"I Pray for the Welfare of Your Company..." - Pharmaceutical Executive


"I Pray for the Welfare of Your Company..."
And why not? Big Pharma's drugs fill Teva's pipeline. CEO Isræl Makov says he's not the enemy. To prove it, he offers lessons in survival.

Pharmaceutical Executive

Amir Elstein, head of biogenerics, are charged with creating new efficiencies in Teva's next growth platform—generic biologics.
For the branded pharmaceutical industry, Teva's success is a blessing and a curse. A robust generic industry is a prime driver of innovation. To survive, pharma must create new drugs that payers will buy over older, cheaper ones. Successful generic drugs also keep money in payers' budgets to cover newer and pricier innovative medicines. Only 10 percent of the estimated $250 billion the United States spends on pharmaceuticals each year goes for generics. But that relatively small sum pays for more than 50 percent of all prescriptions. "Just imagine if all those drugs would be prescribed with their original prices," Makov says. "Even in the US, you can't pay so much money."

Such sentiments are cold comfort to a brand manufacturer facing the generic threat. It's tough for pharma companies to love Teva as they watch blockbuster revenues shrink to a trickle. But Makov thinks companies should take another look at the company that now sells their former top performers. Teva, he says, has the adventurous spirit and tough business discipline that pharma needs. His managers know how to thrive even when risks are high, revenues are down, and it is time to cut costs.

Teva become a legal powerhouse in the Hatch-Waxman era, and built a tight, responsive organization within a vast network of international subsidiaries. The company that sits on the long end of the seesaw when it talks to tight-fisted payers in the age of Medicare Part D has a few things to teach Big Pharma. And the industry will do well to listen. Teva has applied what it learned in the generic business to its expanding innovative division, and plans to bring its pioneering spirit across the Atlantic when the US market opens to generic biologics. Listen up: Here are some of Israel Makov's lessons about life on the generic side.


Eat or Be Eaten

A History of Successful Integrations
Teva got its start around the turn of the century as a medicine-distribution company, which sent its wares throughout Palestine on the backs of camels and donkeys. The company gained momentum as many Jews boycotted German products. And then, all of a sudden, with the start of the second World War, Teva became one of the few sources of drugs for the region.

After Israel was established in 1948, the local drug market grew, and Teva began exporting its products. In 1976, Israeli-based Assia and Zori, two smaller pharma firms, formally merged with Teva, launching its three-decade acquisition spree. It acquired Abic, Israel's second-largest pharmaceutical company; Plantex, which produced active pharmaceutical ingredients (API); and Migada, a manufacturer of disposable medical equipment. Most important, it opened the door to two key elements of its future: In 1986, it acquired Lemmon, a small generic manufacturer in Pennsylvania; in 2001, it gained full ownership of Teva-Marion Partners, which would later become the company's research-based division, Teva Neuroscience.

Makov came on board as vice president of business development in 1995 at an important cross-section in the company's history. (He was appointed president and CEO in 2002.) He had the experience of establishing Interpharm, the company that created Rebif, a treatment for multiple sclerosis and the first drug based on recombinant human interferon-beta. Now, Teva was preparing to launch its first innovative drug, Copaxone (glatiramer), to compete with Rebif. "So you see," says Makov, "I actually developed my own competitor for the future."

The company was struggling to understand what type of organization it wanted to be. Infatuated with the promise of Copaxone, Teva's leadership leaned toward becoming an innovator. "At the time—little did we know—we thought that the world was coming to us," says Makov. But it soon became clear that a small company in Israel couldn't compete with the brawn of the big, branded companies.

Perceiving that the generics industry was about to go through a major consolidation, Teva execs faced an existential dilemma: It was eat or be eaten—and they decided to eat. "But we knew that if we took that road and failed, it was the fate of the company," says Makov. "You can just cease to exist."


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