With cost-cutting measures exacerbating an already fraught regulatory process, the Canadian generics industry is facing somewhat of an existential crisis. However, within this difficult market environment, enterprising generics companies are still seeing significant opportunities for growth.
“Sometimes it seems as if [non-industry members] believe generic products grow on trees”
The Canadian federal government’s cost-cutting measures – in particular the April 2014 Pan-Canadian Tiered Pricing Framework, as well as pricing agreements with pCPA and Québec’s Ministry of Health and Social Services – have impacted the country’s generics industry. Jim Keon, longstanding president of the Canadian Generic Pharmaceutical Association (CGPA), describes, “We are in a transition period. Lower pricing impacts not only on our manufacturers directly, but also on the entire supply chain … there was a lot of discounting and rebating going on which ultimately impacted on pharmacies as well,” requiring an alteration of the entire business model.
To exacerbate the issue, Health Canada can only approve a generic drug as long as the patent is cleared – a costly and lengthy legal process. Health Canada often has additional clinical requirements for a number of products beyond what either the FDA or EMA requires, which increases the burden on companies. Keon highlights, “Sometimes it seems as if [non-industry members] believe generic products grow on trees … a lot of money goes into developing the active ingredient, doing the testing, developing the clinical trials and submitting it for regulatory approval.” CGPA’s goal is “to get to the point when we do not have to talk about prices all the time.”
CEO Dr. Jeremy Desai of Canadian generics champion Apotex, the largest Canadian pharma MNC, sheds some light on this. “For many types of generics, Health Canada still does not have defined regulatory pathways for market approval. There are many complex products whose patents have by and large expired, but Canadians are missing out on them. Another challenge is that Canada does not have a consistent reference when it comes to regulatory decisions because they sometimes take guidance from the US and sometimes from Europe.”
Having a homegrown generics industry is not just a source of pride but a matter of national security. Louis Pilon, president and CEO of local player JAMP Pharma, says vehemently. “The generics industry may be reaching the limit in terms of [its] viability. Drug shortages have been a major issue in the past couple of years, with the larger companies operating within the injectables business facing supply issues, which affected some hospitals. Pricing is just one aspect of the equation. Product availability is also very important, and that depends on having sustainable pricing for the industry.” Ultimately, “the Canadian government needs to consider their interest in – and need to – maintain a strong Canadian generics industry. If there is ever a crisis, Canada needs to ensure that there is a local industry … able to meet domestic healthcare needs instead of relying excessively on international supply.”
An inevitable result of these market pressures is a steady consolidation of the local generics industry over the past few years, with local players such as Paladin Labs, EuroPharm and Novopharm being gobbled up by MNCs. The top ten players now account for over 90 percent of generics sales. At the same time, enterprising low-cost players – typically Indian multinationals – have seen enough potential in Canada to join the fray. This has driven Canadian generics companies to differentiate themselves by moving up the value chain.
With a thoughtful strategy, growth remains possible – and JAMP Pharma is testament to that, having grown company revenues 25 times over the past decade, and now stands as the fastest-growing generics company in terms of new product launches each year. Pilon underlines, “Innovation is perhaps a concept that people do not always associate with the generics industry, but we operate in a very patented market. We have to be innovative in the way we develop products to ensure we do not infringe [additional patents surrounding the manufacturing process and so on]”. Pilon sees it as a mission to launch new and innovative generics products with a significant market need: “we are ready to invest and take risks where others are not. This is where we differentiate ourselves.”
Apotex’s Desai laments, “Many companies – branded and generics – have pulled out of manufacturing in Canada due to M&A or strategic reasons. The industry’s manufacturing footprint – worth around 10,000 jobs today – is shrinking. This is one of the discussions we as an industry are having. How do we, at the government, academic and industry levels, work together to preserve innovation and support a viable manufacturing industry?”
For him, it is a matter of Canadian pride and heritage. He boasts, “Apotex is one of the few companies that can truly claim to be selling products truly made in Canada. Of the 89 million prescriptions we fill yearly, 90 percent are manufactured in Canada – not only as finished products but along the entire manufacturing cycle. A large amount of the APIs for our products is also manufactured here; Apotex has the largest fine chemical facility in Canada. We even manufacture the plastic bottles that we put our products in!”
Michel Robidoux, president and general manager of global generics giant Sandoz, shares, “within the generics space, Canada is expecting various patent expiries worth a total of around CAD 11 billion (USD 8.6 billion) over the next five years. This means that there are still significant opportunities – as long as we can stabilize the pricing environment.” Having been an essential thread within the fabric of Canadian healthcare – “There is not a single surgery, major or minor, that is conducted in Canadian hospitals without a Sandoz product” – the company is also pushing into new frontiers. Robidoux exults, “we have been transforming the organization by expanding our portfolio into the areas of biosimilars, consumer (OTC), and specialty products – and we believe that these segments will drive growth within Canada as well.”
Writer: Karen Xi