Recent figures show that the global generics market grew by 20% in 2005 – three times the amount by which the pharma sector grew, and four times the growth of patented drugs. In fact, Cygnus predicts continued growth for the sector in the next five years, forecasting a CAGR of 13.62% for 2006-2010.

Analysts have identified the patent expiries of some of the pharmaceutical industry’s biggest brands as the main catalyst for success for the generics sector. Datamonitor has warned that drugs worth almost $140 billion in sales will come off patent by 2016. This may be considered a conservative estimate. Elsewhere, experts predict that patents for branded pharmaceuticals with sales of over $100 billion will expire by 2010.

In fact, the imminent 2007 patent expiries of blockbusters Zyrtec (Pfizer) and Imigran (GSK)alone will bring generic competition to products that between them generated sales of over $2.5 billion in 2006. This follows hard on the heels of the 2006 expiries of blockbusters such as Zocor (Merck), Pravachol (BMS) and Zoloft (Pfizer), whose combined sales were in excess of $11 billion.

So what can the pharmaceutical industry do to protect itself from the inevitable generic erosion? A common strategy has been to pursue line extensions, with extended release patents a popular tactic to ward off generic competition. However, a number of recent unsuccessful lawsuits in the US have exposed this strategy as being far from foolproof, and in the process raised fears that the extent of protection enjoyed by patents is steadily diminishing. Worryingly, generics manufacturers have themselves begun developing extended release versions. Although resultant lawsuits generally favour the patent holder, legal loopholes have been exploited by generics lawyers and the outcome is no longer guaranteed.

As such, pharma cannot rely on litigation as its best weapon against generic competition. Instead it needs to explore strategies such as next generation product launches, additional indications and line extensions, and defensive pricing to combat the ongoing threat. In some cases, companies are establishing their own generics subsidiaries.

With so much at stake, the pharmaceutical industry must defend its patents aggressively and proactively. Early preparation for patent expiry is critical to a brand’s long-term success and should be built into lifecycle planning at the earliest possible stage. Too often, it would seem, companies consider generic competition too late in the day.

With the generics market tipped to reach $121 billion by the end of 2010, failure to plan ahead could mean that pharma’s headache will only get progressively worse.