From pressure on profits to poor public perceptions, the booming generics market has hurdles to overcome if its success is to continue.

The generics market is booming. Three quarters of NHS prescriptions are now for generic medicines, revealed data released by the Health and Social Care Information Centre in April. Given their popularity, it's little wonder that Ornella Barra, chief executive of Alliance Boots' wholesale division, proclaimed that the "future is generic" back in 2012.

Of course, this growth in generics has been driven by the large volumes of drugs to come off patent over the past few years – most notably, blockbuster drug Lipitor. But the market is far from problem-free. There are few other blockbuster drugs due to come off patent and generics manufacturers are having their margins squeezed, as are the pharmacists who dispense the drugs. So what are the main challenges facing the generics market and what could they mean for the future?

1. Edge of the patient cliff

The past few years have seen a number of branded drug patents expire, creating the so-called patent cliff. The most memorable case is Lipitor. Prior to its patent expiry in 2012, 11.4 million items of the blockbuster drug were dispensed in 2011 at a price of around £27 each. Once generic versions were allowed onto the market, prices plunged and uptake increased – 18.2 million items were dispensed in 2013. It was a huge boost for the market and one that generics manufacturer Actavis hailed as "one of the biggest generics opportunities ever" at the time.

It was undoubtedly a win for the market., but there are few other patent expiries of this magnitude in the pipeline. So will this halt the recent growth of generics? Warwick Smith, director general of the British Generic Manufacturers' Association, is adamant that the answer is no. Mr Smith points out there are more biological medicines due to come off patent such as monoclonal antibodies, which are very high cost and could make up for the lack of Lipitor-style expiries.

"Competition will reduce the price of drugs but, because of the complexity of the product, it won't reduce by the same proportion [as standard medicines]," he says.

2. Pressure on profit margins

Increasing use of generics is often hailed as an easy way of pushing down the NHS drugs bill. But there is a danger that too much pressure is being put on generics prices, warns the BGMA's Mr Smith.

"The NHS enjoys the lowest [generics] prices in Europe," says Mr Smith. "But there is a level below which you can't go, and some manufacturers are now saying we can't go any further or we can't make the product."

He points out that manufacturers are also facing increasing regulatory costs from the European and UK medicines watchdogs. These costs will put an end to the old days of manufacturers keeping numerous licences and intermittently producing the medicines, he believes.

"I speak to manufacturers with 100 products [that are] only making profit with 20 of them," Mr Smith reports. "If we don't do anything about that, we will find fewer manufacturers producing huge portfolios."

3. Funding fiasco

The main reason behind low generics prices is the payment mechanism for pharmacies. Category M has encouraged pharmacists to shop around for the lowest generics prices available, acting as the government's "budget gatekeeper", says Mr Smith. But there are clear disadvantages to the mechanism, too. Pharmacists not only suffer the ups and downs of clawbacks, but the cheap UK prices are making it profitable to export generic drugs, creating a potential for shortages.

Mike Hewitson, owner of Beaminster Pharmacy in Dorset, says the latest drug he is unable to get hold of is allopurinol."We are getting more and more supply problems in common-or-garden medicines and it is not sustainable," he argues.

Mr Hewitson believes the government is enjoying the benefits category M brings, but "burying their heads in the sand" over the problems it causes. "The answer has to be about finding a sustainable pricing formula that takes into account that we are in a global economy," he stresses.

Raj Nutan, Numark's director of commercial operations, is also open to the prospect of a new funding mechanism. The priority is to give pharmacists stable reimbursement for generic dispensing that offers a "fair return" for their work, he says.

4. Treating an ageing population

The NHS is struggling to meet the needs of an ageing UK population. The elderly often have multiple complex chronic conditions, which is fuelling the annual growth in prescription items dispensed in the community – at 3 per cent in 2013 – and also creating demand for more complex treatments.

But the health service's challenge could be the generic market's gain, says Mr Smith. Generic medicines will have to be the gold standard for the majority of chronic conditions if the NHS is to also afford state-of-the-art new therapies, he says.

"For some patients there will be a need for newer, more expensive, cleverer medicines, maybe targeted at smaller populations, and the economics of that can only be sustained by a growing generics market," Mr Smith argues.

Raj Nutan, Numark's director of commercial operations, also believes the tough NHS funding environment could boost the market. Prescribers will be more wary of prescribing branded products when there are cheaper generic alternatives available, he says. "With primary care organisations tightening the purse strings in terms of medicines expenditure... there is little doubt that the UK generics market will continue to grow," Mr Nutan tells C+D.

5. Battling public resistance

Every day, Beaminster Pharmacy's Mr Hewitson has a conversation with a patient who is unhappy about being switched from a branded product to the generic version. Some customers are unwilling to accept it is the same medicine, he reports.

"There is a reluctance to even try a generic," he says. Mr Hewitson acknowledges there is a small group of patients who are genuinely sensitive to changes in medicines – epileptics are one of these – but he doesn't have much sympathy with patients who fall outside this category. Despite his belief in generic products, he says it is tough to change perceptions. This could hamper growth in the market.

 "You have to come at it from a practical standpoint," Mr Hewitson says. "The patient has the ultimate power of going somewhere else if they don't like the answer."

It is particularly hard to get the message across when patients don't foot the higher bill for the branded drug. "There is no consequence for people who want Zantac rather than ranitidine," he says. "There needs to be an understanding from the patient that [generics] are the preference."