Insight

Generics 2030: Three strategies to curb the downward spiral

By 2030, generics manufacturers will need to shift from the status quo and explore one of three avenues for change.

Roger van den Heuvel

Roger van den Heuvel

Principal, Corporate Strategy, Life Sciences Lead, KPMG US

+1 212-997-0500

Mary J. Rollman

Mary J. Rollman

Principal, Advisory, Life Sciences Strategy & Supply Chain Operations, KPMG US

Spencer Champagne

Spencer Champagne

Director, Healthcare and life sciences strategy, KPMG US

+1 617-875-5445

Jeff Stoll

Jeff Stoll

Principal, National Strategy Life Sciences Leader, KPMG US

+1 617-988-1000

The generics industry faces two opposing forces that complicate profitability and growth.

On the one hand, demand for generics continues to rise. In 2019, patent expiries totaling nearly $8 billion in U.S. annual sales opened up substantial opportunities for creating generic counterparts. A significant number of additional expirations are expected in the next five years.

At the same time, the industry is grappling with unstable economics and disruptions to the supply chain. Although most generics players outsource manufacturing to less expensive markets to remain profitable, offshore manufacturing raises quality issues and other risks.

The intersection of opportunities and challenges can create a vicious cycle:

  • Rising healthcare costs drive increasing demand for generic drugs.
  • More and more generics manufacturers invest to increase supply and meet patients’ needs.
  • An expedited FDA generics approval process helps accelerate manufacturers’ ability to keep up with demand.
  • However, when increased supply outstrips demand, product prices tend to fall.
  • Downward pricing pressure is exacerbated by the increased leverage of consolidated drug buyers.
  • As prices decline, drug manufacturers see a decrease in profitability.
  • Many choose to exit markets, thus causing greater demand than supply.

And so, the cycle continues. Generics manufacturers have an opportunity to break this cycle by pursuing one or more of the three scenarios for change we present in our recent thought leadership – Generics 2030: Three strategies to curb the downward spiral. In short, these strategies are:

  1. Become bigger and better: Consider mergers and acquisitions that increase scale to allow more effective negotiation with consolidated buyers.
  2. Eliminate the middlemen: Redesign the supply chain through forward/backward integration to reduce dependence on distributors and active pharmaceutical ingredient suppliers and help secure the supply chain in times of volatility.
  3. Develop higher-value generics: Instead of focusing on identical generic products, invest in innovation to create differentiated, high-value products.

Generics 2030: Three strategies to curb the downward spiral

View our companion video for a dynamic look at the forces complicating the generics landscape and the strategies that will help break the cycle and pave a pathway to success.


Generics 2030
Download PDF