The US generics market
The US is dominated by unbranded generics. According to IMS Health, in fiscal 2013, generic drugs—unbranded and branded—accounted for 86% of dispensed US prescriptions. Unbranded generics accounted for 80%. In terms of the percentage dollar, value generics were only 29%. Unbranded generics were 17%. Branded generics were -12%.
The US generics industry is fragmented. The top five companies accounted for 44.4% of the market share of unbranded generics in 2013, according to IMS Health. The leading publicly listed companies are Teva (TEVA), Actavis (ACT), Mylan (MYL), Hospira (HSP), Impax (IPXL), and Periggo (PRGO).
Major driving forces
The major driving force that led to strong industry growth in the US is the cost savings that it achieved over the years. The generics market largely depends on government spending on public budgets. The industry made medication affordable for millions of people. It significantly reduced the overall healthcare expenditure. It comprises over 17% of the GDP (gross domestic product).
According to IMS Health, in the last ten years, the US healthcare system had a cost savings of $1.46 trillion through generics.
Some of the key factors that will likely drive industry growth are the expected increase in healthcare spending—$4.5 trillion by 2020—and the implementation of the Affordable Care Act. Specialty or complex generics will be the major driving forces. There will be more patents expiring in the specialty product segment in the next few years.
According to IMS Health, products worth more than $98 billion are expected to lose exclusivity from 2013 to 2019. It will dominate chronic therapy areas like oncology, modern insulins, respiratory, and anti-tumor necrosis.
The industry’s growth opportunities can be capitalized through pharmaceutical ETFs like the S&P Health Care Select Sector Index (XLV), the VanEck Vectors Pharmaceutical ETF (PPH), and the First Trust Health Care AlphaDEX Fund (FXH).