Overview

Generic pharmaceuticals, both "branded" and "unbranded" represented approximately 16% of total pharmaceutical prescription dollar purchases ($286 billion), or $45 billion, in 2007. But, as some of the "branded" generics are sold under a brand label, these statistics are misleading. A more realistic picture of the generic industry is represented by "unbranded" generics, which represented 11% of the total dollar market, or $31 billion. However, because of the significant pricing differences between "unbranded" generics and their brand counterparts, the unit share of the "unbranded" market showed a very different picture. In 2007, approximately 57% of all prescription pharmaceutical products dispensed were "unbranded" generics.

Another way to demonstrate and understand the difference between "pure brands", "branded generics", and "unbranded generics" is with a pricing comparison. Specifically, in 2007 an average prescription was priced as follows:

Industry Average Product = $75
Pure Brand Product = $180
Branded Generic Product = $73
Unbranded Generic Product = $15

There are numerous major factors influencing the growth of the generic business - which will "grow" the unbranded generic industry to over $40 billion by 2010:

• "Authorized Generics" from brand companies
• Aging US population that consumes more medicines on less income
• "Bio-Generics" and/or "Bio-Similars" are getting closer
• Brand company price increases create wider gaps in pricing
• Broad healthcare cost-containment efforts throughout the economy
• Consolidation within the generic industry
• Fewer new ÒnovelÓ drugs being approved by the FDA
• Generic companies moving into more stable 'brand' products
• Generics generally provide greater profits than brands to providers
• Growth of managed healthcare
• Increasing chemical and therapeutic substitution rates, both before and after patent expiration and generic introductions
• Less generic price cutting, and price increases on older products
• Medicare Part D
• Major brand products, with projected future sales of over $85 billion, facing patent/exclusivity expirations by 2012
• Rapid conversion to generics after brand patent expirations