Teva Makes Your Pills

June 11th, 2010 | Sources: NY Times


Generic drugs saved the US health system $734 billion between 1999 and 2008. These low-cost alternatives to brand-name drugs account for 75% of all prescriptions filled in the US, a massive increase from the 47% share they held 10 years ago.

TevaTeva, an Israeli company many have never heard of, is the 800 pound gorilla of generic drug makers. Last year, Teva products were used to fill 630 million prescriptions, or one out of every 6 prescriptions in the US. That’s more than Pfizer, Novartis and Merck combined.

Between 1999 and 2009, Teva’s revenues grew from $1.3 billion to $14 billion and its profits rose from $2 million to $135.5 million. Its market cap is now about $53 billion.

Generic companies like Teva can be profitable at lower price-points than pharmaceutical companies, because they don’t have to develop a medication from scratch. Instead, they use the active ingredients major pharmaceutical concerns have already created after their patent protections expire.

Teva entered the US market in 1985, shortly after Congress passed the Hatch-Waxman Act, which expedited federal approval for generic drugs.

Teva’s biggest challenge is maintaining quality control as it grows. Recently for example, the FDA called-out Teva for “serious manufacturing violations” at a facility in Irvine, California.

The issue was bacterial contamination in a generic form of propofol, the intravenous anesthetic made famous by Michael Jackson. Teva recalled thousands of vials of propofol, but officials indicated they weren’t sure the problem wouldn’t recur.

“Can they keep their finger on the pulse of every single smaller company they acquire, every generic maker and ingredient supplier?” Joe Graedon, the co-founder of a drug information Web site asked the New York Times. “We have seen missteps over the last few months.”


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