A Generic Manufacturer’s Current Pressures and Opportunities

Consolidation of purchase power in the past 20 years has dramatically changed the landscape for generic manufacturers; and recent events are making it worse: active prosecution for price-fixing, the FDA recently announcing a wave of unannounced FDA audits, and blame for the Opioid Epidemic. So what is a generic manufacturer to do? There are opportunities still available for a generic manufacturer to increase their top and bottom lines.

Pressures

Recent events are stacking the cards against the viability of many generic manufacturers.

Price-Fixing Scandals

A federal investigation that started in 2016 has developed into a scathing lawsuit filed in May 2019, uniting 44 states against 20 manufacturers (read the unredacted version here). On 34 separate counts, the Attorneys General allege that drug companies have, since 2012, worked with one another to develop “one of the most egregious and damaging price fixing conspiracies in the history of the U.S.”
The allegations identify specific schemes across named companies, individuals, and drugs that helped drug companies maintain market share and avoid price erosion. Additionally, companies are accused of adjusting quality ratings of their peers according to their participation in the scheme.

Unannounced FDA Inspections

Republican Sen. Chuck Grassley, a vocal proponent of drug importation as a measure to reduce drug costs for the U.S., has called on the FDA to run surprise inspections on pharmaceutical production sites particularly in India and China, which supply the biggest share of APIs for drugs used in the U.S.

Opioid Epidemic Tab

The Boards of Pharmacy for Minnesota and New York are two examples of states using ongoing business to fund their response to the Opioid Epidemic. As we have covered before (read our previous article here), opioid drug manufacturers will have their annual Minnesota registration fees increased to $55,260. Additionally, opiate product manufacturers with Minnesota sales of more than 2 million units in a year will be required to pay an opiate product registration fee of $250,000. Manufacturers may have to build an extra $300,000 per year, just to sell to Minnesota residents.

New York passed Opioid Tax legislation in March 2019. The bill imposes a one-cent per milligram surcharge on opioid prescriptions to fund statewide drug addiction prevention, treatment, and recovery programs.

Opportunities

However, there are small changes a generic manufacturer can make that will result in big increase to their bottom line.

Realignment of Sales Operations

Many generic manufacturers have an antiquated approach to their sales organization: multiple “National Account Managers” are tasked with getting the word out to buyers on what pricing they can get for upcoming and existing products.
However, with over 100 years of combined professional experience, our Senior Consultants for Manufacturer Trade Operations can assist in transitioning a “National Account Manager” to a cross-functional “Business Manager” – a quarterback pulling together Supply Chain, Customer Service, Finance, Accounting, and Legal to create a value proposition past having the lowest price. Further, Business Managers need to develop an infrastructure, including contracting, pricing, and customer service disciplines.

Just as important is to ensure that a generic manufacturer is not missing lines with customers. Developing the strategy and tactical applications for selling each product (ANDA) and introductions to wholesale and retail trade can be crucial to growing market share on already established products.

Reducing Compliance Operating Expenses

Our “No-Contract” policy speaks to Pharma Solutions’s commitment to providing great service and leveraging cutting edge technology to manage state licensing and Puerto Rico drug registration requirements.

Reducing Compliance Risk

Pharma Solutions has developed a technology solution, NavigateSOM C3, which specifically supports Generic Manufacturers identify and report suspicious orders of pharmaceutical products and comply with record-keeping requirements. In July 2017, Mallinckrodt agreed to pay a record $35 million settlement (read the DOJ press release here).

Reducing Commercial Operating Expenses

Pharma Solutions can additionally identify leakage – we have developed technology to perform chargeback audits. With over 100 years of combined professional experience, our Senior Consultants can help negotiate or renegotiate pricing, wholesale/3PL fees as well as review rebate and return leakage.