Generic Drugs Getting Cheaper in U.S.

The competition is particularly strong for pharmaceuticals that had been brand-name blockbusters, such as the osteoporosis drug Fosamax and the anti-cholesterol Zocor, which have come to the end of their patent-protected lives and are now fair game for generic drug makers. "There can be as many as 20 generic manufacturers competing for [market] share," said Murray Aitken, a senior vice president at IMS.

The downward price pressure began in 2006, when discounter Kmart slashed its prices on many popular generic drugs to attract more shoppers. The firm was closely followed by Wal-Mart Stores Inc. and Target Corp. All cut prices to just $4 or $5 per month. Other giant retailers and drugstore chains have now done the same, with some offering generics for just $10 for a three-month supply. "It's a very good story for the health care system," Aitken said.

But the story's not over, for additional popular generics will soon be on the market. Between today and 2012, patents will be expiring on brand-name pharmaceuticals with $139 billion in annual sales in the world%u2019s largest eight markets. Generics manufacturers will then rush in. Those drugs include the world's best-selling remedy, the cholesterol-lowering medicine Lipitor, which brings Pfizer Inc. almost $13 billion a year.

Over the next 10 years, IMS and Aitken see "seismic change" coming in the global generics industry. Specifically, they expect industry consolidation, with many small generics makers being bought out by the "big boys." The big generics companies, then, will start making their own brand-name products, giant brand-name manufacturers will begin to expand into generics, and generic forms of biotech drugs - not yet permitted in America - will become more common, expanding the generics market.