After ‘initial shock,’ generics supply chain likely to weather COVID-19 blows: analyst

The specter of global drug shortages looms large amid the coronavirus pandemic. But so far, the supply chain is holding steady and prices are going up—in the generic drug business, at least. One analyst, in fact, figures COVID-19 could turn out to be a profitable time for the generics industry.

After some “initial shocks” from COVID-19, the global generic drug supply chain is likely to rebound and deliver strong growth numbers despite some potential “spot shortages,” including a med President Donald J. Trump touted as a possible treatment, Bernstein analyst Ronny Gal said in a note to investors Wednesday.

A potent mixture of patient and channel stockpiling and manufacturer “allocation” measures will drive generics pricing upward in the short term, Gal argued, and could have a “lasting positive impact” on the industry in future quarters.

A turnaround in profits would be a big win for a generics industry that has faced pricing pressure stateside and a pinch in profits in recent years. Big players like Novartis’ Sandoz unit and Pfizer’s Upjohn business posted 1% growth and 16% decline on the year in 2019, respectively.

Upjohn’s continued decline was part of the reason Pfizer agreed to a spinoff and merger with Mylan, dubbed Viatris, this is currently under review. The deal would create the single largest generics maker in the world, by Pfizer’s count.

That deal will be delayed into the second half of this year, the companies said Thursday. But now, even with more and more companies instituting “social distancing” and governments––particularly China and India––locking down, Gal predicted that generics supply will remain strong in the coming quarters despite the potential for small-scale shortages of particular drugs.

“The way we hear it, the more severe interruptions are in large part the impact of the initial shock,” Gal wrote. “Even if social distancing is the new normal, the supply chain will function well enough to supply the market, we may see few spot shortage…but nothing too bad.”