As Novo Nordisk and Eli Lilly dominate the market for diabetes and weight-loss medications, a new challenge looms on the horizon. Generics of their blockbuster drugs are gaining ground, with approvals from regulators in countries like Bangladesh, Laos, Russia, and Paraguay. These generic versions, containing the same active ingredients found in popular treatments such as Ozempic and Mounjaro, could potentially undermine the market share and pricing power of these pharmaceutical giants.

Novo Nordisk’s Ozempic, initially developed for diabetes, and its sister drug Wegovy for obesity, have seen unprecedented sales growth since their approval. Similarly, Eli Lilly’s Mounjaro and Zepbound, which also tackle diabetes and obesity, have become major revenue drivers for the company. However, the global rise of generic versions could threaten both companies’ bottom lines, particularly as these generics are often much cheaper than their branded counterparts.

Market Dynamics: A Window of Opportunity for Generic Versions

The approval of generic versions of Ozempic and Mounjaro in emerging markets reflects the complex dynamics within the pharmaceutical industry. Countries such as Bangladesh, Laos, Russia, and Paraguay have granted licenses for medicines containing semaglutide (the active ingredient in Ozempic) and tirzepatide (found in Mounjaro). These generics offer patients the same therapeutic benefits at a significantly lower price. For example, in Russia, a month’s supply of the generic Semavic costs around 4,420 Russian rubles ($42.76), which is 24% cheaper than the original Ozempic.

This price difference is substantial, especially in countries where access to healthcare is limited, and generic versions offer an affordable alternative for treating obesity and diabetes, conditions that affect millions worldwide. The success of these generics in these regions may spill over into other markets, such as India and China, where patents for semaglutide and tirzepatide are set to expire in the next few years. This could lead to increased competition and potentially lower prices, challenging the profits of Novo and Lilly in these critical markets.

The Long-Term Impact: Price Pressure and Market Share Loss

While Novo Nordisk and Eli Lilly currently enjoy a strong market position due to the high demand for their weight-loss and diabetes treatments, the growth of generics could disrupt this dominance in the long term. Anna Kemp-Casey, a medical policy expert at the University of South Australia, notes that while demand currently exceeds supply, the introduction of more generics could eventually lead to price pressure. As generics flood the market, the giants will be forced to lower their prices to remain competitive, thus eroding their market share and revenue.

Novo’s patent for semaglutide is set to expire in major markets like Japan, Europe, and the United States between 2031 and 2032. Eli Lilly’s patent for tirzepatide will also run out in 2036 in the United States and later in other key markets. The expiration of these patents will open the floodgates for generic competition, potentially leading to a drastic reduction in prices, similar to what has happened in the past with other blockbuster drugs.

A Pattern of Pharmaceutical Turnarounds: How Big Pharma Has Responded

The potential for generic competition is not new to the pharmaceutical industry. In the past, several high-profile drugs have faced similar challenges, and companies have had to adapt their strategies accordingly.

One notable example is the case of Lipitor, a cholesterol-lowering drug developed by Pfizer. Lipitor was one of the best-selling drugs in the world, but when its patent expired in 2011, generic versions of the drug flooded the market, leading to a sharp decline in Pfizer’s revenue from the drug. Pfizer responded by focusing on its pipeline of new drugs, as well as shifting its strategy towards vaccines, a field that has paid off with the success of its COVID-19 vaccine.

Similarly, when the patent for the diabetes drug Glucophage (metformin) expired, generics were quickly introduced. While the market share of the brand-name drug fell, the overall market for diabetes treatments continued to expand as more patients gained access to affordable options.

Pharmaceutical companies often respond to patent expiration by innovating with new formulations or investing in emerging markets to maintain a competitive edge. For instance, after Lipitor’s patent expired, Pfizer launched a reformulation of the drug called Lipitor 80 mg, which was aimed at keeping patients on the brand-name version for longer. Similarly, Novo Nordisk and Eli Lilly are likely to focus on product differentiation, such as new formulations or expanded indications for their existing drugs, to stave off the impact of generics.

Regulatory Challenges and the Future of Obesity Treatment

The rise of generics also raises questions about the regulatory frameworks in place to ensure the safety and efficacy of these drugs. Regulatory agencies in countries such as Bangladesh, Laos, and Russia have approved generic versions of Ozempic and Mounjaro without the same stringent testing protocols seen in developed markets. Enrique Seoane-Vazquez, a pharmaceutical policy specialist, emphasizes the need for careful oversight of generic approvals to ensure patient safety. While the generics may offer a cheaper alternative, their safety and efficacy could vary depending on local regulatory standards.

Despite these challenges, the introduction of generics could benefit global healthcare systems by improving access to life-saving treatments for conditions like diabetes and obesity, which are growing health concerns worldwide. However, Novo and Lilly will need to adapt their strategies to compete with these lower-cost alternatives while ensuring the continued effectiveness of their brand names.

The Bigger Picture: How the Obesity Crisis Is Shaping the Market

The increasing prevalence of obesity, a condition linked to numerous health issues such as diabetes, heart disease, and stroke, has led to a surge in demand for weight-loss medications. Over a billion people globally are considered obese, and the market for obesity treatments is expected to reach $150 billion annually by 2033, according to BMO Capital Markets. As a result, Novo and Lilly are racing to ramp up manufacturing capacity to meet this demand. The success of their diabetes and weight-loss drugs has been a significant part of their business growth in recent years.

However, as the demand for these drugs increases, so does the pressure for affordable solutions. The growing number of generics entering the market could force Big Pharma to reconsider their pricing strategies, especially in developing economies where access to healthcare remains a challenge. In countries like India, where Novo has already launched Rybelsus, the affordability of generics could lead to more competition and lower prices, benefiting consumers but putting additional strain on drugmakers’ profits.

A Market in Flux

The increasing availability of generic versions of Ozempic and Mounjaro highlights the shifting dynamics of the pharmaceutical industry. As Novo and Lilly continue to dominate the market for obesity and diabetes treatments, the rise of generics poses a significant challenge to their pricing strategies and market share. While the immediate impact may be limited, the growing competition in emerging markets and the eventual expiration of patents will force these companies to adapt or risk losing their grip on the market.

The key to success in this evolving landscape will be innovation, as seen in previous pharmaceutical turnarounds, and a focus on expanding access to affordable treatments for global populations facing the obesity and diabetes epidemics. The next few years will be critical for Novo and Lilly as they navigate this increasingly competitive environment.

(Adapted from Business-Standard.com)

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