Generics makers use familiar tactics to fight their own patent cliffs

The patent cliff prompted branded drugmakers to get creative. Some diversified. Others megamerged. Others sold off products and divisions to get back to drug-development basics. Still others have done all three. And now that Big Pharma's makeover is well under way, it's Big Generics' turn.

Yes, the expiring patents on Big Pharma's biggest drugs have been a windfall for copycat drugmakers. One top-selling product after another has gone generic, giving companies such as Teva Pharmaceutical Industries ($TEVA), Watson Pharmaceuticals ($WPI), Mylan ($MYL), Actavis and others the chance to tackle huge markets. Some $35 billion worth of branded drugs fell off patent just this year.

But while drug patents will continue to expire in the coming years, the biggest expirations are winding down. Generics companies are under pressure. What can a growth-minded copycat drugmaker do?

Lots of things, apparently. The New York Times rounds up the variety of strategies major generics companies are using to fight their patent-cliff problems. And in a way, those strategies mirror Big Pharma's patent-cliff responses. "[E]ither I need to get bigger, or I need to get 'specialer,' " said Michael Kleinrock, director of research development at the IMS Institute for Healthcare Informatics (as quoted by the NYT).

Just as some branded drugmakers have scaled up via megamerger, or added on new business lines and expanded geographically via bolt-on deals, generics companies such as Watson are growing by acquisition. Watson bought Actavis in October, while Teva expanded its branded offerings with its Cephalon buyout last year. Generics makers such as Mylan have taken a page from branded drugmakers' globalization playbook, expanding into new markets in Eastern Europe and Japan.

And now, Teva's new CEO is taking another tried-and-true patent-cliff approach: cost cutting. Besides relying on his company's sheer size to carry it past its own patent cliff, Jeremy Levin is planning to cut up to $2 billion in expenses.

In many ways, it's a same song, second verse situation. "I can't go anywhere without being asked about the patent cliff, the patent cliff, the patent cliff," Mylan CEO Heather Bresch told the NYT. Many a Big Pharma CEO has said the same.

- read the NYT story (sub. req.)

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