Teva wants Allergan's distribution biz now that $40B drug deal has closed

Having bought nearly $40 billion worth of generic drugs from Allergan ($AGN), Teva has now decided it wants its supply chain operation for delivering them. And so Teva said today it will pony up another $500 million for Allergan’s Anda, the fourth largest drug distributor in the U.S.

Teva ($TEVA) made the declaration shortly after it announced it had completed its deal for the Actavis Generics division of Allergan, getting 338 approved drugs and another 115 more under consideration, paying $33.43 in cash and 100 million shares of Teva stock, which in premarket trading was running $53.12. The Israeli-based drugmaker said the deal will have to be vetted for anti-trust issues before it will close, which it expects in H2 of this year. 

Anda’s business is actually much more than delivering Actavis’ generic drugs. It handles  generic, branded and over-the-counter products for 300 manufacturers, delivering them to chain and independent retail pharmacies as well as mail order pharmacies, nursing homes, hospitals, clinics and physician offices across the U.S. For all of 2016, Anda is projected to generate more than $1 billion in third-party net revenue, Teva said today. Included in the deal are distribution centers in Olive Branch, MS; Weston, FL; and Groveport, OH, with more than 650 employees.

Siggi Olafsson, CEO of Teva’s Global Generic Medicines, said that Anda will operate as a standalone business reporting to him. 

“This strategic move enables us and our customers to improve capabilities and flexibility given the changes the pharmaceutical industry is currently undergoing, in order to provide access to more patients throughout the country," Olafsson said. "Additionally, both Teva and Anda’s customers will benefit from our ability as the largest producer of medicines in the world to leverage our size and scale."

This price leveraging by big manufacturers and chain pharmacies has become very important in the drug distribution industry, which is dominated in the U.S. by three companies. McKesson ($MCK), AmerisourceBergen ($ABC) and Cardinal Health ($CAH) handle about 95% of the drug distribution market in the country. They all have been trying to expand and forge alliances with pharmacy chains to get better negotiating power with global drugmakers on prices. McKesson this year paid $2.2 billion to buy Canada’s Rexall pharmacy chain, while last year AmeriSourceBergen laid out about $5 billion to buy national compounding company PharMEDium Healthcare Holding and MWI Veterinary Supply, an international animal health distribution company.

- here’s Teva’s Anda announcement 
- and Teva’s drug deal announcement

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