessing healthcare in these countries; to $36.4 billion. therefore, generics generally perform Over the five years to 2024, IBISWorld better than brand name drugs. As a expects the number of industry result, more brand name manufacturers enterprises to increase an annualized are anticipated to acquire generic drug 2.4% to 1,281 companies. This trend can companies to gain better access to be attributed to companies such as brand emerging economies over the coming name manufacturers that produce years. In terms of international trade, biosimilars entering the industry due to exports are forecast to increase at an its high profit margins. Enterprises will annualized rate of 2.5% to $15.4 billion likely continue to grow as pharmaceutical over the five years to 2024. Any changes manufacturing derives a greater in the value of the US dollar are expected proportion of total revenue from generic to be offset by more industry operators drugs rather than brand name drugs. offering specialized drugs, such as Employment is anticipated to grow as biosimilars. During the same period, the well, rising at an annualized rate of 2.2% number of industry imports is anticipated to 79,324 workers during the same period.
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Industry Performance Life Cycle Stage Industry value added is growing at a pace comparable to GDP growth The number of industry participants is expected to steadily increase The development of new generics is increasing the industry’s share of the overall pharmaceuticals market
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Industry Performance
Industry Life Cycle Over the 10 years to 2024, industry demand for generics to grow, driving value added, which measures the increased industry sales and further Generic Pharmaceutical Manufacturing bolstering the value that the industry This industry industry’s contribution to the economy, adds to the overall US economy. In this is Mature is anticipated to increase at an way, industry expertise combined with annualized rate of 1.3%. During the patent expiration for brand name drugs same period, US GDP is projected to rise is not only enabling the creation of new at an annualized rate of 2.2%. This industry product offerings but is also steadily growing contribution relative to creating a broader market for industry the national economy is a signifier that products. As the market expands, the the industry is in the mature phase of its development of new products and new growth cycle. product lines (such as biosimilars) will Still, industry companies are rapidly provide opportunities for new companies growing in size and gaining the expertise to enter this industry. As a result, to introduce new products at a IBISWorld expects the total number of progressively faster rate. As more patents industry enterprises to grow an based on brand name pharmaceuticals annualized 2.5% to 1,281 companies over and medicines expire, IBISWorld expects the 10 years to 2024.
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Supply Chain KEY BUYING INDUSTRIES 42421 Drug, Cosmetic & Toiletry Wholesaling in the US Wholesalers distribute pharmaceuticals and medicines produced by the industry to retailers and healthcare providers. 44511 Supermarkets & Grocery Stores in the US Supermarkets and grocery stores account for a small percentage of final retail sales of certain industry products. 44611 Pharmacies & Drug Stores in the US Pharmacies and drug stores are key retailers of industry products. 62211 Hospitals in the US Hospitals are significant end users of medicines and pharmaceuticals.
KEY SELLING INDUSTRIES 32561 Soap & Cleaning Compound Manufacturing in the US Surfactants produced by the Soap and Cleaning Compound Manufacturing industry are used in the manufacture of pharmaceuticals. 32599 Chemical Product Manufacturing in the US Organic and nonorganic compounds, including various solvents, are used in the manufacture of various industry products. 33451a Navigational Instrument Manufacturing in the US Laboratory analytical instruments are used in the development, testing and analysis of industry products. 33451b Medical Device Manufacturing in the US Laboratory analytical instruments are used in the development, testing and analysis of industry products. 33911a Medical Instrument & Supply Manufacturing in the US Medical devices and instruments are used in the development and testing of pharmaceuticals and medicines. NN001 Biotechnology in the US Advances in biotechnology are transforming drug discovery and development. Bioinformatics, a branch of biotechnology using information technologies to work with biological data like DNA, is a particularly dynamic new area of work.
Products and Services Cardiovascular disease prevent clots (anticoagulants). In 2019, cardiovascular disease (CVD) Depending on the specific condition a associated medication is expected to patient has, a doctor may prescribe any make up the largest share of total revenue combination of these drugs to manage for the Generic Pharmaceutical risk associated with CVD. Many of these Manufacturing industry at 36.1%. medications must be taken regularly, as According to the Centers for Disease enabling cholesterol to rise without Control and Prevention (CDC), in 2017, taking an anticoagulant greatly increases heart disease is the leading cause of death the risk of a blockage in the heart in the United States (latest data resulting in a heart attack. Additionally, available). Medication associated with according to IQVIA, savings from generic CVD comprise of the drugs that either usage of medications in this segment are lower blood pressure (antihypertensive), estimated to total $71.0 billion in 2017 reduce cholesterol (lipid regulators) and (latest data available). Over the next five
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Products & Markets
Products and Services Products and services segmentation (2019) continued 5.6% Antibacterials 7.3% Diabetes 10.0% Pain 36.1% 14.7% Cardiovascular disease Mental health and central nervous system
26.3% Other Total $64.5bn SOURCE: WWW.IBISWORLD.COM
years, demand for CVD drugs is expected Pain to rise as the population of 65 and older Pain medications is expected to account increases, which make up the largest for 10.0% of total revenue in 2019. While patient population for this medication. the burgeoning population has supported demand for pain medications, growing Mental health and central wariness of the potential misuse of pain nervous system medications will likely limit patient This segment accounts for 14.7% of total accessibility over the next five years. industry revenue in 2019. Demand for According to the National Institute on mental health pharmaceuticals has been Drug Abuse, of the 8.8 million people robust over the past five years, particularly that abused a prescription medication, due to several antidepressants losing 5.1 million people abused painkillers. patent exclusivity in recent years, including Pain medication in particular opioids, are Pristiq. According to the National Institute expected to decline as a share of revenue of Mental Health, mental health over the next five years as recent news is encompasses any mental, behavioral or causing drug manufacturers and doctors emotional disorder. Moreover, more than to find new ways to treat pain. 18.0% of all US adults have a mental illness. While the prevalence of mental Antibacterials illness has been high in the United States, In 2019, antibacterials are expected to social stigma related to receiving treatment make up 5.6% of industry revenue. has constrained demand. Antibiotics include doctor prescription Additionally, nervous system disorders pills, over the counter topical creams include vascular disorders (e.g. stroke), and hospital administered intravenous infections (e.g. meningitis), structural drugs. Antibiotics have become a large disorders (e.g. brain or spinal cord topic of debate globally as the misuse tumors), functional disorders (e.g. and consequentially rise of resistant epilepsy) and degeneration (e.g. “superbugs”, or bacteria and other Parkinson’s disease and multiple microorganisms increasingly become sclerosis). These diseases make up a tolerant to stronger medications. smaller share of this segment as they are Over-prescription of antibiotics in cases less common in the United States. where they are not needed are a large
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Products & Markets
Products and Services source of rising resistance. However, been robust and expected to rise over continued this segment is expected to increase as the next five years. these drugs still save countless lives from deadly infections. Other This other category accounts for the Diabetes remaining 26.2% of industry revenue and Drugs associated with the management includes drugs in therapy areas such as of diabetes generated 7.3% of total anti-ulcer, dermatology, ophthalmology, revenue in 2019. Diabetes affects nearly vaccines, respiratory, gastrointestinal 10.0% of individuals in the United diseases and others. Drugs in this States, according to data from the segment are not used as regularly as American Diabetes Association; other segments as the diseases the treat therefore, demand for antidiabetics has are generally transient.
Demand Socioeconomic and demographic factors, Similarly, the level of insurance affects Determinants including levels of disease and chronic purchases; for example, insured illness rates, government health policies, consumers choose more expensive drugs pharmaceutical prices, doctors’ than those without insurance. In this prescribing patterns and consumer regard, as insurance coverage increases, utilization rates determine demand for consumers may be less encouraged to generic pharmaceuticals. Factors that purchase generic drugs. contribute to generic drug use, opposed Patent expiration for brand name to brand name pharmaceuticals, include drugs also drives demand for generics. the amount that consumers have to pay Patent expirations have an immediate out-of-pocket for healthcare, the prices of effect because brand name drugs tend to brand name drugs, population quickly lose market share once generic demographics and the rate of patent versions are on the market. However, expirations. For example, IBISWorld generic entry is often delayed because of expects the portion of the population that litigation and administrative issues, such is older than 65 years old to increase over as citizen petitions. According to the the five years, which may drive demand Generic Pharmaceutical Association’s for the Generic Pharmaceutical (GPhA) 2017 Generic Drug Savings in the Manufacturing industry’s products US Report, generic drugs result in because older people generally require significant cost savings for the healthcare more healthcare and have particular system compared with brand name drug access to generics through Medicare. use, though savings vary by the generic Insurance plays a significant role in drug’s therapeutic class. For example, determining demand for generic generic mental health drugs saved the prescription drugs. By implementing healthcare system $44.0 billion in 2016 drug cost sharing plans and other forms followed by hypertension ($29.0 of coverage, insurers enable individuals billion); cholesterol ($28.0 billion); within their network to access more antiulcerants ($22.0 billion); nervous pharmaceuticals, boosting prescription system disorders ($16.0 billion) and drug utilization rates. For example, pain ($13.0 billion dollars), among revenue rises when insured individuals other generic pharmaceuticals. In total, fill prescriptions that they would have GPhA estimates that generics have forgone if they lacked insurance. saved the US healthcare system almost
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Products & Markets
Demand $2 trillion over the last decade (latest years, boosting potential growth Determinants data available). opportunities for biosimilars. This continued As brand name drug patent expirations represents an opportunity for the have occurred during the five-year biosimilar industry to generate revenue period, this trend has bolstered demand because biologics will experience a patent for generics. Additionally, biologics will cliff similar to brand name lose patent protection over the coming pharmaceuticals over the next five years.
Major Markets Major market segmentation (2019) 7.6% Out-of-pocket expenses 14.7% Medicaid 50.2% Third-party payers
27.5% Medicare
Total $64.5bn SOURCE: WWW.IBISWORLD.COM
According to the latest available data being a lower cost option compared with from IQVIA, 30.7% of total brand name pharmaceuticals. According pharmaceutical sales are derived from to data from the Generic Drug Savings in chain/mass merchandisers, followed by the US Report by the Generic mail service pharmacies (23.4%), clinics Pharmaceutical Association (GPhA), (14.0%), independent pharmacies generic drugs have the potential to save (11.1%), hospitals (7.6%), food stores the healthcare system a substantial (6.6%), long-term care providers (3.7%), amount, with cost savings specifically HMO (1.2%) home healthcare providers occurring within certain therapeutic (0.9%) and others (%). However, this classes, such as mental health, breakdown reflects the dispensing hypertension, cholesterol and pain drugs. locations of both brand name and generic Over the next five years, this market pharmaceutical prescriptions. segment is expected to grow.
Third-party payers Medicare In 2019, third-party payers make up the Medicare reimbursements are estimated largest share of revenue for the Generic to account for an estimated 27.5% of total Pharmaceutical Manufacturing industry, revenue. According to a 2017 report from with 50.2% of total revenue. Many the GPhA, Medicare saved $82.7 billion third-party payers have increasingly in costs from beneficiaries’ using generic implemented initiatives to increase drugs in 2014, with this figure being $1,952 generic drug utilization rates, due to it per capita on average. As the number of
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Products & Markets
Major Markets Medicare beneficiaries grows in line with over the past five years. However, continued the burgeoning elderly population, cost- according to data from the Henry J. cutting initiatives will become increasingly Kaiser Family Foundation, prescription imperative to providing coverage. As a drugs only comprise about 5.0% of total result, federal and state-level initiatives to Medicaid spending, meaning that bolster generic drug utilization rates will cost-cutting initiatives (such as likely occur over the next five years, bolstering generic utilization rates and spurring demand for this market lowering demand for brand name segment. Overall, according to data from drugs) was not particularly imperative Express Scripts’ Drug Trend Report, to cut costs over the past five years. Medicare beneficiaries are likely to use However, this is expected to change drugs in the following therapeutic over the next five years, thus increasing classes, including oncology, multiple demand for generic pharmaceuticals sclerosis and hepatitis C. from this market segment.
Medicaid Out-of-pocket expenses Medicaid reimbursements account for Out-of-pocket expenditures generate 14.7% of total revenue. Medicaid generic 7.6% of total revenue. Over the past five drug use is expected to save $568 per years, generic drug prices, on average, beneficiary on average, according to data have risen, causing consumers to incur from GPhA. As healthcare reform has higher out-of-pocket costs. However, expanded the number of individuals government initiatives to lower generic that are eligible for Medicaid drug pricing over the next five years may reimbursements, such as childless help lower generic drug prices, thus adults, this has spurred Medicaid lowering patients’ out-of-pocket costs beneficiaries’ share of industry revenue and increasing demand.
International Trade Imports The Federal Food, Drug and Cosmetic Industry trade balance Act prohibits the interstate shipment of Level & Trend 20 unapproved new drugs. Therefore, the Exports in the importation of new drugs that lack US 10 industry are High Food and Drug Administration (FDA) 0 and Steady approval, whether for personal use or otherwise, violates this act. The FDA also -10 Imports in the restricts the re-importation of drugs $ billion -20 industry are High produced by US manufacturers and sold and Increasing elsewhere. In response to increasing -30 prescription drug costs, more US patients -40 are importing less-expensive Year 11 13 15 17 19 21 23 25 pharmaceutical products from other Exports Imports Balance countries. Large-scale prescription drug SOURCE: WWW.IBISWORLD.COM importation is currently illegal, but the FDA permits individuals to bring in the United States, and key active 90-day supplies of drugs for personal ingredients are required to be produced use. Additionally, generic medications within FDA-approved international sites. are often not completely manufactured in Importation from approved sites outside
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Products & Markets
International Trade of the United States may include of 5.1% to $32.9 billion over the five years continued importation of only the active ingredient, to 2019, bolstered by the increase in the with the final product manufactured in trade weighted index, making imports the United States, or the importation of relatively more affordable. The escalation the total final product from a site outside of imported drugs has contributed to a of the United States that is from an continuing debate among federal approved or unapproved source. legislators regarding the full legalization Unapproved sources have no FDA of importation. oversight; therefore, importation of that generic product is illegal. Exports An over-the-counter (OTC) drug is a Historically, the US government and product marketed for use by the consumer brand name pharmaceutical companies without a prescription. An OTC drug can opposed efforts by the United Nations, be imported into the United States under the World Health Organization and the an approved new drug application, an World Trade Organization (WTO) to approved abbreviated new drug permit the export of generic drugs to application or in compliance with an OTC poor nations for global health monograph. Currently, there are still emergencies, such as AIDS and several categories of OTC drug products tuberculosis. This is a politically sensitive that are not subject to final regulations. topic because as a consequence of Imports for the Generic restricted exports, lifesaving AIDS drugs, Pharmaceutical Manufacturing industry which can cost as much as $15,000 per are expected to account for 39.3% of year in the United States, remained out of domestic demand in 2019. Imports are reach for most patients in the developing expected to increase at an annualized rate world. However, in August 2003, the
Exports To ... Imports From ... 5.9% India 10.9% 7.4% Switzerland Italy 7.6% Canada 7.6% 11.4% Belgium Germany 43.7% Other 7.6% Netherlands
69.8% Other 28.1% Ireland
Year: 2018 Total $13.6bn Total $32.9bn SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 19
Products & Markets
International Trade WTO agreed to relax patent restrictions making them less likely to be resold in continued to permit low-cost producers to export the United States. Over the five years generic versions of brand name to 2019, industry exports are expected medicines to impoverished nations. to decrease an annualized 0.4% to Only poor countries that cannot $13.6 billion, generating 21.1% of manufacture these medicines themselves industry revenue. This decline in are permitted to import the generic exports is most likely a response to the drugs. The agreement also stipulates increase in the trade weighted index, that special packaging or differently resulting in a comparatively more colored tablets are to be used for expensive product being shipped generics intended for poor countries, outside the United States.
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Products & Markets
Business Locations 2019
est AK 0.0 e a d
ME reat M d 0.9 akes t a t c 1 2 NY 3 WA ND 6.3 4 MT 0.1 5 2.0 0.4 MN 2.1 WI ock 2.7 MI PA 6 SDP a s 2.3 4.0 OR 0.1 7 1.4 Mou ta s ID IA OH 9 8 0.5 WY 1.3 2.0 0.3 IN VA NE IL 1.5 WV 1.0 3.0 0.2 1.2 KY est NV 0.8 0.8 NC UT MO 3.5 2.5 CO KS 2.5 2.9 1.2 TN 0.8 SC CA 1.2 17.5 OK AR out east 0.8 0.6 GA AL 1.8 AZ MS 0.7 1.7 NM 0.5 0.5 out est LA TX 0.5 FL 4.9 5.7
est Establishments (%) HI Less than 3% 0.1 Additional States (as marked on map) 3% to less than 10% 1 VT 2 NH 3 MA 4 RI 10% to less than 20% 0.3 0.5 3.8 0.4 20% or more 5 CT 6 NJ 7 DE 8 MD 9 DC 1.0 6.5 0.6 2.2 0.1
SOURCE: WWW.IBISWORLD.COM
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 21
Products & Markets
The West and Mid-Atlantic regions are Business Locations Distribution of establishments vs. population the most prolific pharmaceutical and drug manufacturing regions in the United 30 States, accounting for 21.9% and 19.6% of the Generic Pharmaceutical
Manufacturing industry’s establishments, 20 respectively. Mylan Inc., Greenstone and
Par Pharmaceutical are located in the % Mid-Atlantic, which significantly boosts 10 industry revenue in this region. California, home to several small generic drug manufacturers, is another 0 significant center of industry activity. West Locating near other industry Plains Southeast manufacturers enables companies to Southwest Great Lakes Mid-Atlantic have access to a local specialized work New England
force, experienced business services and Establishments Rocky Mountains access to highly specialized facilities. Population Moreover, industry establishments are SOURCE: WWW.IBISWORLD.COM typically prevalent in highly populated areas. Although the company’s major Florida is also representative of downstream customers (wholesalers) are industry location trends in that is not always headquartered in populated located in the Southeast, which areas, their sales branches are often accounts for 17.4% of establishments located in the highly populated areas that and represents the region that is home are home to retail customers (such as to the largest portion of the elderly pharmacies in hospitals and grocery population in the United States. stores). Manufacturers similarly prefer to According to US Census Bureau data, be located proximate to their the Southeast region accounts for downstream customers to keep 24.7% of the total population that is distribution costs low. California is home aged 65 years and older. The Southeast to 17.5% of industry establishments as consequently generates more industry well as 12.2% of the US population. revenue than any other region, largely Industry establishments are similarly because the elderly population concentrated in population hubs like New requires more healthcare than other Jersey (6.5%), New York (6.3%), Florida age populations and, subsequently, (5.7%) and Texas (4.9%). more pharmaceuticals.
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 22 Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
Market Share The Generic Pharmaceutical pharmaceuticals sector with modest Concentration Manufacturing industry exhibits a growth rates and little or no comparatively low level of market international business. As these concentration as compared with the companies grew, often by acquisition, Level Brand Name Pharmaceutical they have developed a need to Concentration in Manufacturing industry (IBISWorld consolidate, particularly because generic this industry is Low report 32541a). In 2019, the top three biologics (biosimilars) are becoming an companies account for 14.1% of total increasingly large component of industry revenue. Having a large industry revenue and these products are operation as a generic manufacturer does typically costly and difficult to produce. not offer the same advantages as it does Over the five years to 2019, major for brand name producers. Generic drug players have expanded their operations manufacturers can be smaller because through acquisitions or partnerships. the cost of research and development Mergers and acquisitions can increase a (R&D) is significantly lower than it is for company’s geographical reach and brand name companies; however, product portfolio diversification. Mylan operators can still benefit from NV (Mylan), for example, grew a global economies of scale through savings on presence by developing a presence in administrative and capital costs. Germany, Spain, Italy, Australia and Moreover, a company’s presence in both Japan. Although foreign acquisitions generic and brand drug markets can may not directly contribute to US buffer company revenue against revenue, industry players are able to volatility in price or demand for any one access the acquired company’s R&D specific drug. team and can leverage this newfound In the past, industry companies were knowledge into the development of typically small players in the products for the US market.
Key Success Factors Control of distribution arrangements exclusivity for being the first generic Pharmaceutical distribution is highly applicant to challenge a patent. complex and fragmented. Manufacturers Companies must actively review patents IBISWorld identifies seek to influence distribution to monitor and produce generic versions. 250 Key Success pricing, control quality and manage Factors for a end-user data. Control of ingredient development business. The most Companies that control or own important for this Undertaking generic pharmaceutical pharmaceutical production gain early and medicine research and development access to high-quality active industry are: Improving generic R&D capabilities and pharmaceutical ingredients and can production capacity, with a focus on improve profitability and further enhance capturing high-value, first-to-market R&D capabilities. opportunities in key markets, can enhance a company’s market position. Degree of globalization As the pharmaceutical industry becomes Timely development of new products increasingly global, it is essential for Approval for generic drugs is granted industry players to have access to foreign upon the expiration of patents. markets and manufacturing facilities to Companies may also gain a period of control costs and boost sales.
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Competitive Landscape
Key Success Factors Maintenance of a good reputation negative publicity, or if any of a continued Market perceptions of the safety and company’s products are harmful to quality of industry products are consumers, a company’s reputation important. If a company receives could be harmed.
Cost Structure Operators in the Generic Pharmaceutical brand name pharmaceutical Benchmarks Manufacturing industry have lower research manufacturers typically have higher and development (R&D) costs compared wages than generic pharmaceutical with brand name pharmaceutical manufacturers as a proportion of revenue manufacturers. Companies that manufacture due to the high R&D wage expenses of generic versions of medications do not have brand name manufacturers. While this to incur high R&D expenditures, finance the industry is not as dependent on R&D as drug through clinical trials or implement brand name manufacturers, operators marketing strategies. Due to fewer financial still have to employ a considerable barriers, industry operators are able to number of skilled research personnel. compete with a competitive global market by Chemists, drug researchers and quality selling generic drugs at low prices. control technicians are needed to develop effective generic versions of brand name Wages drugs. The growth of generic biological Wages are estimated to comprise 9.7% of drugs (biosimilars) has also dramatically industry revenue in 2019. In general, increased demand for researchers, who
Sector vs. Industry Costs
Average Costs of all Industries in Industry Costs sector (2019) (2019) 100 6.8 n P r o fi t 12.1 n Wages 11.6 n Purchases 80 9.7 n Depreciation n Marketing n Rent & Utilities n Other 60 30.7 55.1 2.3 1.0 1.0 40 Percentage of revenue Percentage 2.1 0.5 20 2.3 43.2 21.6
0 SOURCE: WWW.IBISWORLD.COM
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 24
Competitive Landscape
Cost Structure can generally demand higher wages due immediate competition once the drug Benchmarks to their expertise. patent expires. continued The average industry profit margin Purchases dipped slightly from 12.7% in 2014, partly Purchases are estimated to account for due to the slowdown in the number of 30.7% of revenue in 2019. High purchase brand name drugs going off of patent costs are mainly the consequence of protection. Declining patent expirations quality requirements, which require will further damage industry profit by industry operators to purchase high- heightening competition within the quality raw materials from reputable generic industry as manufacturers have suppliers. Over the past five years, fewer opportunities to produce more generic companies have reduced costs by generics. However, some industry consolidating and sourcing materials operators have offset this trend by from global suppliers. introducing more specialized drugs to the Inventory costs, restructuring and market, such as biologics. acquisition expenses, and expenditures on property, plants and equipment Depreciation account for a large portion of purchase Due to heavy reliance on manufacturing costs. Costs will be substantially higher for equipment and technology, depreciation companies that engage in acquisitions and is anticipated to account for 2.3% of conduct large-scale operations. As generic industry revenue in 2019. Associated manufacturers focus on producing drug development equipment varies biosimilars, purchase costs will increase. greatly in life span for example, Producing biosimilars is a complex analytical instruments used in the manufacturing process due to the nature determination of drug purity are of extracting or semi-synthesizing routinely replaced by newer more products from organic origins. Slight sensitive instruments. variations in production environments can greatly alter a drugs function, as a Marketing result, operators will have to endure larger Marketing is expected to account for 1.0% purchasing costs associated with the of total revenue in 2019. This percentage required high-end technology. generally remains low as patients do not have a say in most prescriptions they Profit take, drug choice is mainly by price. Profit, measured as earnings before interest and taxes, can vary widely based Rent on a company’s size and product line. The In 2019, rent costs for the industry top companies in this industry can account for 0.4% as many companies opt achieve profit margins close to 20.0%, for more inexpensive real estate to build while most operators have profit margins manufacturing plants, and in some cases that range from between 5.0% and running production in other countries. 10.0%. In 2019, profit is estimated to account for 12.1% of revenue for an Utilities average industry player. Typically, profit Utilities are expected to cost the industry margins for generic drugs are slimmer 0.6% of industry revenue in 2019 and than that of their brand name mainly include water and electricity as counterparts because the drugs are sold well as other services associated with at a lower price than brand name drugs drug manufacturing such as chemical and many generic drugs experience waste disposal.
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Competitive Landscape
Cost Structure Other repeat costly clinical trials, due to brand Benchmarks In 2019, other costs mainly consist of name manufacturers already having continued research and development and associated regulatory approval from the US Food regulations, and account for an and Drug Administration (FDA), more estimated 43.2% of total revenue. While regulatory frameworks for biosimilar generic drug makers do not invest in drug development will likely occur over R&D to the extent that brand name the next five years. For example, the pharmaceutical companies invest in FDA will likely establish regulations for R&D, this is expected to change in line biosimilar drug makers to demonstrate with more industry operators investing that their drug meets safety and efficacy in biosimilar drug development. While requirements, rather than just being industry operators are not required to similar to biologic drugs.
Basis of Competition Competition in the Generic seeking to counter generic products. Pharmaceutical Manufacturing industry is Many brand competitors try to prevent or intensifying as operators vie for a share of delay approval of generic equivalents Level & Trend the generic drug market. Competition in through several tactics, including Competition in the US generic market continues to legislative initiatives (e.g. pediatric this industry is increase, as evidenced by the continued exclusivity), extending patent protection High and the trend price declines due to new entrants. and changing dosage forms or dosing is Increasing Additionally, the US pharmaceutical regimens prior to the expiration of a market is undergoing, and is expected to patent. In addition, brand name continue to undergo, rapid and significant companies will occasionally launch an technological changes. IBISWorld expects authorized generic concurrent with the competition to intensify as technological first generic launch. When this occurs, advances are made. the patent challenger no longer has the A significant proportion of US generic full exclusivity granted by the Hatch- sales are made to a relatively small Waxman Act. number of retail drug chains and drug wholesalers. These customers have been Methods of competition consolidating, which has resulted in Generic manufacturers are customers gaining more purchasing increasingly competing on the basis of power. Consequently, there is heightened price. Price competition from competition among generic drug additional generic versions of the same producers for business. Conversely, this product results in significant reductions trend provides a competitive advantage in sales and margins. To compete on the to large suppliers that are capable of basis of price and remain profitable, a providing cost-efficient quantities of generic drug manufacturer must high-quality products. manufacture its products in a cost- efficient manner. In addition, External competition competitors may develop products more Generic pharmaceutical companies rapidly or complete the regulatory experience intense competition from approval process sooner, enabling them brand name pharmaceutical companies to market products earlier.
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Competitive Landscape
Barriers to Entry Brand name drugs have the benefit of barriers to entry in the form of patent Barriers to Entry checklist protection. Although generic Competition High Level & Trend manufacturers lack such a barrier, there Concentration Low Barriers to Entry are many other barriers to entry such as Life Cycle Stage Mature in this industry regulation requirements and Capital Intensity Medium are High and consolidation in downstream markets. Technology Change High Decreasing Pharmaceutical companies, both generic Regulation and Policy Heavy and brand name, have generally Industry Assistance Medium
maintained high profit levels, indicating that high barriers are keeping new SOURCE: WWW.IBISWORLD.COM producers from entering to take advantage of relatively easy-to-earn cannot be sued for consumer margins. Barriers have been reduced compensation due to generic drug slightly over the five years to 2019, as defects. The court’s 2013 ruling will lower strong growth for the Generic barriers to entry because potential Pharmaceutical Manufacturing industry industry entrants will no longer have to has provided small companies with worry about consumer lawsuits more opportunities to be acquired by minimizing revenue and profit. larger ones. Payers and pharmaceutical Regulation barriers to entry representatives drive market The production of generics is strictly Many industry operators benefit from regulated and companies must adhere to economies of scale; as a result, new stringent goods manufacturing practices companies entering the industry are at a and quality-control standards from the US steep disadvantage due to the relatively Food and Drug Administration (FDA). high costs of production. In the United Gaining government approval for generic States, physicians are responsible for equivalents of brand name drugs may prescribing medicines, but it is largely prove time consuming for new entrants health insurers that influence the end with less experience and a limited product for consumers. This is done reputation. Also, the cost of setting up within the framework of tenders, under production facilities is often high, creating which pharmacists are obligated to a barrier to enter the industry. dispense a discounted generic product if In 2009, the US Supreme Court ruled one is available. Under this framework, that consumers could sue brand name payers are able to pressure prices and manufacturers for compensation due to require high quality generics. This inadequacies in safety-warning labels. requires companies to be able to quickly However, in June 2013, the Supreme produce high volumes at a low Court ruled that generic manufacturers manufacturing cost and high quality.
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Competitive Landscape
Industry The level of globalization in the Generic in examining both generic drugs and Globalization Pharmaceutical Manufacturing industry generic drug suppliers. is high. Several major companies in the Additionally, imported generic industry are based abroad, including the pharmaceuticals are expected to satisfy Level & Trend major player, Mylan Inc. Often, 39.3% of domestic demand in 2019, and Globalization in medications are not completely exports are expected to generate 21.1% of this industry is manufactured in the United States, and total industry revenue. Developed High and the trend key active ingredients are required to be markets (i.e. North America, Western is Increasing produced within international sites Europe and Japan) account for 74.0% of approved by the Food and Drug the total pharmaceuticals market but Administration (FDA). Manufacturing only 44.0% of the generics market. In abroad creates an additional hurdle for contrast, emerging markets (i.e. Eastern manufacturers to sell the drug in US Europe, Latin America and China) markets. Importation from approved account for 26.0% of the total sites outside of the United States may pharmaceuticals market but a hefty include importation of only an active 56.0% of the generics market. This ingredient, with the final product being discrepancy is explained by the positive manufactured in the US, or importation effect on the mix of innovative brands, of the total final product from foreign which are first launched in developed sites that are either approved or countries. The branded nature of generics unapproved sources. Unapproved in emerging markets and their sources have no FDA control oversight; importance for any company seeking to therefore, importation of these generic or grow in these markets, make generics brand name products is illegal. Overall, that are active in emerging markets, as the industry increases its global particularly attractive targets for large presence, the FDA will have a larger role pharmaceutical companies.
International trade is a Trade Globalization Going Global: Generic Pharmaceutical major determinant of Manufacturing 2005–2019 an industry’s level of 200 Export Global 200 Export Global globalization. Exports offer growth opportunities for fi rms. 150 150 However there are legal, economic and political risks 100 100 associated with dealing in Generic foreign countries. Pharmaceutical Exports/Revenue Exports/Revenue 50 50 Import competition can Manufacturing 2005 2019 bring a greater risk for companies as foreign 0 Local Import 0 Local Import producers satisfy domestic 0 40 80 120 160 0 40 80 120 160 demand that local fi rms Imports/Domestic Demand Imports/Domestic Demand would otherwise supply. SOURCE: WWW.IBISWORLD.COM
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 28 Major Companies Sandoz Ltd. | Mylan Inc. Teva Pharmaceutical Industries Ltd. | Other Companies
Major Players (Market Share) Mylan Inc. 5.0% 85.9% Other
Sandoz Ltd. 5.8% Teva Pharmaceutical Industries Ltd. 3.3% SOURCE: WWW.IBISWORLD.COM
Player Performance Sandoz Ltd. (Sandoz) is a business Sandoz specializes in dermatology, division of the Swiss healthcare respiratory, oncology, ophthalmic and conglomerate Novartis AG (Novartis) and other products. In 2016, total revenue for Sandoz Ltd. develops, manufactures and markets Sandoz reached $10.1 billion (latest data Market Share: 5.8% generic medicines, as well as available). The company continues to be a pharmaceutical and biotechnological leader in the differentiated generic drug active ingredients. Until recently, market, meaning that Sandoz develops Novartis operated through three and manufactures drugs that are difficult divisions: innovative medicines, Alcon for competitors to replicate. The and Sandoz. In April 2019, Novartis company’s product mix includes more announced that it completed the spin-off than 1,000 types of medicines, with a of its Alcon unit into a separately traded strong portfolio of biosimilar drugs. entity. In total, Novartis employs over Sandoz’s major products include the 100,000 people and sells products in 155 multiple sclerosis treatment Glatopa, the countries. Sandoz generates revenue inhaler therapy AirFluSal Forspiro and the relevant to the Generic Pharmaceutical pain medication fentanyl. In addition, the Manufacturing through the company joined the biosimilars market in manufacturing of generic 1996 when it began developing generic pharmaceuticals and biosimilars and is biologic drugs. Today, Sandoz is a leading organized into three segments: retail manufacturer of biosimilars worldwide. generics, anti-infectives and Generic chemotherapy agents have biopharmaceuticals. Sandoz’s US been a significant portion of the headquarters is located in Princeton, NJ. company’s portfolio, as many of the
Sandoz Ltd. (US industry-specifi c segment) - fi nancial performance* Revenue Operating Income Year ($ million) (% change) ($ million) (% change) 2014 3,569.8 N/A 758.6 N/A 2015 $3,684.3 3.2 669.3 -11.8 2016 3,578.8 -2.9 609.9 -8.9 2017 3,469.1 -3.1 609.6 0.0 2018 3,335.7 -3.8 525.0 -13.9 2019 3,729.3 11.8 567.0 8.0
*Estimates SOURCE: ANNUAL REPORT
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 29
Major Companies
Player Performance brand name pharmaceutical agents lost relatively large size insulates it from continued exclusivity by 2015. In 2016, the company some of the volatility in the Generic launched several new industry-relevant Pharmaceutical Manufacturing products in the United States, including industry. Additionally, Novartis enables generic versions of Adderall XR, Zyvox, Sandoz to avoid volatility while Nasonex, Nexium and others. In the providing backing for investment in company’s retail generic segment, major further acquisitions and potentially product lines include generic versions of high-risk ventures such as biosimilars. amoxicillin, zoledronic acid and fentanyl. Over the five years to 2019, biopharmaceutical sales are expected to Financial performance grow an annualized 0.9% to $3.7 billion In July 2013, Sandoz voluntarily recalled as strong US launches of Glatopa, a its generic drug Estarylla due to a multiple sclerosis drug, and Zarxio, customer reporting a placebo tablet which counteracts neutropenia in present with other active tablets in a chemotherapy patients. However, income pack, hurting industry-specific revenue. was offset by declining performance in However, the company’s other generic other areas of Sandoz’s portfolio. As a versions launched that same year, result, operating income for Sandoz’s including Metrogel and Atacand, largely industry-specific operations is expected to offset the negative effects of the decline at an annualized rate of 5.7% to Estarylla recall. Luckily, the company’s $567.0 million over the five years to 2019.
Player Performance Mylan Inc. (Mylan), headquartered in Mylan’s generic business segment Canonsburg, PA, is one of the largest operates under its wholly owned generic pharmaceutical manufacturers subsidiary Mylan Pharmaceuticals Inc. Mylan Inc. in the United States, offering products for research, development, Market Share: 5.0% in more than 165 countries and manufacturing, marketing and employing more than 35,000 distribution. Overall, Mylan markets employees globally. The company 320 generic products with 790 dosage operates through two business strengths. The company estimates that segments: generics and specialty. one out of every 12 prescriptions
Mylan Inc. (US industry-specifi c segment) - fi nancial performance* Revenue Operating Income Year ($ million) (% change) ($ million) (% change) 2014 2,522.4 N/A 318.4 N/A 2015 2,907.2 15.3 282.2 -11.4 2016 3,208.8 10.4 35.3 -87.5 2017 2,832.7 -11.7 214.8 509.3 2018 2,334.5 -17.6 60.9 -71.6 2019 3,217.9 37.8 85.0 39.4
*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 30
Major Companies
Player Performance dispensed annually in the United States Swedish pharmaceutical manufacturer continued is a Mylan product. The company Meda Aktibloag (Meda). According to operates 50 manufacturing facilities Mylan’s president, the addition of around the world. Meda will provide Mylan with six $1.0 Notably, Mylan is one of the world’s billion franchises. largest producers of active pharmaceutical ingredients (API) used Financial performance for manufacturing generic antiretroviral Mylan’s industry-specific revenue is therapies, a key ingredient in HIV/AIDS estimated to grow at an annualized rate of treatment. By developing a vertically 5.0% to $3.2 billion over the five years to integrated supply chain, Mylan is well 2019. In 2016, Mylan acquired Meda for positioned to enter the biosimilar market $7.2 billion, enhancing Mylan’s over-the- as several blockbuster biologics come off counter drug offerings and expanded its patent over the five years to 2024. Recent market presence in emerging markets acquisitions and partnerships have also including Southeast Asia and the Middle strengthened Mylan’s global market East. Mylan released relatively few generic presence in generics. For example, Mylan products in 2014 but is well-positioned to acquired Agila Specialties Private Ltd. benefit from the nearly $100.0 billion (Agila) from Strides Arcolab Ltd. to worth of branded drugs that will lose become a global leader in generic patent protection over the next few years. injectables. Mylan benefited from Agila’s Moreover, Mylan’s acquisition of Abbott product portfolio and pipeline, enabling Laboratories’ generic pharmaceuticals the company to maximize its generic business in 2015 will likely have a biologics segment. Partnerships have also significant effect on the company’s enabled the company to strategically revenue and operating profit over the grow as a key market player. In 2013, coming years. However, in 2017, the Mylan partnered with Biocon Ltd. to company came under fire for price fixing collaborate on generic versions of insulin and overcharging its EpiPen emergency analog products. In 2016, Mylan made its allergy treatment. In late 2017, Mylan paid largest recent acquisition, purchasing the $465.0 million to settle the lawsuit.
Player Performance Teva Pharmaceutical Industries Ltd. headquarters in North Wales, PA. (Teva) is headquartered in Petah Tikva, According to the company’s most recent Israel, and is the world’s leading annual report, Teva maintains a top- Teva manufacturer of generic drugs. three leadership position in more than 30 Pharmaceutical Additionally, Teva is the leading generic countries worldwide. Industries Ltd. drug manufacturer in the United States, Teva produces proprietary brand name Market Share: 3.3% producing the largest number of generic pharmaceuticals, biopharmaceuticals and drugs in terms of both total prescriptions active pharmaceutical ingredients. and new prescriptions filled. According to Generic drug revenue is primarily driven the company’s data, Teva dispenses by downstream markets, such as drug one-seventh of the 3.4 billion generic store chains, which comprise 41.0% of prescriptions used in the United States. the company’s total generic drug sales. The company’s operational infrastructure Drug wholesalers account for an includes 42,535 employees, additional 36.0% of company revenue, manufacturing and research and followed by managed-care organizations development centers worldwide and a US (12.0%), generic distributors (7.0%) and
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 31
Major Companies
Player Performance government facilities and others (4.0%). authorized generic at the same time, continued Teva is one of the leading generic drug expanding the company’s RespiClick companies in the United States, product line. marketing more than 500 generic prescriptions and over-the-counter Financial performance (OTC) products in more than 2,000 Over the five years to 2019, Teva’s US dosage strengths and packaging sizes, industry-specific revenue is estimated to according to the company’s latest decrease at an annualized rate of 2.5% to available annual report. $2.1 billion. Industry-specific revenue Teva has recently conducted numerous increased 12.8% in 2017 as a result of the acquisitions to develop a global market Actavis acquisition in 2016. However, presence. In 2013, Teva acquired New overall growth in the company’s generic Jersey-based MicroDose Therapeutx Inc., business was hindered due to price a drug-delivery company specializing in erosion/pricing pressures and an inhalation technologies. In 2015, the accelerated US Food and Drug company purchased Auspex Administration approval process for Pharmaceuticals Inc., which will generic versions of certain medicines, strengthen the company’s product resulting in increased competition for those portfolio of central nervous system drugs. products, according to the company’s In 2016, Teva acquired Allergan PLC’s annual report. Still, the company focuses generics business, Actavis Generics, for its research and development (R&D) $40.5 billion. In addition, Teva acquired efforts on expanding its existing generic Allergan PLC’s Anda Inc. business for portfolio. In total, the company has more $500.0 million the same year. These than 1,550 generic products in its major acquisitions are expected to preapproved global pipeline, according to increase the company’s competitive Teva’s latest annual report. These positioning in the generics business for products are expected to improve Teva’s years to come. Most recently, in 2017, the standing as a leader in generic company launched AirDuo and its manufacturing in the years to come.
Teva Pharmaceutical Industries Ltd. (US industry-specifi c segment) - fi nancial performance* Revenue Net Income Year ($ million) (% change) ($ million) (% change) 2014 2,403.1 N/A 468.4 N/A 2015 2,267.4 -5.6 386.7 -17.4 2016 2,502.6 10.4 246.1 -36.4 2017 2,822.0 12.8 -2,204.1 -995.6 2018 2,000.0 -29.1 -173.7 -92.1 2019 2,115.6 5.8 438.8 -352.7
*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 32
Major Companies
Other Company Sun Pharmaceutical Industries Ltd. (Sun the company’s US portfolio. In 2015, the Performance Pharma) is one of the leading specialty company acquired InSite Vision Inc., generic pharmaceutical companies in the strengthening its ophthalmic portfolio in Sun Pharmaceutical US market. Headquartered in Mumbai, the United States. Most recently, Sun India, the company employs more than Pharma acquired the global rights for Industries Ltd 30,000 employees worldwide and Seciera and Odomzo, expanding the Market Share: 2.0% operates 42 manufacturing facilities company’s specialty pipeline globally. globally. Sun Pharma is India’s top Sun Pharma operates seven pharmaceutical company, holding 30 manufacturing facilities in the United brands of the country’s top 300 brands, States that are focused on producing according to the company’s most recent generics, specialty and over-the-counter annual report. It is the largest Indian products, as well as antiretrovirals, active company in the United States. Currently, pharmaceutical ingredients and others. the company leads in the generic In 2019, the company is expected to dermatology sector. generate less than 5.0% of Generic In 2013, Sun Pharma acquired URL’s Pharmaceutical Manufacturing industry- generic business, adding 107 products to specific revenue.
Other Company Headquartered in Peapack, NJ, Pfizer medicines, including several Performance Greenstone LLC (Greenstone) is a injectables. It also distributes non-Pfizer subsidiary of brand name medicines through agreements with pharmaceutical manufacturer Pfizer Inc. other pharmaceutical companies, such Greenstone LLC (Pfizer). Pfizer acquired Greenstone in as India’s Aurobindo Pharma Limited. Market Share: 1.5% April 2003 through its acquisition of The established products business unit Pharmacia. Since 2009, the company’s portfolio contains more than 600 generics unit’s operation started to products spanning a range of increase sales volumes when the therapeutic areas. Greenstone has more company formed a business unit focused than 5,000 employees and its industry- on products that have lost patent specific revenue is expected to account protection. Greenstone manufactures for less than 5.0% of total industry and distributes generic versions of many revenue in 2019.
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 33 Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Capital Intensity The Generic Pharmaceutical Manufacturing industry has a medium Capital Intensity level of capital intensity. Industry players Capital units per labor unit Level require considerable investment in 0.5 The level of capital research and manufacturing equipment. intensity is Medium In 2019, for every dollar spent on labor, 0.4 $0.24 is spent on capital investments. 0.3 Over the five years to 2019, capital expenditures rose slightly. In addition, 0.2 many industry operators are reducing 0.1 their product portfolios, increasing their 0.0 reliance on global outsourcing and Economy Manufacturing Generic conducting acquisitions. Acquisitions Pharmaceutical Manufacturing typically lower spending on capital Dotted line shows a high level of capital intensity because companies are able to acquire SOURCE: WWW.IBISWORLD.COM existing infrastructure. Additionally, many companies are operators are increasingly shifting currently rationalizing to reduce capital production development and commercial investments and cut costs. Industry focus to biopharmaceuticals, specifically
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 34
Operating Conditions
Capital Intensity biologics, increasing their presence in semisynthetic biological compounds. It also continued global markets. Biologic production requires specialized technicians to monitor requires high capital costs due to strict the manufacturing process because minor regulations in manufacturing protein variations can significantly alter the pharmaceutical drugs from extracted or drugs’ safety and efficacy.
Technology and Generic drug manufacturers rely on and Medicaid Services. All in all, Systems high-volume, technologically advanced prescribers receiving incentive payments distribution facilities that enable the for using EHRs will increase the use of Level delivery of new products to customers EHRs in the medical field and increase quickly and efficiently. Operators in the demand for generics due to healthcare The level of Generic Pharmaceutical Manufacturing providers having greater access to drug technology industry incorporate new technologies, information, such as drug costs and change is High such as biomarkers, early in the reimbursement rates. development process to reduce risks to quality during advanced stages of Manufacturing technologies manufacturing. In addition, generic drug Over the past five years, generic drug manufacturers use complex information manufacturers have been progressively technology systems, including online adopting technologies to increase quality systems, to support supply-chain control. With more generic drugs processes as well as communications. entering the market, consumers are increasingly questioning their quality E-prescribing and electronic health compared with brand name records increase generic demand pharmaceuticals. Many generic E-prescribing enables prescribers to pharmaceutical manufacturers have electronically send a prescription directly failed to invest in the technology and to pharmacies. While this process cuts quality-control improvements that would costs and increases prescription accuracy, reduce the risks of partial or complete it also increases demand for generics, facility shutdowns. However, the according to a study conducted by government’s tight price controls for Brigham and Women’s Hospital, a generic drugs, especially when purchased teaching affiliate of Harvard Medical by Medicare and Medicaid, can limit the School. E-prescribing also streamlines industry’s profitability and can reduce the the healthcare process and reduces errors feasibility of investing in new from incorrect drug names or doses. technologies. Similarly, the industry has Electronic health records (EHRs), or typically been hesitant to introduce electronic versions of a patient’s medical innovative manufacturing processes due history, cuts costs and increase efficiency to concern of violating regulations. because physicians and hospitals use Recently, however, the US Food and EHRs to coordinate care for Medicare Drug Administration implemented the and Medicaid patients. The Affordable Process Analytical Technology (PAT), Care Act implemented an incentive plan which streamlines the production process for hospitals and healthcare patients to by introducing measurement devices convert to EHRs, qualifying 36.0% of such as data analysis to ensure quality for healthcare professionals and about 70 generic and brand name products. In hospitals to receive incentive payments, addition, PAT takes a manufacturing according to the Centers for Medicare approach based on chemical and
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 35
Operating Conditions
Technology and mechanical properties of the drug’s technology enables industry operators to Systems components, aiming to ensure quality by start up a new production line in 15 to 18 continued design rather than quality from testing. months, compared with three to five Single-use technology (SUT) will years using conventional production become more commonplace as technology. Also, using SUT in manufacturers use disposable manufacturing cuts costs by requiring bioreactors to manufacture less instrumentation, preventing cross biopharmaceuticals. According to a contamination, using fewer utilities and report from Pharmaceutical eliminating costs from sterilization and Manufacturing Magazine, SUT cleaning processes.
Revenue Volatility The Generic Pharmaceutical steadily due to government-led efforts to Manufacturing industry exhibited a low control healthcare costs; however, fierce to moderate level of revenue volatility price competition reduced profit margins Level over the five years to 2019. Generic for several industry companies. The level of volatility pharmaceuticals and medicines are Government healthcare reforms focusing is Medium relatively resilient to fluctuations in the on reducing the cost of prescription drugs economy as consumers rely on industry also influence industry revenue volatility products as a matter of maintaining health because reforms often target generic drug or quality of life. Over the five years to prices when attempting to lower 2019, demand for generics has increased healthcare costs.
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Operating Conditions
Regulation and Policy Food and Drug Administration approval manufacturing design, examine the Approval from the Food and Drug quality of raw materials, detect and Administration (FDA) of an Abbreviated investigate product quality deviations, Level & Trend New Drug Application (ANDA) is and maintain testing laboratories. All in The level of required before marketing a generic all, CGMPs uphold quality standards by Regulation is Heavy equivalent of a drug approved under a preventing contamination, mix-ups, and the trend New Drug Application (NDA) in the deviations and errors. Regulation is is Increasing United States or for a previously particularly prominent for generic drugs unapproved dosage strength or delivery because CGMPs regulate the product’s system for a drug approved under an safety, ingredients and strength. ANDA. The ANDA development process is generally less time-consuming and International generic complex than the NDA development pharmaceutical manufacturing process. Typically, it does not require new The agreement on Trade-Related Aspects of preclinical and clinical studies because it Intellectual Property Rights (TRIPS) is an relies on studies establishing safety and international agreement administered by efficacy conducted for the drug previously the World Trade Organization (WTO) that approved through the NDA process. sets down minimum standards for many The ANDA process, however, does forms of intellectual property regulation as require one or more bioequivalence applied to other WTO member nations. studies to show that the ANDA drug is Over the five years to 2019, several bioequivalent to the previously approved developing countries issued compulsory drug. Bioequivalence compares the licenses to increase access to medicines. bioavailability of one drug product with While the TRIPS Agreement contains that of another formulation containing several safeguard mechanisms, the same active ingredient. When compulsory licensing is particularly established, bioequivalence confirms that significant for the Generic the rate of absorption and levels of Pharmaceutical Manufacturing industry. concentration in the bloodstream of a A compulsory license (CL) is a license formulation of the previously approved granted by the government to permit the drug and the generic drug are equivalent. use of a patented invention without the Bioavailability indicates the rate and permission of the patent holder. Virtually extent of absorption and levels of all patent laws contain provisions for concentration of a drug product in the compulsory licensing, a special case of bloodstream needed to produce the same compulsory licensing is government use therapeutic effect. or a CL for public noncommercial use, One requirement for FDA approval of when a government uses or authorizes a NDAs and ANDAs is that a company’s third party to use a patented invention manufacturing procedures and for government purposes without the operations conform to the FDA’s strict permission of the patent holder. requirements and guidelines, referred to In addition to TRIPS, the WTO has as Current Good Manufacturing Practices also set up a system that enables industry (CGMPs). The requirements for FDA products to be exported to countries that approval include all aspects of the lack domestic manufacturing capacity, production process, such as validation provided certain procedures are followed. and recordkeeping, and these standards Countries can also use competition law to are continuously changing and evolving. gain access to medicines that do not fall In addition, CGMPs regulate proper within the scope of TRIPS.
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Operating Conditions
Regulation and Policy The Hatch-Waxman Act facilitate the approval of generic continued The Hatch-Waxman Act (Hatch- products through ANDA and paper NDA Waxman) is the popular name for the procedures, Hatch-Waxman and related Drug Price Competition and Patent legislation limit the ability of pioneers to Term Restoration Act of 1984. Hatch- have exclusive rights to certain data that Waxman and related legislation demonstrate the safety and effectiveness established a broad array of regulations of the approved drug. Prior to Hatch- governing how the pioneer Waxman, the pioneer manufacturer had pharmaceutical industry interacts with exclusive access to its safety and the generic pharmaceutical industry. To effectiveness data.
Industry Assistance The US government is obligated to establish people who are not eligible for other a national medicine supply system that government programs. In 2010, 42 states protects drug manufacturing industries. Due established or authorized some type of Level & Trend to international human rights law, program to provide pharmaceutical The level of Industry governments have a duty to ensure that coverage or assistance. These subsidy Assistance is existing medication is available within their programs used state funds to pay for a Medium and the borders. Moreover, governments have a portion of the costs, usually for a defined trend is Steady responsibility to take all necessary measures population that meet enrollment criteria. to ensure that new medicines are developed, In addition, an increasing number of available and accessible. states use discounts or bulk purchasing approaches that do not spend state funds Exclusivity for drug purchases. The Hatch-Waxman amendments to the Medicare covers a portion of the cost Federal Food, Drug and Cosmetic Act of prescription drugs for qualifying provide an incentive of 180 days of participants. The Medicare market exclusivity to the first generic Modernization Act further expanded the applicant that challenges a listed brand scope of Medicare coverage for patent. This rule has been circumvented participants by creating what is known as in recent years however because of a the Medicare Part D prescription drug loophole in the law, which enables drug benefit. Medicare prescription drug companies to designate manufacturers of coverage under Part D is insurance that the generic drug. The Supreme Court, covers the Medicare beneficiary’s cost, however, recently ruled that pay-for- which is subject to certain statutory delay agreements, which occur when a purchasing thresholds, copayments, brand name manufacturer maintains insurance premiums and deductibles, of market exclusivity by paying a generic prescription drugs at participating manufacturer to delay its generic drug pharmacies. In addition, the structure of from entering the market, are now illegal reimbursement under Medicare Part D due to antitrust law violations. includes a gap or doughnut hole in coverage, which occurs after the initial Government programs coverage limit is reached and before the Prescription drug assistance for catastrophic coverage benefit begins. consumers has been a substantial and growing state interest for many years, Tariffs and US competitiveness particularly in response to residents who Tariff barriers are no longer a form of lack insurance coverage for medicines or protection for the Generic
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 38
Operating Conditions
Industry Assistance Pharmaceutical Manufacturing On a global scale, the United States continued industry following the Uruguay Round provides a highly favorable investment of the General Agreement on Tariffs environment for pharmaceutical and Trade (GATT), by which many companies, such as a research and countries eliminated tariffs pertaining development tax credit, which is thought to pharmaceutical products. Prior to to be a key contributing factor for the Uruguay Round, the average tariff boosting industry production. imposed by the United States on the Other credits include those intended to importation of pharmaceutical offset foreign taxes, research expense products was 4.4%. Some nontariff deductions and credits for drugs barriers, such as technical barriers are developed for the treatment of rare still in existence. diseases and orphan drugs.
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 39 Key Statistics
Industry Data Industry Total health Revenue Value Added Establish- Exports Imports Wages Domestic expenditure ($m) ($m) ments Enterprises Employment ($m) ($m) ($m) Demand ($ trillion) 2010 53,004.5 13,290.5 815 720 58,178 11,321.1 21,035.2 5,468.0 62,718.6 2.7 2011 58,005.8 14,154.7 912 804 60,814 11,520.1 23,754.8 5,594.0 70,240.5 2.7 2012 60,441.2 15,670.8 1,075 939 69,312 13,835.2 25,353.7 6,509.0 71,959.7 2.8 2013 59,268.7 15,477.8 1,103 974 66,767 13,930.5 24,611.1 6,078.9 69,949.3 2.8 2014 60,168.5 14,806.9 1,126 1,001 65,645 13,923.2 25,674.5 5,776.6 71,919.8 2.9 2015 61,865.2 15,489.9 1,163 1,029 67,978 14,328.9 29,234.4 5,926.6 76,770.7 3.1 2016 59,566.7 14,501.7 1,124 1,004 65,553 13,237.7 28,777.1 5,740.5 75,106.1 3.2 2017 60,538.2 14,606.9 1,166 1,043 66,908 11,916.5 26,419.6 5,854.1 75,041.3 3.2 2018 62,641.8 15,189.6 1,221 1,092 69,218 13,081.4 32,717.7 6,056.6 82,278.1 3.3 2019 64,527.7 15,540.7 1,268 1,135 71,281 13,636.7 32,932.7 6,237.4 83,823.7 3.4 2020 65,051.8 15,731.4 1,290 1,157 71,946 13,815.8 32,885.5 6,294.1 84,121.5 3.5 2021 66,873.0 15,930.1 1,323 1,186 73,674 14,216.9 33,741.3 6,450.2 86,397.4 3.6 2022 69,063.6 16,160.8 1,359 1,218 75,772 14,707.2 34,734.8 6,639.5 89,091.2 3.7 2023 70,568.2 16,478.1 1,389 1,245 77,343 15,046.5 35,406.4 6,778.5 90,928.1 3.9 2024 72,347.3 16,875.9 1,429 1,281 79,324 15,412.7 36,358.1 6,951.6 93,292.7 4.0 Sector Rank 19/193 17/193 72/193 67/193 56/193 18/184 19/184 36/193 15/184 N/A Economy Rank 157/694 186/694 523/694 493/694 376/694 20/216 20/216 242/694 17/216 N/A
Annual Change Industry Establish- Domestic Total health Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand expenditure (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) 2011 9.4 6.5 11.9 11.7 4.5 1.8 12.9 2.3 12.0 0.0 2012 4.2 10.7 17.9 16.8 14.0 20.1 6.7 16.4 2.4 3.7 2013 -1.9 -1.2 2.6 3.7 -3.7 0.7 -2.9 -6.6 -2.8 0.0 2014 1.5 -4.3 2.1 2.8 -1.7 -0.1 4.3 -5.0 2.8 3.6 2015 2.8 4.6 3.3 2.8 3.6 2.9 13.9 2.6 6.7 6.9 2016 -3.7 -6.4 -3.4 -2.4 -3.6 -7.6 -1.6 -3.1 -2.2 3.2 2017 1.6 0.7 3.7 3.9 2.1 -10.0 -8.2 2.0 -0.1 0.0 2018 3.5 4.0 4.7 4.7 3.5 9.8 23.8 3.5 9.6 3.1 2019 3.0 2.3 3.8 3.9 3.0 4.2 0.7 3.0 1.9 3.0 2020 0.8 1.2 1.7 1.9 0.9 1.3 -0.1 0.9 0.4 2.9 2021 2.8 1.3 2.6 2.5 2.4 2.9 2.6 2.5 2.7 2.9 2022 3.3 1.4 2.7 2.7 2.8 3.4 2.9 2.9 3.1 2.8 2023 2.2 2.0 2.2 2.2 2.1 2.3 1.9 2.1 2.1 5.4 2024 2.5 2.4 2.9 2.9 2.6 2.4 2.7 2.6 2.6 2.6 Sector Rank 27/193 56/193 8/193 10/193 17/193 49/184 75/184 22/193 62/184 N/A Economy Rank 145/694 268/694 49/694 50/694 101/694 54/216 85/216 119/694 68/216 N/A
Key Ratios Imports/ Exports/ Revenue per Share of the IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy (%) (%) (%) ($’000) (%) per Est. ($) (%) 2010 25.07 33.54 21.36 911.07 10.32 71.38 93,987.42 0.09 2011 24.40 33.82 19.86 953.82 9.64 66.68 91,985.40 0.09 2012 25.93 35.23 22.89 872.02 10.77 64.48 93,908.70 0.10 2013 26.11 35.18 23.50 887.69 10.26 60.53 91,046.48 0.09 2014 24.61 35.70 23.14 916.57 9.60 58.30 87,997.56 0.09 2015 25.04 38.08 23.16 910.08 9.58 58.45 87,184.09 0.09 2016 24.35 38.32 22.22 908.68 9.64 58.32 87,570.36 0.08 2017 24.13 35.21 19.68 904.80 9.67 57.38 87,494.77 0.08 2018 24.25 39.76 20.88 904.99 9.67 56.69 87,500.36 0.08 2019 24.08 39.29 21.13 905.26 9.67 56.22 87,504.38 0.08 2020 24.18 39.09 21.24 904.18 9.68 55.77 87,483.67 0.08 2021 23.82 39.05 21.26 907.69 9.65 55.69 87,550.56 0.08 2022 23.40 38.99 21.30 911.47 9.61 55.76 87,624.72 0.08 2023 23.35 38.94 21.32 912.41 9.61 55.68 87,642.06 0.08 2024 23.33 38.97 21.30 912.05 9.61 55.51 87,635.52 0.08 Sector Rank 86/193 58/184 68/184 27/193 151/193 78/193 15/193 17/193 Economy Rank 434/694 64/216 80/216 93/694 547/694 113/694 89/694 186/694
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data. SOURCE: WWW.IBISWORLD.COM Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 40
Industry Financial Ratios Apr 2017 - Mar 2018 by company revenue Apr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium Large Mar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios Current Ratio 1.9 2.1 2.0 1.8 1.7 1.8 1.8 Quick Ratio 0.9 1.1 1.0 1.0 1.0 1.0 1.0 Sales / Receivables (Trade Receivables Turnover) 9.0 8.9 8.9 8.2 10.0 8.1 7.9 Days’ Receivables 40.6 41.0 41.0 44.5 36.5 45.1 46.2 Cost of Sales / Inventory (Inventory Turnover) 4.2 3.8 4.2 4.0 4.3 3.8 4.1 Days’ Inventory 86.9 96.1 86.9 91.3 84.9 96.1 89.0 Cost of Sales / Payables (Payables Turnover) 9.4 9.2 9.8 9.5 16.7 7.5 10.0 Days’ Payables 38.8 39.7 37.2 38.4 21.9 48.7 36.5 Sales / Working Capital 6.9 6.0 6.5 6.9 7.9 7.0 6.6
Coverage Ratios Earnings Before Interest & Taxes (EBIT) / Interest 8.1 11.0 7.0 4.5 8.7 3.5 6.0 Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 4.6 5.0 3.4 4.5 n/a 4.4 4.7
Leverage Ratios Fixed Assets / Net Worth 0.6 0.5 0.6 0.7 0.3 0.7 0.8 Debt / Net Worth 1.5 1.3 1.4 1.7 1.3 1.7 1.7 Tangible Net Worth 28.7 32.0 28.3 27.5 37.8 26.7 22.8
Operating Ratios Profit before Taxes / Net Worth, % 27.3 31.1 27.1 20.6 26.2 22.8 16.4 Profit before Taxes / Total Assets, % 9.2 11.3 8.4 7.2 10.7 5.9 6.2 Sales / Net Fixed Assets 9.8 11.7 10.3 9.1 14.0 8.8 7.4 Sales / Total Assets (Asset Turnover) 1.8 1.6 1.6 1.5 1.8 1.5 1.4
Cash Flow & Debt Service Ratios (% of sales) Cash from Trading 40.5 40.7 45.5 46.5 58.4 39.5 45.5 Cash after Operations 7.2 9.4 9.1 7.1 5.6 6.7 10.7 Net Cash after Operations 6.1 9.0 8.3 7.2 4.8 7.3 7.9 Cash after Debt Amortization 2.2 3.6 3.5 1.6 1.7 1.6 1.8 Debt Service P&I Coverage 2.7 4.5 3.1 2.0 2.9 1.5 2.9 Interest Coverage (Operating Cash) 6.7 11.5 7.2 5.2 6.8 3.4 6.5
Assets, % Cash & Equivalents 12.9 16.8 14.2 13.2 16.0 11.8 13.5 Trade Receivables (net) 20.1 19.8 19.6 20.5 20.9 21.5 19.0 Inventory 23.5 21.5 22.4 21.4 21.5 21.2 21.6 All Other Current Assets 2.8 3.0 2.9 2.7 1.9 1.9 4.3 Total Current Assets 59.4 61.1 59.1 57.8 60.3 56.3 58.4 Fixed Assets (net) 22.7 20.7 22.3 21.5 21.1 20.6 23.0 Intangibles (net) 10.8 11.8 12.6 13.8 7.6 16.7 13.5 All Other Non-Current Assets 7.1 6.4 6.0 6.8 10.9 6.3 5.2 Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total Assets ($m) 12,602.9 13,857.7 11,745.4 11,663.2 161.7 3,080.9 8,420.6
Liabilities, % Notes Payable-Short Term 6.6 5.5 6.5 6.1 9.2 5.6 5.1 Current Maturities L/T/D 3.2 2.6 3.2 3.2 1.9 2.8 4.4 Trade Payables 14.8 13.3 12.5 11.5 11.2 11.9 11.2 Income Taxes Payable 0.3 0.3 0.2 0.2 0.1 0.1 0.2 All Other Current Liabilities 10.3 10.9 10.7 14.3 14.1 13.3 15.6 Total Current Liabilities 35.2 32.6 33.0 35.2 36.5 33.8 36.5 Long Term Debt 15.5 14.9 15.6 15.0 10.8 13.2 19.7 Deferred Taxes 0.9 1.1 1.1 0.7 0.1 0.9 0.9 All Other Non-Current Liabilities 8.9 7.6 9.3 7.7 7.1 8.7 6.6 Net Worth 39.5 43.8 40.9 41.3 45.4 43.4 36.3 Total Liabilities & Net Worth ($m) 12,602.9 13,857.7 11,745.4 11,663.2 161.7 3,080.9 8,420.6
Maximum Number of Statements Used 279 293 245 240 46 112 82
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online.
Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Generic Pharmaceutical Manufacturing in the US May 2019 41
Jargon & Glossary
Industry Jargon ABBREVIATED NEW DRUG APPLICATION (ANDA) An DOUGHNUT HOLE The Medicare Part D coverage gap; application for the approval of a generic drug where the difference of the initial coverage limit and the manufacturers must scientifically prove that their catastrophic coverage threshold. products are bioequivalent to the brand products. EVERGREENING The process whereby pharmaceutical AUTHORIZED GENERIC A prescription drug produced companies slightly tweak the formulation of their by brand pharmaceutical companies and marketed high-profile products to avoid patent expiration. under a private label at a generic product price. NEW DRUG APPLICATION (NDA) An application filed BIOPHARMACEUTICALS A large protein molecule for the approval of a new drug product. Once approved, derived from living sources, as opposed to a chemical the product may be marketed in the United States. substance. Examples include insulin, human growth PATENT CLIFF A phenomenon wherein revenue for hormones and antibiotics. brand name pharmaceuticals drop as the patents for BIOSIMILAR Versions of innovator biopharmaceutical high-profile drugs expire. products that follow patent and exclusivity expirations on innovator products.
IBISWorld Glossary BARRIERS TO ENTRY High barriers to entry mean that EXPORTS Total value of industry goods and services sold new companies struggle to enter an industry, while low by US companies to customers abroad. barriers mean it is easy for new companies to enter an IMPORTS Total value of industry goods and services industry. brought in from foreign countries to be sold in the CAPITAL INTENSITY Compares the amount of money United States. spent on capital (plant, machinery and equipment) with INDUSTRY CONCENTRATION An indicator of the that spent on labor. IBISWorld uses the ratio of dominance of the top four players in an industry. depreciation to wages as a proxy for capital intensity. Concentration is considered high if the top players High capital intensity is more than $0.333 of capital to account for more than 70% of industry revenue. $1 of labor; medium is $0.125 to $0.333 of capital to $1 Medium is 40% to 70% of industry revenue. Low is less of labor; low is less than $0.125 of capital for every $1 of than 40%. labor. INDUSTRY REVENUE The total sales of industry goods CONSTANT PRICES The dollar figures in the Key and services (exclusive of excise and sales tax); subsidies Statistics table, including forecasts, are adjusted for on production; all other operating income from outside inflation using the current year (i.e. year published) as the firm (such as commission income, repair and service the base year. This removes the impact of changes in income, and rent, leasing and hiring income); and the purchasing power of the dollar, leaving only the capital work done by rental or lease. Receipts from “real” growth or decline in industry metrics. The inflation interest royalties, dividends and the sale of fixed adjustments in IBISWorld’s reports are made using the tangible assets are excluded. US Bureau of Economic Analysis’ implicit GDP price INDUSTRY VALUE ADDED (IVA) The market value of deflator. goods and services produced by the industry minus the DOMESTIC DEMAND Spending on industry goods and cost of goods and services used in production. IVA is services within the United States, regardless of their also described as the industry’s contribution to GDP, or country of origin. It is derived by adding imports to profit plus wages and depreciation. industry revenue, and then subtracting exports. INTERNATIONAL TRADE The level of international EMPLOYMENT The number of permanent, part-time, trade is determined by ratios of exports to revenue and temporary and seasonal employees, working proprietors, imports to domestic demand. For exports/revenue: low is partners, managers and executives within the industry. less than 5%, medium is 5% to 20%, and high is more ENTERPRISE A division that is separately managed and than 20%. Imports/domestic demand: low is less than keeps management accounts. Each enterprise consists 5%, medium is 5% to 35%, and high is more than of one or more establishments that are under common 35%. ownership or control. ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.
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Jargon & Glossary
IBISWorld Glossary LIFE CYCLE All industries go through periods of growth, VOLATILITY The level of volatility is determined by maturity and decline. IBISWorld determines an averaging the absolute change in revenue in each of the continued industry’s life cycle by considering its growth rate past five years. Volatility levels: very high is more than (measured by IVA) compared with GDP; the growth rate ±20%; high volatility is ±10% to ±20%; moderate of the number of establishments; the amount of change volatility is ±3% to ±10%; and low volatility is less than the industry’s products are undergoing; the rate of ±3%. technological change; and the level of customer WAGES The gross total wages and salaries of all acceptance of industry products and services. employees in the industry. The cost of benefits is also NONEMPLOYING ESTABLISHMENT Businesses with included in this figure. no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals. PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.
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