Company branded generics

Some prestigious brand-name pharmaceutical companies that once looked askance at the high-volume, low-cost business of generic drugs are now becoming major purveyors of generic medicines.

Just don’t call them no-name drugs.

Giants like Sanofi-Aventis and GlaxoSmithKline are not looking to enter the commodity generics market in the United States, where chain pharmacies often determine which generics they offer based on the lowest available price — and where consumers often view generic makers as interchangeable.

Instead, the big drug makers are pursuing a growing consumer base in emerging markets like Eastern Europe, Asia and Latin America where many people pay out of pocket for their medicines but often cannot afford expensive brand-name drugs.

And, in some emerging markets, where the fear of counterfeit drugs or low-quality medicines runs high, consumers who can afford it are willing to pay a premium for generics from well-known makers, industry analysts said. These products are known as company-branded generics, or branded generics. They carry the name of a trusted local or foreign drug maker stamped on the package, seen as a sign of authenticity and quality control.

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Branded generics may appeal to leading drug makers because they represent a hybrid of the generic and name-brand models — allowing drug makers to use their existing commercial distribution system and marketing skills to sell premium-priced generics as if they were brand-name drugs, said Ronny Gal, an analyst at Sanford C. Bernstein & Company.

Under this approach, manufacturers or distributors advertise branded generics. Company sales representatives visit doctors and pharmacists to market them. And, in emerging markets where government health coverage and private insurance are less common, consumers who pay out of pocket for their own medicines would rather spend on names they can trust, Mr. Gal said in an interview last month.

“Patients prefer brands,” he wrote in a note to investors last year, “and as long as they are the main payers, they will continue to use branded generics.”

Still, branded generics may not be a diversification strategy for the long term.

Some companies are moving into branded generics as a short-term tactic to make up for revenue shortfalls and capture near-term growth in emerging markets, Mr. Gal said.

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