One of the industries having really bright prospects, and which stock traders need to be looking at, is the pharmaceutical industry dealing with generic drugs. Even within the pharmaceutical industry, the focus is shifting to the generic drug companies from the drug research firms.
Why Drug Research Pharmaceutical Companies Struggle
The $300 billion industry is now undergoing a shift towards the generic drug companies. The pharmaceutical segment had been tilting towards branded drug manufacturing giants that are mainly located in the United States and Europe. These control over a third of the market. However, these companies are now facing revenue losses amounting to billions of dollars as a result of losing market exclusivity. Patent expiration has also contributed to their loss.
In 2012, branded drugs sales worth $54.7 billion lost their patent protection and this was followed by a further loss of $47.5 billion in 2015. All this has caused pharmaceutical manufacturers to face greater uncertainty over the revenue streams that will be available in the future. In addition to this, they each face increasing competition from other manufacturers, while patent expiration and reducing sales further pressurize them, sapping the potential of their products. They look to develop new drugs that will help them get out of these troubles by being runaway successes. But that further adds to the pressure on research and development.
How Generic Drug Manufacturers Capitalize on This
Pharmaceutical research companies do incur steep expenses in research and development, which is why they depend on patient monopolies for recovering the costs. But on patent expiration, the formulation ends up becoming public property since the patent then becomes insignificant.
That’s what generic drug manufacturers capitalize on, launching drugs that cost a fraction of the price of the drugs painstakingly brought out by the research companies. These generic drug makers thereby secure nearly 90% of the revenue which the research companies generate from their drugs.
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