TEVA TO CUT BACK PRODUCTION OF GENERIC DRUGS OVER PROFITABILITY
Company won’t drop any in short supply due to high demand
Teva Pharmaceutical Industries plans to cut back manufacturing of generic drugs, citing low profitability, at a time when shortages are intensifying and makers of these medicines are struggling to stay in business.
The Israeli-based company is one of the world’s largest makers of generic drugs, but has been contending with high debt as prices shrink across the board. Some nine out of 10 prescriptions filled in the U.S. are for generic drugs. The industry has been under increasing pressure, leading to a scarcity of crucial medicines like antibiotics and cancer treatments.
As part of a plan to improve its finances — the company has more than $20 billion of debt — Teva will stop producing some older generic drugs and reduce the number of new generics it develops, Chief Executive Officer Richard Francis said on a call with reporters Thursday. FranTeva cis, who joined the company at the beginning of the year, declined to specify which drugs would be dropped and said the changes will not be concentrated among therapies for any specific disease.
“There are some molecules which are supplied by many manufacturers, and because of that, it’s very much a low-margin business,” Francis said.
Francis said he doesn’t anticipate Teva’s decisions will create shortages of any drugs.
The company doesn’t yet know what generic drugs will be cut and is not planning on dropping any that are currently in short supply due to high demand, said Kelley Dougherty, a spokesperson. “This is a very long-term effort in which we are going to be very carefully considering the marketplace,” she said.
The effect of Teva’s cuts will depend on which drugs the company stops making, said Erin Fox, who runs the University of Utah’s drug information service that tracks shortages. If Teva cuts a drug for which it is a major supplier, that might lead to shortages, she said, but if they stop producing a drug they make little of, there might not be an impact.
is acutely aware of this problem. The company makes the antibiotic amoxicillin and attention-deficit/hyperactivity disorder drug Adderall, which both have been in short supply for more than 6 months.
Drug shortages are at a fiveyear high in the U.S. for a variety of reasons. Sometimes a big supplier has a quality problem and other makers of a given drug aren’t able to quickly fill the gap. Other times there are spikes in demand for certain drugs, but companies don’t have space or resources to keep up. Consolidation among the companies that buy generics is also forcing prices lower and driving manufacturers to stop making the drugs.
Teva’s changes are part of a long-term plan announced Thursday, which focuses more on innovative products and biosimilars, copycats of expensive biologic drugs. Both categories are more lucrative than the simple generics that have sustained the company for years.
While Teva still makes much of its revenue from generics, the company also sells some branded drugs that pull in hundreds of millions of dollars annually. The company has biosimilar drugs on the market and in development, but recently struggled to launch a biosimilar to AbbVie’s Humira, a treatment for arthritis and other immune diseases that is one of the top-selling medicines in the U.S.
Teva will focus in the future on complex generics such as drugdevice combinations and longacting injected drugs.
“Generics are a contracting business, and Teva will need to focus elsewhere to find growth to support its large debt load,” AnnHunter van Kirk, a Bloomberg Intelligence analyst, said before the plan was released.
Much of the world’s generic drug production takes place in China and India, and safety problems with medicines have arisen. Aware of this and the increasing drug shortage problem, the White House has a task force to address problems in the generic drug market, Bloomberg News reported last week. It’s unclear how far the U.S. government is willing to go to shore up the industry. Congress has also held hearings on this issue but has not introduced legislation.