Generic Price War Remains Strong; Intensity Is Product Specific, Firms Say

Heavy price competition between generic drugs is product specific and company specific, Andrx President-Generic Business Lawrence Rosenthal said.

"It's really still somewhat product specific and a function of your product line," Rosenthal said during a third quarter earnings call Nov. 4.

"It's a function of people getting new products," he said. Without new products, firms "have to try to get market share on existing products and that's what causes prices to go down basically. So it really is product dependent and company dependent."

Products that are difficult to replicate draw less price competition, Alpharma CEO Ingrid Wiik said during a Nov. 2 earnings call.

"For the pretty easy products to replicate, it will have more entrants," Wiik stated. "As you get the products that are more advanced, our belief is that the environment is not going to be as competitive and difficult as it is now."

Teva said the generic price war has not affected its products. The company said its product reach allows it to stay above the frays between smaller generic firms.

"The pricing environment for our base business has remained relatively unchanged with the normal pricing responses as new competitors come into individual product markets," Teva CEO Israel Makov said.

For environments "in which price erodes very quickly, the fact that we're, in many cases, vertically integrated is an enormous help," Teva USA President George Barrett stated on a Nov. 4 earnings call.

Aggressive pricing, particularly for three newly generic products, has affected sales for several firms.

The generic market for Bristol's Glucophage XR jumped from two to five entrants following the expiration of Ivax' 180-day exclusivity in May.

"After our exclusivity period on metformin ER expired, aggressive competitive pricing curtailed its revenue and earnings contributions," Ivax President Neil Flanzraich said during an earnings call Nov. 1.

"Authorized generics and aggressive competitive pricing, and in certain cases irrational pricing, have impacted sales and reduced the benefits of some of our excellent opportunities," Flanzraich declared.

Competition between AB- and non-AB-rated generics brought down prices for the generic market of Pfizer's Neurontin , Flanzraich said.

Ivax launched a non-AB-rated generic of gabapentin tablets in August (¹ (Also see "Ivax Launches Neurontin Generic “At Risk” As Pregabalin User Fee Date Nears" - Pink Sheet, 23 Aug, 2004.), p. 16). Alpharma's Purepac division, Teva, and Pfizer's Greenstone division each launched AB-rated gabapentin capsules within hours of each other on Oct. 8 (² (Also see "Pfizer’s “Swift Response” To Neurontin Generics Gives Greenstone 23% Share" - Pink Sheet, 25 Oct, 2004.), p. 16).

"The introduction of three other generic competitors for gabapentin markedly reduced prices after they launched their product," Ivax' Flanzraich said.

Purepac's citalopram generic was priced at a 14% discount to Forest's antidepressant Celexa , the lowest price listed of four generic entrants on the market shortly after the Oct. 28 launch.

Alpharma described the pricing in the citalopram market as unusually competitive. "When we put our models together, we assumed it would be three to four players in what we called wave one," Alpharma Generic Pharmaceuticals President Frederick Lynch said. The pricing environment for wave one was "reflective of what we would have expected with six to eight players on the market."

The initial citalopram generics had a two-week head start on the three most recently approved applications from Alphapharm, Kali and Watson.

The level of generic pricing competition tends to be cyclical, several execs stated. "If you look back, we've gone from a favorable pricing environment over the last few years to a neutral price environment," Andrx' Rosenthal said. It is "now in some state of decline."

Competition that includes an authorized generic will tend to have aggressive pricing despite the number of product entrants, Alpharma's Lynch said.

"Whenever an authorized generic enters the market, the pricing tends to be lower and more competitive than if an authorized generic is not on the market, regardless of the number of players," Lynch said.

The price war between generic firms could have an upside for pharmacy benefit managers due to increased utilization and better margins, Express Scripts CEO Barrett Toan said during a Nov. 4 earnings call.