Teva Pharmaceutical: Number One in Generic Drugs

According to the FDA, around 44% of all prescriptions are filled with generic drugs. Recently, Fortune Magazine had two interesting articles on the topic. The first was an article about the number one manufacturer of generic drugs, Israeli company Teva Pharmaceutical, and the second about the top generic drugs in terms of sales.

Generic drug companies make their money by reverse engineering patented drugs made by other companies, and then selling them for less when the patent expires. Currently Teva Pharmaceuticals is number one in the segment, receiving 22% of all generic prescriptions in the US, and making $11 billion in revenues last year. Teva’s top selling generics include one for high blood pressure, and one for epilepsy/bipolar disorder.

There are two things that separate Teva from competitors, and make them number one. First, they have a “blockbuster” drug of their own, for multiple sclerosis, which accounts for $2 billion in revenue. They are the only generic company with such a drug. Second, Teva often begins selling generic versions of drugs while they are still supposed to be under patent. They are able to do this by proving another companies patent is ‘unenforceable.’ In 2004, they argued that the patent on a blockbuster blood pressure drug was ‘obvious,’ and in 2007 they were able to begin producing a generic version of it. The patent wasn’t supposed to expire until 2017.

This is incredibly annoying to the big pharmaceutical companies. As a result, they are beginning to form their own generic divisions, making competition in the generic space intense. This could be bad news for Teva, but more competition and more interest in generic drugs can only be good news for the consumer.