A new battle to corner the market in cheap, off-patent medicines began this week as the United States’s Mylan Laboratories bought its rival, King Pharmaceuticals, in a $4-billion deal that will create the second-biggest prescription drugs company in the US.
The all-paper takeover of King will create a corporation with $3-billion in annual revenue and 6 000 staff — including 1 400 sales representatives.
Between them, the companies want to build an organisation that can be first off the mark in manufacturing drugs as soon as their creators lose patent protection.
The business of making generic drugs has become more popular since charities mounted a campaign urging big pharmaceutical companies to permit cheaper versions of their products to be sold to Aids patients in Africa.
Multinational companies typically have patents of 20 years over drugs, which allows them to recoup development costs by preventing rivals from encroaching on their markets.
Analysts said the main attraction for Mylan was King’s sales force. Mylan wants to use this to distribute its hypertension drug, Nebivolol, which was recently accepted for review by the US Food and Drug Administration.
The tie-up is the latest in a string of deals involving generic manufacturers, which want to increase their geographic reach and financial muscle. Sales of generics have been rising as health-care providers in the US and Europe try to cut their costs by buying cheaper medicines.
Generic manufacturers face intense competition from Indian drug firms, which have lower production costs and are making inroads into Western markets. Exports by Indian drug firms to the US surged by 23% last year, while sales to Germany jumped 45%.
Some industry experts questioned the logic of Mylan buying a company that has struggled to satisfy investors. Richard Silver of Lehman Brothers said: ”We believe that more attractive for Mylan would have been to seek a co-promotion partnership for marketing Nebivolol rather than acquisition of a company.” — Â