An imbalance in supply and demand is the root cause of recent pain for companies like Mylan and Teva Pharmaceuticals, said Chip Davis, CEO of the Association for Accessible Medicines, the trade group for generic and biosimilar medicines.
“[Analysts are] pointing to some of the imbalances in the generic marketplace that haven’t happened overnight, and that are continuing to evolve, but the reality is that the sustainable, robust competitive market is at risk now,” Davis told CNBC on “Power Lunch.”
He expects generic drugmakers will continue to feel pressure in the pharmaceutical market amid declining prices and nearly flat revenues.
Davis pointed to the “consolidation in the wholesalers and the retail pharmacy” as one cause for the deflationary environment, saying that there are “only three or four purchasers in the market, which are controlling 90-plus percent of the supply.”
From June 2016 to June 2017, the number of generic prescriptions is nearly flat, up around 1 percent, while revenue is down 12 percent, he said.
Davis said he expects that if these conditions persist drugmakers will drop out of the market and that could potentially lead to a situation similar to the flu vaccine shortage in 2004. In that case, the number of suppliers shrank, resulting in an insufficient amount of the vaccine.
“We want to make sure we don’t see the same type of concerns that we did previously in the vaccine sector,” Davis said.
He also praised the new commissioner for the Food and Drug Administration, Dr. Scott Gottlieb.
“The robust level of competition per se is a good thing and new FDA commissioner Gottlieb should be applauded for his action plan… as we want to make sure that we don’t have just competition but sustainable competition,” Davis added.
The competitiveness of the market has been a flashpoint for generic drugmakers. Teva Pharmaceutical’s interim CEO Yitzhak Peterburg blamed his company’s recent poor performance on a saturation of the U.S. generic drug market.
On Wednesday, Mylan’s second-quarter earnings report also missed estimates in what CEO Heather Bresch called “a tough quarter.”