Overseas quality concerns are driving generic production back to the US, finds report

Published: 5-Aug-2014

Nearly 40% of US manufacturers are planning an acquisition imminently


The US market remains the most dynamic and the largest pharma economy in the world and is projected to be worth nearly US$350bn by 2015. But structural changes are presenting new and contrasting opportunities, according to a new report, CPhI Pharma Insights USA, a joint venture between CPhI Worldwide and InformEx.

The report finds that there are increased investment opportunities in the region, with imminent acquisitions taking place. Domestically, 12.5% of US companies are undertaking an acquisition, with a further 25% planning one overseas.

In contract, more than 30% of international companies are seeking acquisitions in the US, suggesting that domestic firms are looking for international sites to lower manufacturing costs, while overseas firms are seeking a domestic base from which to further penetrate the regional healthcare economy.

Over 70% of US manufacturers taking part in the report forecast growth in the domestic production of generics – particularly in off-patent prescription drugs and branded over-the-counter products – a trend that goes against recent history and outsourcing economics. The report says this is the result of rising concern about the safety of generics produced overseas, which is providing a path for generics production to return to the US.

US companies continue to thrive with the majority of their trade (over 60%) and net sales coming from within the US. However, interest in international acquisitions shows the desire to expand in higher growth markets and, possibly, to increase domestic margins through lower costs.

Over 70% of US manufacturers taking part in the report forecast growth in the domestic production of generics

In contrast, the international companies surveyed only receive a minority of their sales, under 10%, from the US, which is surprising given the size of the market. However, many are planning domestic rather than international acquisitions, showing that international firms are trying to increase their revenues from the US.

The relative split of sales from the US market received by international companies is probably because nearly 75% of those firms do not yet have facilities in the US, the report says. Among these firms the consensus is that exporting drugs directly to the US remains prohibitive owing to a complicated regulatory framework and a protective market. But both international and domestic companies agree that FDA regulatory changes provide more opportunities than threats.

Surprisingly, over 75% of domestic companies do not perceive drugs manufactured in the US as any safer than those produced in the EU, while more than half of international firms interviewed see US production far more positively.

The report concludes that structurally the key aspects to continuous growth and success in the US pharma market are its technical capabilities and its mature regulatory and IP guidelines.

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