Generic Drugs and Private Label Products: Loss of Innovation?
By Al McClain
The rise of private label products in the CPG industry, combined with the growth of generic drug alternatives, have many concerned about losing the economic motivation for new
With respect to generic drugs, a recent article in Forbes reported that top-sellings such as Zocor, Zoloft, Allegra, Pravachol, Flonase, and Biaxin have already lost their
patents, or are about to. By 2011, up to 25 percent of all current drug sales will be exposed to generic alternatives. The percentage of prescriptions that are generic is expected
to increase to 75 percent in 2011 from 56 percent now.
Of course health plans push generics, and according to Forbes are in some cases asking patients to switch from one branded product to a generic version of a different
Drug makers are fighting back by patenting drugs multiple times, protecting not just the chemical makeup, but the manufacturing process or uses as well. And, some drug companies
are reducing the price on their branded products to compete with or even undercut generic versions.
Meanwhile, on the CPG side, there is seemingly a private label version of almost every branded product, and the branded manufacturers aren’t wild about investing in new product
R & D only to have retailers put a nearly identical PL version right next to it on the shelf.
As the quality of private label CPG increases, the products are drawing a more upscale consumer base. And, retailers like Costco for example, have built much of their reputation
around the quality of their Kirkland products.
So, private label products and generic drugs are growing like weeds, generic weeds. Beyond the obvious positive of savings for consumers, how much of a downside could there be
Moderator’s Comment: Are the systems that allow generic drugs and private label CPG products fair to the manufacturers who make the original branded
products? What should the manufacturers do to make sure they have enough revenue and profits to plow back into R & D? –
Al McClain – Moderator