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

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"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


Makov expected Merck to do something to preserve Zocor revenue, but this particular move caught him by surprise. The morning Merck's deal with UnitedHealth was announced, Makov got calls from people all over Israel. "I told them that it's really against the interests of all the players," says Makov. "And I borrowed from Shakespeare and told the media, 'It's much ado about nothing.'"

Why nothing? Despite Merck's maneuvering, Teva's generic simvastatin is expected to earn more than $300 million over the 180-day period, making it the biggest launch in generics history. "I think that if you look at our results, we can live with [their authorized generics]," says Makov. "It is not so bad."

After releasing its second-quarter earnings, Teva told analysts that Zocor captured more than 70 percent of the market in doses that Teva sells. No Teva drug has ever done better.

"For every trick that they have, we have an anti-trick," says Makov. Including launching its own authorized generics.

"If it looks completely clear that this is becoming an established part of the system, then we'll have to evaluate it differently," says George Barrett, president of Teva North America. "As a company, we have to keep an open mind to authorized generics as the legislation moves forward."

In fact, Teva has already made some authorized-generic deals, most of which were in the pipeline at Ivax before Teva bought the company. "Post-Ivax, you see Teva saying they are more than happy to go ahead and do authorized generics," says Milton. "They've done two: the deal with Cephalon for Provigil, which will launch in 2012, and the deal with Wyeth for Effexor XR, which will come to market in 2010."

Unless Congress puts a stop to it. This summer, Senators John Rockefeller (D-WV), Charles Schumer (D-NY), and Patrick Leahy (D-VT) introduced legislation that would prohibit authorized generics during the 180-day exclusivity period. Elsewhere in Washington, the Federal Trade Commission plans to study how authorized generics affect drug pricing in the long term.

Whatever lawmakers and regulators decide, authorized generics may not last. The problem, says Makov, is that companies must factor the cost of authorized generics into the best price and average sales price they report to the government. This determines how much a company can charge federal payers for its brand. "It's more to deter us than to make money—even now they are not making a fortune on authorized generics," says Makov. "They will have to think about it because it might cost them even more than they think right now."

LESSON #4

Be a Lean, Mean, Manufacturing Machine

With operations in more than 50 markets, Teva expects to produce 36 billion tablets and capsules this year. Around the globe, the company maintains 44 manufacturing sites, 15 generic R&D centers, and 18 facilities that produce active pharmaceutical ingredients. In all, Teva makes 700 compounds in more than 2,800 doses and formulations.

"In general, manufacturing isn't considered a core competence in the pharmaceutical world—not the way it is with Toyota or Dell," says Chris Bogan, CEO of Best Practices, a consultancy based in North Carolina.

Manufacturing efficiency isn't just a matter of process excellence, Bogan emphasizes. Companies like Teva maintain a decisive edge over the branded industry when it comes to lean manufacturing techniques. "It makes sense that generic companies could teach Big Pharma a thing or two when it comes to manufacturing," says Doug McCormick, editor-in-chief of Pharmaceutical Technology. "After all, it was never a core strength of pharma's, while increases in process efficiencies is where generics make money."


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