In Europe, generic drugs account for around half the market by volume. Through the year 2021, the global generic market is forecast to grow at approximately 5.8% CAGR.
Inside or outside the EU, European countries have individual approaches to generic drug markets.
Many government and healthcare authorities across Europe are concerned about rising pharmaceutical prices, and they increasingly promote the use of generics over branded drugs when possible. This is good news for companies interested in generic drug market entry in Europe.
However, pricing and reimbursement policies in Europe are complicated. Each country has its own set of policies governing generics. The result has been uneven penetration of generics in different European countries.
Germany currently has the greatest generic drug penetration, followed by Poland and the UK, and then Russia. This still leaves plenty of European countries where generic drug penetration is lower, and where opportunities for generic drug market entry can be promising.
Generic Drug Market Entry in Europe: Influencing Factors
According to a report by Deloitte titled “European market-entry strategies for generics companies,” a one-size-fits-all approach to generic drug entry in Europe won’t work. There is too much variation among European countries in terms of how generics are prescribed, dispensed, and purchased (by government health authorities) for a single approach to work everywhere.
According to the report, companies considering generic drug market entry in European countries must evaluate these eight core competencies before deciding how to proceed.
- Relationships with European distribution channels
- Supply chain reliability
- Sales and marketing reputation in European countries
- Breadth of portfolio
- Legal expertise
- Product and brand reputation
- Ease of doing business in various European countries
- Customer service for customers and channel partners
Understanding these key competencies will help generic drug makers determine which ones they are best positioned to use as competitive advantages in the various European markets.
Prescribing, Dispensing, Purchasing Traditions Affect Market Entry Strategies
Prescriptions are written either using the International Non-Proprietary Name (INN) or the specific generic brand name, and different countries tend toward one or the other. In the INN-prescribing countries, price is the primary strategic driver. In countries that prescribe using specific generic brand name, strong customer service and a local sales force are strategic drivers.
In some European countries, having a strong local sales force is a plus for generic drug makers.
In individual European markets, drugs may be primarily dispensed at independent pharmacies or larger chains. When chains dominate, wholesaler and distributor availability become more important. When independent pharmacies dominate, a strong distribution network and sales force become more important.
European markets may or may not purchase drugs through a tendering process. Tendering is a cost-control mechanism designed for lowering unit prices, and has become more popular among large European payers and hospitals. In markets where the tendering process is used, margins are typically smaller, but market entry can be faster, benefiting generics makers with low production costs.
Example Generic Drug Market Entry Keys
Here are two examples of successful generic market entry keys in Europe.
In Germany, INN prescribing is favored, and dispensing of drugs is influenced by the country’s insurance fund. Drugs are purchased using a tendering system. Therefore, generic manufacturers with low production costs, broad portfolios, and stable supplies would be likeliest to succeed there.
In Russia, INN prescribing is required, and drugs are primarily dispensed through chain pharmacies. Drugs are purchased both through a tendering system and through the private market. Consequently, generic manufacturers with strong product brand recognition, local sales forces, and extensive regulatory and political experience would be likelier to succeed.
The Sequence of Generic Drug Market Entry Is Also Important
Not only must generic drug manufacturers tailor their entry strategies to individual countries, but they must also consider the sequence in which they enter European markets. Cross-country dependencies can affect pricing and distribution.
In markets where prices are determined by a reference price (such as a percentage discount off the original branded drug), branded drugs typically have more influence over generic pricing. Additionally, if a generic maker enters one country at a low price point, then tries to enter another country at a higher price point, the second country may insist on buying at the lower price point offered in the first country.
Though some healthcare authorities have called for a more uniform Europe-wide policy covering generic pharmaceuticals, at present that is not the case. Different European countries handle generics differently. Therefore, generic drug manufacturers interested in entering European markets must create strategies designed for specific countries, and they also benefit from planning the order in which they choose to enter European markets.
