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Specialty Generic Market to Exceed $40 Billion by 2027

The U.S. market for specialty generic drugs hit $23 billion in 2021, and is expected to reach nearly $43 billion by 2027, driven by the rising aging population and complex chronic diseases, according to a new market report.


By Gina Shaw | Original Article

The U.S. market for specialty generic drugs hit $23 billion in 2021, and is expected to reach nearly $43 billion by 2027, driven by the rising aging population and complex chronic diseases, according to a new market report.

“As major branded specialty products lose their exclusivity, we think [crucial] opportunities in this space will be in oncology and multiple sclerosis,” said Michelle Rogers, PharmD, BCPS, the director of clinical pharmacy for IPD Analytics, during a session on the drug pipeline at the MHA 2023 Business Summit, in Las Vegas. “We have already seen a wave of generics in these categories, and payors are implementing different benefit structures or utilization management strategies to drive utilization to generics.”

The continued growth of the specialty generic market is likely to lower overall specialty drug spending, she said, but predicted that some of those savings will be offset by new specialty brands coming to market and the expanded indications they could receive for higher-prevalence diseases.

“If there are more than 10 generic competitors for a branded specialty drug, we can expect a very steep drop in the price, resulting in substantial savings right away,” said Dinakaran Balasubramanian, the director of marketing for specialty generics at Dr. Reddy’s Laboratories, in a separate interview. “With a smaller number of players in the competition, the savings would be more modest in the initial years, and grow as the drug sees more competition.”

Specialty generics differ from traditional generic drugs in several ways and have their own barriers to uptake, Dr. Rogers said. “First, there are fewer market entrants. Because these tend to be complex molecules with a smaller market volume and pool of patients, sometimes there will be only one or two generic entrants, really limiting generic competition.”

When a branded specialty drug nears patent expiration, brand manufacturers often pursue strategies to keep their market exclusivity, including follow-on products and different formulations. “If you drive utilization to these innovator products, that may undermine generic competition,” Dr. Rogers added. They will also often offer aggressive rebates to try to maintain a preferred formulary status for their brand products, a strategy that can often influence payors to use branded over generic products, she noted.

Finally, specialty drugs have strong brand loyalty among patient populations who are often coping with lifelong, extremely challenging and potentially fatal chronic disease states. “For patients with diseases like HIV, multiple sclerosis [MS] and cancer, there can be the perception that maybe a generic doesn’t work as well,” she said. “Brand manufacturers have also increasingly expanded their copay programs to provide patient support, and patients may assume that there won’t be the same level of assistance with specialty generics.”

“Patients and providers are used to all of the additional support services afforded by the brand manufacturer,” Mr. Balasubramanian agreed. “When you knock off a significant portion of the value of the drug because there are multiple players entering the market, it might be difficult for manufacturers to adopt all of those bells and whistles that patients and prescribers have come to expect. All of these services need to be replicated by follow-on players in the generic space because patients have come to expect them from their originator.”

Education Is Key

Dr. Rogers said a lack of awareness regarding some of these programs needs to be addressed. “I think it’s a matter of education; there are specialty generic manufacturers that do offer financial assistance and other support programs. However, patients and providers may not be aware of them,” Dr. Rogers said. She noted that such programs are available for MS products, including fingolimod, which has a copay assistance card and patient support program.

It is difficult to know whether new specialty generics will be distributed through limited distribution networks, she noted. “At IPD Analytics, we track limited distribution drugs and the specialty pharmacies that are in those limited distribution networks, and we’re starting to shift to look at specialty generic limited distribution networks, but this information is very hard to obtain. So, at times it is difficult to determine whether there will be a limited specialty network with these specialty generics.”

The 2023 Pipeline

In 2023, one of the biggest specialty generic launches was for the MS drug teriflunomide (Aubagio, Sanofi Genzyme), Dr. Rogers noted. “The originator drug lost exclusivity on March 12, 2023, and more than 20 companies have filed Abbreviated New Drug Applications [ANDAs],” she said. To date, at least nine of those companies launched generic teriflunomide: Accord, Aurobindo, Camber, Dr. Reddy’s, Glenmark, Sandoz, Teva, Viatris and Zydus.

“This is a $2 billion brand and probably the biggest opportunity this year.”

Given the number of competitors, “we believe there will be a significant price drop with this product ... in the MS space by the end of 2023,” Dr. Rogers added. “So, expect payors to implement generic step therapy policies before using brand-name MS drugs.”

In contrast, teduglutide (Gattex, Takeda), a drug for the management of short bowel syndrome, which lost pediatric exclusivity this March, had only one ANDA filer, and that company, Endo, filed for bankruptcy protection in August 2022. “We’re not really sure if this product is going to get FDA approval or launch. Because of the complex nature of this drug and its accompanying REMS [Risk Evaluation and Mitigation Strategies] program, we think there will be limited generic price competition, and thus limited price erosion for this very expensive drug.”

Oncology drugs that lost brand exclusivity this year include gefitinib (Iressa, AstraZeneca), a tyrosine kinase inhibitor used for the first-line treatment of certain patients with metastatic non-small cell lung cancer, and plerixafor (Mozobil, Sanofi), used to mobilize stem cells in patients with non-Hodgkin lymphoma or multiple myeloma planning to undergo an autologous stem cell transplant.

“Both of these drugs have multiple ANDA filers,” Dr. Rogers said, and several have come to market, including Ingenus, which launched a gefitinib generic in May, and Fresenius Kabi, which launched its generic plerixafor injection in August. “But for Iressa, this is a less than $10 million product, and generic Tarceva [erlotinib] is already available, so we think there will be limited uptake. And Mozobil use is limited to autologous stem cell transplant, and it may increase the rebate offering of the branded products.”

As for other key market trends, Mr. Balasubramanian noted that specialty drugs that are complex to develop or commercialize have seen fewer competitors entering the generic space. “In the case of these complex generic drugs, sometimes the approval pathway can be unclear,” he said. “The FDA’s understanding of the requirements to be met from the manufacturers increases with their complexity, which makes the approval cycle fairly long, which acts as a barrier [to] bringing new products to market.”


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