A coming tide of Chinese exports to the international generic drug market is set to push down the price of generic drugs, according to a report released by IMS Health on May 13.

China is already the world's biggest producer of active pharmaceutical ingredients (APIs), but to date it has not been a significant supplier of finished generic drugs. Now that is about to change.

U.S. Food and Drug Administration approved the first ANDA for a Chinese generic, a copy of Boehringer Ingelheim's AIDS drug nevirapine, from Zhejiang Huahai Pharmaceutical Ltd.  At least 10 other Chinese companies are set to follow suit with other generic products, according to IMS. Some could be available as early as this year.

The result will mean increased competition in a generic drugs industry that is already struggling with tumbling prices.

"In order to ensure their success in the market, the Chinese manufacturers are likely to undercut all others on price," IMS said in its annual Intelligence.360 report. "Chinese policy will drive generic prices down still further, with far-reaching consequences for both R&D players and international generic companies."

The rise of Chinese generic drugmakers is expected to mirror that of Indian firms like Ranbaxy Laboratories Ltd, which also started out as an API supplier but moved into finished generic medicines a decade ago.

IMS believes China will seek to erode India's strong position in manufacturing by targeting the United States, Europe and key emerging markets.

One potential obstacle for China's emerging generics industry, however, may be its reputation for quality. IMS said recent safety issues involving tainted heparin made with ingredients from China had put the country "on the back foot".

"India has had less publicity than China for manufacturing inadequacies ... and it is here where the competitive battle may be won or lost," IMS said.

Earlier Indian pharmaceutical companies expressed serious concerns that increasing Chinese drug formulation exports to India are eroding the prices of many key common medicines in the country.