Home Depot would be so proud. This week four health systems from across the USA plan to form a nonprofit generic drug company to address the high costs and shortages of generic medications. Ok, but last we knew, generic drugs were cheap. Apparently not so, and what’s worse, some generic medications are in scarce supply. News to us. And who wouldn’t want to be in the generics business? Look at Teva, the stock’s only down 38% in the past year. That said, the new (unnamed) consortium that represents ~450 hospitals intends to be an FDA-approved manufacturer and will either directly manufacture generic drugs or sub-contract manufacturing to reputable contract manufacturing organizations. Best of luck. We love the ingenuity. Some recommended names: ShowMeTheDrugs, DrugsRUs, GenericMe, iGeneric, or GiveMeMyGenericsNowAndAtALowPrice.
Teva’s been in the news a lot recently, so here’s a roundup to make sense of all of it. Going chronologically, first Teva announced it would be cutting 14,000 jobs company-wide—more than a quarter of its total workforce. The company still has a lot of debt after buying Allergan’s generics business, so they’re planning on a two-year company restructuring. Teva’s a huge deal in its home country of Israel, so this led to thousands of Israeli public sector workers striking last Sunday in solidarity with Teva workers. Israeli PM Benjamin Netanyahu met with Teva’s new CEO Kare Schultz to try to convince him to leave the company’s Jerusalem plant out of their restructuring plan, but they’re planning to go through with it anyway.
Generic company profits are eroding and, according to an article in Bloomberg, this can be traced to the upstart of family-owned drug manufacturing facilities in India. While “family-owned manufacturing facilities in India” might raise both eyebrows for people in drug markets around the globe, India’s Union Health Ministry has proposed new quality checks on its drug manufacturers. The increase in generics competition has caused downward pressure on prices, giving fits to giants like Teva, Mylan, and Sun—all of whom are feeling the squeeze. The editors at InsightCity are pleased the low-cost regions aren’t driving down our earnings. Maybe our $0 (USD) in revenue explains their lack of interest. Nah, they just couldn’t compete.
Foghat reference aside, this is a pretty big deal. At the risk of glossing over the benefits of AUSTEDO, the second product approved for Huntington’s disease (yaaay), what stole the spotlight in Teva’s press release is the fact that this is the first ever approved deuterated product. Delaying drug metabolism has been an expensive problem that pharma has tried to solve for many years. In scientific-y terms, replacing a few hydrogen atoms with the heavier isotope deuterium causes a much stronger chemical bond that makes it more difficult to break down. What this means in the long run: lower doses of deuterated drugs can have the same effect as higher doses of normal meds and hopefully patients will have fewer side-effects. Hooray science!
Teva has announced plans to purchase Anda, Allergan’s generics distributor. This comes on the heels of Teva having purchased roughly $40 billion worth of Allergan’s generic drugs, aka the Actavis Generics division. Anda’s reach goes beyond Actavis, however. According to the release, they distribute “generic, brand, specialty and over-the-counter pharmaceutical products from more than 300 manufacturers.” Teva projects Anda to bring in over $1 billon in third party revenue this year, and the deal is set to be completed in the second half of 2016. Hey Teva, don’t go filling up on candy or you won’t have any room for a main course of innovative pharmaceutical products…am I right? Anyone? Too much? Sorry.
One year to the day since Teva announced the acquisition of Allergan’s generics business it finally has the thumbs-up from the Federal Trade Commission (FTC) to move forward. However, the proposed $40.5B acquisition comes with some strings attached—Teva must divest 79 of its own products to appease the FTC and keep the US pharma market competitive. But it doesn’t stop there. Teva is also required to provide long-term supply contracts to several of their API customers to prevent any anticompetitive backlash stemming from the agreement. As the largest generics producer in the world, Teva’s portfolio just grew substantially, but so did Allergan’s bank account. What’s Allergan going to do with all that moolah?
Teva wants in the club. PhRMA, to be exact. Some existing members of PhRMA want the world’s largest generics company to take a long walk off a short pier. Probably something to do with the long, ugly history of patent challenges. AbbVie EVP, Carlos Alban, for one, wrote Teva’s membership would dilute PhRMA’s emphasis on innovation. Teva touts its more than $6 Billion in branded revenue as evidence to the contrary. And here’s another problem for those throwing shade on Teva’s application… PhRMA’s membership already includes companies with substantial interests in generic products (see Novartis / Sandoz, Pfizer / Hospira, and others). We think PhRMA will have a difficult time denying Teva’s application. But we also think the welcome dinner may be poorly attended.