Teva hit as US hospitals form generic drug rival

Teva Photo: Reuters
Teva Photo: Reuters

A consortium of five organizations with 450 hospitals has set up a not-for-profit generic drug company to bring down prices.

Just as Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) was seeing its share price revive, the Israeli company has been dealt a new blow in the form of a new rival. Intermountain Healthcare is leading a collaboration with Ascension, SSM Health and Trinity Health, in consultation with the US Department of Veterans Affairs* (VA), to form a new, not-for-profit generic drug company. The five organizations represent more than 450 hospitals around the US.

The declared aim of the venture is, "To help patients by addressing the often unwarranted shortages and high costs of lifesaving generic medications."

The organizers of the venture hope that the idea will snowball. "Other health systems will soon be joining this not-for-profit initiative, which will make essential generic medications more available and more affordable, bringing healthy competition to the market for generic drugs."

The new company says it intends to be an FDA approved manufacturer and will either directly manufacture generic drugs or sub-contract manufacturing to reputable contract manufacturing organizations, providing patients an affordable alternative to products from generic drug companies whose capricious and unfair pricing practices are damaging the generic drug market and hurting consumers. The company says it will will also seek to stabilize the supply of essential generic medications administered in hospitals, many of which have fallen into chronic shortage. The new initiative will result in lower costs and more predictable supplies of essential generic medicines, helping ensure that patients and their needs come first in the generic drug marketplace. In a swipe at generic drug producers, of which Teva is the world's largest, the new venture said, "As has been widely reported, certain generic drug manufacturers have been widely criticized for unwarranted and arbitrary price increases, and for creating artificial shortages of vital medications. These activities have resulted in some generic drugs increasing in cost by more than 1,000% in just a few months for seemingly no reason. Research into the actual costs of manufacturing and distributing generic drugs suggests that, in many instances, generic drug prices can be reduced to a fraction of their current costs, saving patients, and the healthcare systems that care for them, hundreds of millions of dollars each year."

Teva's share price, which had doubled since its low-point in early November, was down 4.2% at $20.60 on the NYSE this evening, giving a market cap of $20.9 billion.

Teva Photo: Reuters
Teva Photo: Reuters
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