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Rolling with the punches: Generics firms innovate, expand scope to stay competitive

As they continue to navigate pandemic headwinds, generics firms look to broaden their portfolios and vertically integrate to keep competitive.

There are product supply issues. There are more competitors. There are escalating costs. And then there’s the COVID-19 pandemic, which handed generics companies a particularly rough year.

Amid this head-spinning new landscape, generics companies are delving into new areas, including biosimilars and specialty medications. They are expanding their research and manufacturing facilities, forming partnerships, and putting other measures in place to ensure that they meet their customers’ expectations.

To be sure, customers’ demands for a consistent supply of products is one of the biggest thorns in the side of the generics industry. And while the pandemic is mainly to blame for disrupting the supply chain, it also has accelerated a wave of innovative solutions from generics companies.

a large building
Ascend Labs’ headquarters in Piscataway, N.J. The company has been investing to expand its manufacturing capabilities, building a third facility to supplement its existing ones — which include a plant in India solely focused on the U.S. market.

Growing to Meet Demand
One of the most striking ways that these companies are meeting their customers’ demands for product supply is by making significant investments to expand their manufacturing capabilities.

Parsippany, N.J.-based Ascend Labs is a case in point.

John Dillaway, Ascend Labs executive vice president, said the company, which has two sizable manufacturing campuses in India dedicated solely for the U.S. market, is building an even larger third campus that will increase its manufacturing capacity.

[Read more: AAM report: Medicare plans lag in adopting new generics]

“The first block of the new campus is up and awaiting approval by the Food and Drug Administration, which has been slowed by COVID. The second block is well along in construction,” Dillaway said. “As the FDA catches up on inspections, this new facility will more than double our current capacity.”

Maple Grove, Minn.-based Upsher-Smith also is expanding its manufacturing capabilities.

“We’re doubling down on our U.S.-based manufacturing,” said Mike McBride, Upsher-Smith vice president of partner relations. “We’re in the midst of completing a new addition to our Maple Grove headquarters, which will consolidate our three facilities into one campus and better position us to be more efficient and cost-effective in our manufacturing.”

a sign in front of a building
Dr. Reddy’s Labs, based in Princeton, N.J., adjusted its factory hours throughout the pandemic to ensure adequate staffing and safety.

Getting Creative About Supply
Beyond the expansion of their facilities, generics firms also have developed new strategies for production and distribution, as evidenced by Princeton, N.J.-based Dr. Reddy’s.

Milan Kalawadia, Dr. Reddy’s senior vice president and head of U.S. marketing, said the lockdown that was imposed in India and other countries last March led to major disruptions in the supply chain and logistics for the pharma industry.

“These lockdowns, plus restrictions on people’s movement, adversely impacted plant operations throughout the country,” Kalawadia said. “Added to these constraints were restraints on face-to-face meetings with customers, which is critical to domestic marketing. All of these factors challenged the usual manner of doing business for many India-based pharma companies.”

Kalawadia noted that when air transportation was shut down at one point during the pandemic, a rerouting of supply chains and distribution was required. “The closures meant coming up with novel strategies for COVID-instigated production and distribution vulnerabilities,” he said.

In some Indian states, lockdowns and curfews threatened to curtail staff traveling to and from Dr. Reddy’s multiple manufacturing facilities. “Our supply chain team jumped in and figured out solutions on all fronts,” Kalawadia said.

He noted that Dr. Reddy’s consulted with local governments to ensure its staff could work. The company also altered factory hours to ensure production lines were adequately staffed.

Dr. Reddy’s normally runs three eight-hour shifts a day, seven days a week. This schedule was modified to two 12-hour shifts on a seven-day period. “What this meant is that staff could travel to and from their worksites outside of curfew hours,” Kalawadia said .

The team also looked at their systems to minimize some of their staffing needs while also optimizing manufacturing output. “We learned that we could optimize our systems and processes, resulting in the same output with less manpower,” he said.

These measures allowed Dr. Reddy’s to become more efficient throughout the COVID pandemic, although it took a few months to put the improvements in place and get the operations running smoothly, he said.

“I don’t think anyone fully appreciated the importance of a solid supply chain, a responsive team and strong customer communication until we all experienced the demands of last year’s pandemic.”
—Mike McBride, Upsher-Smith vice president of partner relations

While the pandemic had a negative impact on injectable sales due to a decrease in hospital elective surgeries, Kalawadia said that Dr. Reddy’s was able to ensure the supply of critical medicines.

Victor Borelli, senior vice president of sales and marketing at Edenbridge Parsippany, N.J.-based Edenbridge Pharmaceuticals, said the company has had to focus on strategic planning to meet customers’ needs. He said that during the initial stages of the pandemic, there was a feeling of uncertainty about the pandemic’s effect on the global supply chain.

“Edenbridge has been very strategic in our decisions to focus on the security of our supply chain,” Borelli said. “As a reaction to the uncertainty, we received customer orders that were 3 to 4 times more than normal. Due to the supply chain investments we have made, we were prepared for this and did not experience any issues.”

Borelli also pointed out that as the pandemic continues, there are other places in the world that are still feeling the impact, and this is further stressing the supply chain. “Our decisions are helping us not only meet our customers’ supply demands, but we are also assisting other customers with their supply gaps. We have not, nor do we anticipate any issues with our supply chain,” Borelli said.

Paul McMahon, senior vice president of commercial operations at East Windsor, N.J.-based Aurobindo, mirrored Borelli’s sentiments concerning how supply issues have become a priority for generics firms. He said that from a supply chain perspective, COVID continues to have some impact on the industry, especially when it comes to key starting materials, specifically API delays, as well as variability in material supplies and costs.

“Risk mitigation is another area all trading partners are reviewing within their supply chains for risk and ways to build in redundancy to eliminate it,” McMahon said. “Thankfully, the COVID spike in India has begun to recede significantly, and our team continues to be resilient and dedicated, and output levels have remained consistently high throughout. Aurobindo’s integrated supply chain is long and complex, yet nimble enough to quickly shift with market factors, as well as the incalculable external challenges that the pandemic presented us with.”

a view of a city at night
Mason, Ohio-based Prasco has been focused on growing its portfolio of respiratory products, many of which use the same device as branded treatments. Executives said its U. S.-based manufacturing also helps set the company apart.

Product Strategy and Partnerships
Mason, Ohio-based Prasco, a leading supplier of authorized generics, has made inroads in respiratory treatments, launching three significant products in the past three years and ensuring supply can meet demand for the treatments.

Prasco’s CEO Chris Arington said the company’s respiratory portfolio ensures continuity of care by using the same device as the branded treatment while creating more access and affordability for the patient. In 2020, when respiratory prescriptions spiked, Arington said Prasco was responsive enough to meet the demand due to its strong supply chain.

“Prasco is able to maintain over a 98% service level across their portfolio due to the fact that 80% of their prescriptions filled are manufactured in the United States,” Arington said. “We understand these products are vital for patients and we work hard to provide these medications to over 60,000 pharmacies across the country.”

Aside from meeting a steady supply of products, generics companies are expanding their capabilities or working with partners in new areas, including complex products, biosimilars, specialty medications and injectables.    

Upsher-Smith’s McBride said the company has been focused on diversifying its portfolio. “We’re also focused on and are already moving into some complex generics and diverse dosage forms, either through partnering or our own internal capabilities,” he said. “In May, we announced our commercial launch of moxifloxacin, our first ophthalmic, through a partnership with Rafarm.”

Ascend Labs also has an interest in expanding into new areas.   

Ascend’s parent company Alkem owns a biosimilar company in India. “I have had an opportunity to visit, and they are doing some really interesting and innovative things there,” Dillaway said. “There’s a need for more companies to be involved in biosimilars and injectables, and both areas may offer growth.”

Aurobindo’s McMahon said the company is continuously striving to achieve product differentiation, specifically through formulation development and novel delivery methods of complex products. Aurobindo is expanding into biosimilars by way of a partnership with a company that has significant expertise in this area.

“Some other specialty products include metered-dose inhalers, dry powder inhalers and transdermal patches. Inhalers and patches are part of our specialty research and development team, which is based out of our 40,000-sq.-ft. facility in North Carolina,” McMahon said. “Our specialty R&D team consists of a large group of scientists, with a high level of experience and expertise in [pressurized metered-dose inhaler] aerosol and transdermal delivery systems.”

[Read more: State of the Pharmacy 2021-Executives weigh in]

Among companies exploring new categories, there is Dr. Reddy’s, which has been growing its portfolio of injectables to the point that they now represent one of the firm’s high-growth business segments. “This is a space we planned to own when we launched this business with a small basket of oncology-focused products,” Kalawadia said. “It’s continuing to grow, and we now have over 30 products in this segment.”

Niche products, which treat rare diseases, have limited competition or may be difficult to manufacture, also offer potential for companies willing to invest in the areas. Edenbridge happens to be one of the companies focused on growing its offering of niche products.

The company will have two 505(b)(2) filings before the FDA by the third quarter of this year, and it also has additional 505(b)(2)s in development and dozens of other generic niche products in the works. “Our pipeline is strong. However, we are always looking to explore dynamic new opportunities or create new partnerships that will assist with filling patients’ unmet needs,” Borelli said. “Diversification is key to business longevity. While we have no limit to our development or manufacturing capabilities, we are always looking for like-minded partners in an effort to broaden our reach, enhance our supply chain security further and hurdle any obstacles to bring quality products to the market more quickly. We have worked with several partners over the years in achieving these goals.”

The ability to establish new sales strategies is yet another hallmark of successful generics companies.

Kalawadia said that Dr. Reddy’s strategy to grow its business follows the traditional account management strategy of focusing on major group purchasing organizations and specialty pharmacy groups, but he also noted that the company has established an integrated delivery network sales force to call directly on hospital channels.

Dr. Reddy’s also recently launched an e-commerce site dubbed Dr. Reddy’s Direct, where hospital pharmacies and other customers will be able to purchase products outside of traditional channels.

If that weren’t enough, Dr. Reddy’s also is exploring inorganic growth opportunities to accelerate access to high-quality and affordable medicines to patients globally. The company has put an enhanced R&D and technology-driven platform in place to address the evolving needs of patients, physicians and caregivers through the development of innovative products, services and a digital business model.

a bridge over a road
East Windsor, N.J.-headquartered Aurobindo Pharma said the company, like many generics firms, has seen the pandemic affect the supply of key starting materials and active pharmaceutical ingredients for generic drugs.

Remaining Competitive
Beyond creating sales and digital strategies, generics companies are developing solutions to address pressure that they are feeling from increased competition.

“It is no secret the generics industry is highly competitive and will continue to be,” McMahon said. “In order to keep up with demand and set ourselves apart, it is critical for Aurobindo to have highly competitive costs, product availability, and hold the best-in-class standards of compliance and quality. By doing so, the company is able to grow in a sustainable manner and successfully deliver billions of doses of medicine to our customers and patients.”

McMahon said that vertical integration has become an even more crucial competitive advantage, particularly as pressures continue from economic, regulatory and geopolitical fronts. “Having control and oversight of our operations from development to API to finished goods, all the way through to distribution helps to insulate Aurobindo from market gyrations, set our own priorities and drive out costs throughout the supply chain. This all comes together to fuel Aurobindo’s continued growth story,” he said.

Upsher-Smith’s McBride concurred that there’s never been a time when the generics industry has been more competitive. “The industry is seeing extreme pricing compression and fierce competition among competitors, especially offshore players,” he said. “At the same time, there’s increasing interest from legislators for more U.S.-based manufacturing. These two forces often are at odds, but we’re continuing to distinguish ourselves with our consistent product supply.”

a blue and white plane sitting on top of a building
Executives from Upsher-Smith, operating out of Maple Grove, Minn., said the generics industry has never been more competitive.

Looking Ahead
In sizing up the future of the generics space, while industry players are optimistic, they also are cautious, and they have plans to ensure continued growth.

“Companies who have invested in brand products are likely focused on that side of their business because they have more control of their own destiny, but branded prescriptions have their own unique set of challenges,” McBride said. “I don’t think anyone fully appreciated the importance of a solid supply chain, a responsive team and strong customer communication until we all experienced the demands of last year’s pandemic.”

McBride also pointed out that there is an increasing openness toward the use of more biosimilars, which show a lot of promise for the future as regulations and industry adoption attitudes begin to resemble what you currently find in Europe. “Specialty products that come off patent also may drive future growth in generics, since there just aren’t a lot of new small molecules of significance getting approved right now,” he said.

Ascend’s Dillaway is realistic and cautious about the future. He noted that with increased competition there is a lot of downward price pressure on traditional solid-dose drugs.

“Given the landscape of consolidation and the advent of the three major buying organizations, it’s not uncommon to have more competitors than customers on given molecules and this is certainly not a good recipe for success,” Dillaway said. “Add on top of that increased costs for serialization, potential opioid taxes and stewardship programs to deal with outdated drug takebacks and the numbers look challenging,” he said.     

Borelli also is aware of the challenges in the current environment and the extraordinary steps generics firms will need to employ to meet customers’ needs. “Generics will continue to be a cornerstone of the pharmaceutical industry,” he said. “Despite some companies seeking to disrupt the industry based on price, the customers’ biggest concern will always be supply. Companies that have made significant, strategic investments and concentrate their attention on their manufacturing partnerships, raw material sourcing and supply chain security will continue to succeed.”

Perhaps McBride summed up what is required of generics companies in the future best: “At the moment, it’s hard to see the end game, but we do know from experience that the generics industry is cyclical,” he said. “There likely will be significant contraction continuing within the industry, given the current fierce competition, and the key to surviving these current challenges is diversification.”

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