Teva Pharmaceuticals is an Israeli company, and it also happens to be the largest producer of generic drugs on the market. It is estimated to miss its 2017 earnings projections, and as an effort to streamline its efficiency, it would be cutting several thousands of jobs both in Tel Aviv and in the US. The reason for it to miss its 2017 projections is due largely in part to the fact that the price of generic drugs has fallen recently in the US.
This cannot come at a surprise. The US is notorious for a lack of competition within the pharmaceutical industry; in short, people are unable to choose the drugs they want, at the best price. With only a few wholesale purchasers permitted in the market, the supply is controlled largely by them, and therefore so is the overall price, which continues to fall.
“It will be an absolute priority for me that we stabilize the company’s operating profit and cash flow in order to improve our financial profile,” Schultz [CEO of Teva] said on a post-earnings call with analysts.
Though Teva spokespersons refused to comment on this supposed move, it can only be understood that laying off thousands of workers must only come as a last resort.
A drug, by the name of Copaxone, for the treatment of multiple sclerosis, has experienced lukewarm sales in response to its generic version, put forth by competitors Mylan, having made several gains in the last few weeks. This too, has led to the tepid growth of Teva.
What this all sums up to, is this: The US pharmaceuticals market makes huge gains by controlling tightly the availability and the price of drugs available to US consumers. But it cannot control the floodgates of the generic drug market, and Teva cutting down jobs in the US, in response to the tight and, arguably unfair regulations of the US market, is a stinging reminder of that very fact.
Healthcare is and will remain a hot topic of conjecture, both financially and politically, in upcoming years, especially as the baby boomer generation grows older. To learn more about Teva’s financial forecasts, read this report from Reuters.
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