Generic drugs produced by Teva and other manufacturers are often 50 to 80 percent cheaper than competing brand-name products.The need for quality health care combined with rising costs has Americans facing a squeeze. How do we serve an aging population that will need more and better care as the price for every medical service and every drug continues to skyrocket?
Israel’s Teva Pharmaceuticals says it hopes to be a key player in developing a solution. And the role of generic drugs, Teva’s core business, is drawing support from key business groups in the United States who will be expected to pay for a large portion of the rising costs of care. These costs are likely to come through higher health insurance premiums for workers as well as higher taxes to pay for government benefits, such as a proposed prescription drug benefit under Medicare.
Brand-name drugs generally have 20 years of protection before patents expire. After that, generics, which are required under U.S. law to be the equivalent of the original drug, can be introduced that can provide savings of a whopping 50 to 80 percent.
Teva, based in Petach Tikva, Israel, is already America’s largest drug supplier, producing one in every 15 prescriptions in the United States. It and other manufacturers of generics make knockoff versions of pharmaceuticals produced by Roche, Pfizer, Eli Lilly, Merck and other makers of name-brand drugs after their patents expire.
Teva makes about a third of its products in Israel and does much of its research there. It produces and sells more than 300 generic drugs in North America, Israel, and Europe, including anti-infective, heart, pain and other drugs. In addition, it sells ingredients for other drugs to other manufacturers and creates its own brand-name drugs, like Copaxone, its proprietary treatment for multiple sclerosis.
During the past five years, the company has boosted sales by 86 percent to $2.08 billion in 2001 and nearly tripled its net income to $278 million.
Economic forces are making the U.S. market even rosier for Teva and other generics makers, analysts say. Even before the U.S. economy soured in 2000, prescription costs were a rising problem, amounting to the fastest-growing portion of the nation’s $1.3 trillion annual outlay for health care. U.S. consumers spent $156 billion on prescription drugs that year, up 12 percent from 1999.
Legislators are now trying to put a lid on these skyrocketing costs with proposed rules that would steer more business to generic-drug firms. In addition, states, generics makers and consumer groups have filed lawsuits against makers of name-brand drugs over their efforts to get the patents on their drugs extended.
This pressure from government and in the courts is rising partly because of population trends. U.S. baby-boomers will soon be taking more medicine for illnesses connected with old age, and these aging boomers will carry a lot of weight in future elections. By 2030 the ranks of the elderly are expected to double to more than 70 million, comprising 20 percent of the U.S. population.
Employers, too, are pushing for change. Last February a coalition that includes GM, Motorola, Verizon, and Wal-Mart began a lobbying campaign aimed at reforming drug patent laws to favor generics in order to help hold down the cost of health plans.
In the next five years patents will expire on brand-name drugs worth about $36 billion in annual sales, broadening the field for generics.
Teva introduced 20 new drugs in 2001 and its 2002 pipeline is looking even healthier. As of April, the company had 62 product registrations awaiting FDA approval, representing a $20 billion per year market. Of those, 18 are “first to file” applications on drugs whose patents are expiring. Getting a first-to-file application approved means the company receives exclusive marketing rights on the generic version of the drug for six months.