Why We May Lose Generic Drugs

The mood at the annual generic drug industry confab in Orlando in February was especially somber. The discussion during one panel was all about plunging drug prices, consolidation among drug-buying groups, and the increasingly cutthroat nature of the business. A top executive at Israel-based Teva Pharmaceutical Industries Ltd., the No. 1 supplier of generics in the U.S., which is laying off 14,000 employees and shuttering about half its 80 manufacturing plants, tried to lighten the mood with gallows humor: “Teva certainly has no challenges,” said Brendan O’Grady, the executive vice president who heads its North American commercial business. The joke hit the mark, perhaps because it landed so close to home.

The generic drug industry, which supplies almost 9 of 10 drugs prescribed in the U.S., is in crisis. These companies aren’t the superstars making cutting-edge cancer and hepatitis treatments that are priced through the roof. They’re the producers of bread-and-butter pills consumers often take for granted: antibiotics, arthritis treatments, medicines for diabetes and high blood pressure. With the profitability of these prosaic pills fading fast, companies are exiting important parts of the business. “We’re one of the companies that continues to make antibiotics, and we’ve asked ourselves for years why we continue to still make them,” O’Grady said at the conference.