Word: generics
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...American blockbuster appears to be invulnerable these days. On Aug. 21, for instance, a stock analyst at Smith Barney warned that the threat posed to Lipitor from a potential generic rival created by Ranbaxy, India's largest drugmaker, was bigger than previously thought. That day, Pfizer's stock dipped 3% as investors grappled with the prospect of this unexpected challenge. Ranbaxy, a vigorous exporter to the U.S., claims that its generic version of Lipitor doesn't infringe on Pfizer's patent and is scheduled to argue its case in a Delaware court late next year. And this wasn...
...India showed two years ago it could take on the giants on their home turf when Dr. Reddy's won the right to hawk generic versions of Eli Lilly's best-selling antidepressant, Prozac. That success opened the floodgates: there are currently at least a dozen patent challenges filed by Indian firms against U.S. drugmakers. In all, Indian companies have received either judicial or administrative clearance to sell 87 generic drugs in the U.S., and 68 more are awaiting approval. "It's a great time for the Indian pharmaceutical industry," exults G.V. Prasad, CEO of Dr. Reddy...
...reason Indian companies are doing so well in America: they have learned to exploit U.S. patent laws that two decades ago were amended to allow for the sale of generic pharmaceutical products. In the mid-1990s, Indian companies searching for overseas revenue streams began pushing into the U.S., where chronically high prices for prescription drugs created a ready market for generics. Dr. Reddy's, for example, now generates one-third of its sales in the U.S. Though domestic sales for Indian drugmakers as a whole are growing at less than 10% a year, their exports soared by 20% last year...
...theory, the WTO agreement should benefit India's generic-drug companies by shielding them from strict patent laws. But many of India's drugmakers are angry about the agreement's fine print. According to D.G. Shah of the Indian Pharmaceutical Alliance, which represents the nation's largest drugmakers, the U.S. pharmaceutical lobby won key restrictions?for instance, a stipulation that generics sold under the agreement be manufactured in a different shape, dosage and packaging from the original?that make it difficult for non-U.S. companies to sell their products in poor countries and still turn a profit...
...harder. For one thing, the constant court battles that are required when challenging patents are exorbitantly expensive by Indian standards. "Profit margins at some companies are declining because of litigation costs," says Kothari from ASK Raymond James. Even when a court case is won, the life of a generic-drug company is never easy: high profit margins last for just the six months that the company has an exclusive right to sell a generic drug. If India's drugmakers are to become truly global, they'll have to start producing the kinds of original medications that they now so freely...