As patent cliffs and law suits rule US generic drug industry, research-based majors look to deals and diversification

Generic drug makers which include the likes of Mylan (Nasdaq: MYL) and Watson Pharmaceuticals (NYSE: WPI) have been on a bumpy ride lately, comments www.stockcall.com, an on-line South Africa-based research and analysis service. With the recent and coming expiry of many lucrative brand name drug patents, generic makers have been able to produce lower cost versions of popular medicine. With products such as Eli Lilly’s cancer drug Gemzar (gemcitabine), or Pfizer’s cholesterol lowerer Lipitor (atorvastatin) now or soon to be available in generic versions, companies in the industry look well positioned moving forward.

However, the generic sector has been facing its own set of challenges. A recent rash of government law suits over the alleged inflation of prescription prices has landed some copy drugmakers such as Mylan in trouble. Some individual companies have had to pay settlements in the hundreds of millions of dollars while the figures for the industry are in the billions, a recent report for the US Justice Department has revealed (The Pharma Letter November 23, 2010), which said a record of some $2.5 billion had been recovered in health care fraud.

Just last month Mylan agreed to pay $65 million to settle a law suit by the US federal government and Texas alleging it inflated prescription drug prices, increasing the cost of reimbursing pharmacies and other providers. It also settled a case relating to its subsidiary Dey for $280 million, which will be paid by the latter’s previous owner, Germany’s Merck KGaA (TPL December 22, 2010).