Tuesday, March 9, 2010

Bidding war for ratiopharm

Interesting news item: Pfizer and Teva and Actavis are in a three-way bidding war to purchase ratiopharm.

Teva and Actavis are generic drug companies, so its not surprising that they want to buy ratiopharm, which is also a generic drug company. Its interesting that Pfizer would like to buy ratiopharm.

Its another reflection of the blending of "innovative" or "brand name" pharmaceutical companies. (I had a discussion about this with Jocelyn Mackie this morning, so what follows is her thoughts as well as mine)

Innovative companies have been moving into the generic space for a while. One common way to do so is to do what Pfizer is trying to do - buy an established generic drug manufacturer. Another way is for a innovator company to license a generic manufacturer to begin production of a generic product even while the innovator company is still supplying a patent-protected (and more expensive) version - i.e. authorized generics. Or, the brand name company can produce a second version of their product, separately branded and at a lower cost point, then their more-expensive version. Or, most dramatically, as they see their patent protection about to expire, they can reduce their prices for their brand-name product to generic levels and refuse to concede the post-patent market to the generic drug companies.

At the end of the day, the industry is evolving so there is not not as much difference between "innovative" and "generic" drug companies - there may just be pharmaceutical drug companies with different strengths in different product areas and marketing capabilities. Company A may be strongly "innovative" (i.e. lots of patent protection) in one sector and simultaneously compete as a generic in another sector. A more resilient distinction may be in their marketing capabilities - some (innovative) companies have built large sales forces to sell to individual doctors, while other (generic) companies have developed strengths in dealing with pharmacies and governments which does not involve as large a sales force or the same capabilities.

This challenges many fundamental assumptions about public policy in the pharmaceutical arena. Generally, in the past it was easy to assume that innovative and generic companies are fundamentally different, and never the twain shall meet. That assumption is going a bit by the wayside.

This would affect, for example, provincial governments deciding which drugs to place on the formulary and what price to pay for pharmaceuticals. It affects tendering schemes and other price control schemes, which I've written about before. It affects the antitrust analysis of patent settlements in the pharma area. It affects the working of Hatch-Waxman and the PM(NOC) Regulations. It also raises questions about future interest-group lobbying - the commonality of interest between certain groups of companies is eroding. And it is heavily affects consideration of biologics and second-entry biologics - in fact, biologics is probably accelerating the blending of the traditional innovative and generic pharma markets.

Note that I linked to ratiopharm's Canadian website. ratiopharm is a significant player in the Canadian generic marketplace - this 2007 Competition Bureau report states that in 2006, ratiopharm was the fourth largest Canadian generic company measured by sales. Teva, which owns Novopharm, was number two.

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