A Pioneer's Path Forward: "From Here to Eternity"
Whether Israel Makov intends it or not, pharma fears Teva. But as blockbusters give way to niche drugs and government pressure
on pricing increases, the industry needs to look again at the business practices of the generics industry. Today's business
climate requires a leaner and more efficient approach, and much of what generic drugmakers have learned may apply to the branded
industry soon—if it doesn't already.
"The generics and branded business have been very distinct for many years, but now they may start to converge on some level,"
says Barrett. "That convergence is being driven by the concerns about the total cost of healthcare. We recognize that our
experience living on the healthcare-cost side will help us as we do our development on the proprietary side."
As generic companies launch innovative divisions and Big Pharma slashes prices to retain revenues of mature brands, Oliver
Engert, a partner at McKinsey & Company, sees the two sides forging partnerships. "There's two ways of looking at this world:
It's the Big Pharma company interested in participating in generics," he says. "And there's the reverse happening, where you
have a generics company that is moving upstream into pharma with patented products." GlaxoSmithKline, for example, has already
partnered with Biovail for its extended-formulation technology on Wellbutrin XL (bupropion), and it has inked a drug discovery
deal with Ranbaxy.
"Ranbaxy says it sees the writing on the wall and that it needs to get in the branded space," says Joanna Chertkow, Datamonitor's
lead pharmaceutical analyst. "Working with GSK gives them some experience to fall back on. GSK obviously saw something in
the deal that could benefit them— maybe the cost saving of having scientists based in India."
Teva, already with subsidiaries on five continents, believes 2006 sales will reach $8.5 billion, a 60-percent increase over
$5.3 billion last year. With more than $100 billion in branded drug sales coming off patent in the next seven years, there
are few players better positioned to reap a windfall. Teva expects to launch 70 to 80 drugs in 2007 and 2008.
Increasingly willing to straddle the branded and generic worlds, Teva is launching a new respiratory business that combines
generic molecules with innovative drug-delivery systems. But even with such new developments, Makov says Teva will remain
true to the generic model: The company will continue to dispute patents it regards as invalid and work to streamline its increasingly
complex network. Whether or not Big Pharma adopts the generic discipline that made Teva tough, new generic players will continue
to spring up quickly, often using Teva's acquisition model. Activis, for example, has grown from a small generics player to
a company worth watching, says Chertkow.
No matter what the competition, Makov sees enough business to go around: "The consumption of drugs and healthcare services
is growing with the aging population," he says. "This is a process which you are not going to stop. You cannot stop it. Now,
you must find ways to reduce the cost and to make the system more efficient. That's the reason I believe the demand for generics
will grow from here to eternity."