* Novartis CEO: higher bar a major hurdle for small firms
* Indian quality issues a sign of rising regulatory demands
* Scale increasingly important in low-cost drugs sector
By Ben Hirschler and Caroline Copley
BASEL, Switzerland, March 20 Recent
manufacturing problems in India suggest some makers of generic
drugs will struggle to compete in the face of a rising quality
bar, pointing to a likely a shake-out in the low-cost sector,
according to Novartis.
Chief Executive Joe Jimenez said the Swiss group's Sandoz
unit - a world leader in making cheap off-patent medicines - was
well placed to thrive in an era of tougher standards. Others,
however, would not be able to upgrade and stay competitive.
"Some generic companies with lower margins are going to have
a hard time building the quality into their systems," Jimenez
told Reuters in an interview.
"You're talking about an industry where scale is going to
become more important ... I see this as a competitive advantage
for a company like Novartis."
In recent months, the U.S. Food and Drug Administration,
citing quality control problems ranging from data manipulation
to sanitation, has banned the importation of products from
Indian firms such as Ranbaxy Laboratories and
India supplies about 40 percent of generic and
over-the-counter drugs used in the United States, and some U.S.
doctors are becoming concerned about the quality of Indian
generic drugs following a flurry of recalls and import bans.
Jimenez said the challenge of a rising quality bar was not
unique to India, with Western firms including Johnson & Johnson
and Novartis itself having run into problems in the
past, but the issue would be acute for smaller players with
"What was good enough five years ago is no longer good
enough today," he said.
"I think it is going to become very, very hard to be a
small, sub-scale generics company because they are going to have
to invest disproportionately in quality assurance assets that
significantly change their cost structure and they may not
become competitive on price."
Some companies, as a result, may decide in future not to
compete and sell their medicines into highly regulated markets
like the United States and Europe, leading to a reshaping of the
For Novartis, however, generic medicines would remain an
important part of the company's future and Jimenez said low-cost
generics from Sandoz were increasingly central to the company's
business strategy, particularly in emerging markets.
"Having a generic division in the portfolio allows me to sit
down with health ministers and talk about how Novartis can help
lower total healthcare costs," he said.
He also sees a bright future for Sandoz as a pioneer in
developing copies of complex biotech drugs, particularly
antibody-based products for cancer and rheumatoid arthritis that
are now among the world's top-selling prescription medicines.
Sandoz hopes to launch some so-called biosimilar versions of
these antibodies in major markets over the next three to four
years, Jimenez said.
(Editing by Pravin Char)