Teva Membership in PhRMA Benefits Brand-Name Pharma

Posted by | Fuld & Company

Teva, the world’s largest producer of generic medications, recently requested membership into Pharmaceutical Research and Manufacturers of America (PhRMA), the powerful US trade association of brand-name medicine manufacturers.

PhRMA is a lobby powerhouse, largely due to representation from most of the biggest players in the pharmaceutical industry. As detailed in the New York Times, Teva’s request ruffled the feathers of some PhRMA members who see Teva (and other generics companies) as a threat to the success of branded medicine. Brand-name and generic drug companies are no strangers to court battles against each other, typically around brand patent validity and timelines for generic entrance.

In a letter to the PhRMA board, Carlos Alban (Executive Vice President at AbbVie, a leading pharmaceutical company with a diverse portfolio including Humira, the world’s top selling drug), wrote that if PhRMA “broadens its membership to include the world’s largest generic company, the association’s emphasis on innovation will be diluted.” Alban also asked the board how PhRMA would resolve the “differences of opinion” and “internal conflicts” that would likely arise with Teva as a member.

The concern that accepting a generics company into PhRMA would somehow tarnish its reputation for innovation should not be discounted.

Innovation is a core component of PhRMA’s messaging. The word “innovation” appears frequently on the association’s website, actively tying branded drug manufacturers to new therapeutic approaches in statements such as: “The object of the vast drug development enterprise is to get innovative new medicines to patients as quickly as possible” and “Developing innovative, lifesaving medicines for patients is the sole focus of the biopharmaceutical industry.” Generic companies, on the other hand, are often seen as less innovative because of their focus on recreation of reference drugs.

However, Teva is a unique generics company in that it also has a branded business unit that generates significant revenue – over $6 billion in the US in 2015 – more than some of the branded company members in PhRMA.

Teva represents less of a threat to PhRMA than would a generics company without a brand arm, and illustrates an interesting evolution of the definition of brand and generic companies. It is not yet clear how Teva would collaborate with fellow PhRMA members, but the possible benefits outweigh the identified concerns. It is likely that PhRMA will grant membership status to Teva. It would be in its, and the industry’s, best interest to do so:

• Escalating drug prices have resulted in wide-spread scrutiny and poor public relations for the pharmaceutical industry. Teva has described itself as a company that makes drugs affordable to patients. Bringing Teva on board would likely soften the current backlash and improve the credibility of PhRMA lobbyists as they defend against accusations of price gouging.

• According to the New York Times, PhRMA’s councils are “secretive”. Bringing generics-heavy Teva to the table will make PhRMA more inclusive. Although small, the move could be a first step to changing perceptions about branded drug manufacturers as isolated and exclusive, signaling that leaders are open to new approaches. Even such incremental movements are important as the pharmaceutical industry seeks to dispel notions about lack of transparency and undue political influence (e.g., lingering concerns about the industry’s successful strategy to influence legislation in 2003 forbidding Medicare from negotiating drug prices with manufacturers).

• The lines between brand and generics companies are becoming increasingly blurred as more brand companies begin to market generics, and vice versa. Granting membership to a company with blurred lines, such as Teva, could be seen as innovative and in line with PhRMA’s current messaging efforts, rather than contradicting them.

• The addition of Teva would generate millions of dollars in dues for the organization and further increase lobby power for PhRMA.

PhRMA is expected to make its decision in July, so stay tuned, it should be interesting either way.

Update: PhRMA welcomed Teva and four other companies as members on July 15, 2016. “Collectively, our members are at the forefront of the most exciting and innovative biopharmaceutical research taking place in the industry today,” stated Stephen, J. Ubl, president and CEO of PhRMA. “The addition of these biopharmaceutical research companies will help guide us as we advocate for patient-centric policies to enhance the private market and address costs holistically.”

Tags: BioPharma, Competitive Strategy, Health & Life Science, Information Technology, Innovation