for products to be sold in countries with stronger
patent protection.
29.4 Biopharmaceuticals
There is one type of medicine which does not fit
into the regulatory schemes described above:
biopharmaceuticals, also known as biogenerics.
Unlike the typical drug, which is of relatively low
molecular weight (referred to as ‘small chemical
entities’), these massively large compounds are
not easy to either synthesize or describe down to
the individual atoms. They include compounds
such as growth hormone, interferon, erythropoie-
tin and somewhat over 100 additional products,
with a very tempting projected generic market in
the billions (US$). However, they present a two-
fold problem for the generics industry. Unlike the
Hatch-Waxman type of regulatory schemes, there
is no generally agreed-upon approval process for
biopharmaceuticals; specifically, what must be
shown to prove bioequivalence. In the absence
of a method to prove this, a generic company
would be faced with the expensive task of running
full safety and efficacy tests, the very thing that
Hatch-Waxman and the similar non-US schemes
were designed to eliminate. Second, thevery high
manufacturing costs associated with these drugs
will preclude capturing market share by under-
pricing the brand drugs by 70–90%, as can be
done with small chemical entities. Just these two
hurdles will make inroads by the generics com-
panies into this market slow for the foreseeable
future.
29.5 Blurring the lines
The pharmaceutical business is described above as
composed of Generics and Big Pharma, each with
its own business model. The distinction does not
hold up in all cases. Although selling at a premium
under the protection of a patent is Big Pharma’s
modus operandi, many patents are also obtained by
generics companies. This is for two reasons, at
least. First, because of the competition from all
the other generics houses, a patent on a new for-
mulation, manufacturing process or polymorphic
form of an old compound can be quite valuable;
clearly not as valuable as Big Pharma’s original
patent but valuable enough in a very competitive
marketplace. Of course, as with any other patent,
the value of these patents depends on whether or
not they protect some economically desirable inno-
vation. Second, at least some generics companies
can be seen as having aspirations of becoming Big
Pharma or, at least, of developing and selling their
own branded medicines, that is they have research
facilities to discover their own innovative medi-
cines. Adding to the blur, Big Pharma has itself
been in the generics business for some time. They
have done this directly as by owning generics sub-
sidiaries. (‘Ownership’ can take various forms
depending on the desire of the owning company
and national law.) They have also entered into
many types of partnering/licensing relationships
with generics companies, that is no actual owner-
ship but a sharing of the sales of certain products.
This can be useful, for example, if a product is
about to go off-patent but the patentee does not
wish to sell the product generically. If the patentee
has valuable know-how relating to the product, it
might license this know-how to a generics com-
pany, which thereby will gain an advantage over all
its competitors.29.6 The future
Many of the Big Pharma houses very well known in
the 1950s–1980s have now disappeared, their busi-
nesses having been consolidated by merger or
acquisition into fewer and fewer, larger and larger
pharmaceutical operations. A similar pattern has
been emerging in the last decade in the generics
business. The reasons for this are undoubtedly the
same as for other industries: economics of scale
and the desire to expand both geographically and in
breadth of product line. There is no reason to
believe that this trend will stop anytime soon.
Undoubtedly, one or more of these ever larger
generics companies will become an acquisition
target for a Big Pharma company.29.6 THE FUTURE 385