At first sight, generic drugs appear to be just the tonic for a traditional pharmaceutical company (the type that plunges billions into inventing new medicines) looking to diversify.

Increases in life expectancy come at a cost and the generics market is set to reap a demographic dividend.

Japan's annual medical bill is set to rise 70 per cent to 56 trillion yen (£267 billion) by 2025.

To mitigate the burden, Tokyo wants nearly a third of drugs consumed to be cheap copies by that date, compared with as little as 5 per cent at present.

Moreover, a steady stream of key drugs are coming off-patent.

Motilal Oswal, the broker, expects patents on medicines worth $50 billion to expire in the next two years.

Generics may command only 3 per cent of the price of their branded forebears, but that equates to $1.5 billion in new sales.

There is, of course, a catch: the cost factors that make generics popular with patients mean that it is tough to make money out of them.

India's big three generics groups - Dr Reddy's, Ranbaxy and Sun Pharma - may post flat or falling sales this year, analysts say.

That is partly because the world's biggest generics companies - Teva, of Israel, valued at $33 billion (compared with $8.5 billion for Ranbaxy) and Sandoz, which is owned by Novartis, the Swiss giant - have already ploughed ahead with big acquisitions, building scale and cutting costs to levels that will be hard to match.

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