Pfizer pharmaceutical company is in final talks with its powerful competitor, Mylan, regarding drugs not protected by patents anymore. In line with this agreement, Pfizer aims to set up a capable center to overcome the challenges associated with generating and delivering generic drugs. Accordingly, for production of these generic drugs each parties will share some of their knowledge and provide the possibility to create a new reputable brand. Forecasts suggest that the new business will experience sales of around $ 19-20 billion annually, resulting in $ 1 billion in revenue for each party.
The challenge for the most companies producing generic drugs, which their patent protection period is ending, is the price fall due to emergence of competing products. In this case, maintaining sales value is becoming more difficult and requires new policies. Pfizer's decision to merge its pharmaceutical products with Mylan seems to be rooted in the drug giant's decision to focus on some of the more profitable pharmaceutical products. The deal could be a turning point in the pharmaceutical industry that will further attract more customers by consolidating and boosting the production and supply of generic drugs.
The off patent unit in Pfizer, called Upjohn, has been used mainly to package older products such as Lipitor whose patents have expired. The company hopes Upjohn will succeed in a growing market such as China, where the supply of low-quality and even counterfeit generic medicines is common and consumers are seeking more reputable brands such as Pfizer. To this end, Pfizer has even relocated the Upjohn headquarters to Shanghai, indicating the company's complete confidence in its new strategy of targeting such markets. In addition, Pfizer recently offered $ 10.6 billion to buy Array BioPharma, a manufacturer of cancer-specific drugs. Moreover, the company is seeking to divest some of its less profitable businesses, most notably an agreement to merge its consumer health care division with a similar unit in GlaxoSmithKline.
Generic drugs with invalided patents have several advantages and limitations. On the one hand, the use of a well-known brand helps to sell these drugs, and on the other hand, the lack of patent protection makes them a challenge for cheaper competitors. Pfizer's multifaceted strategy to enter the Chinese market, agreeing with companies such as Mylan, while also focusing on specialized and profitable drugs, could enable the company to gain the advantage of being a well-known brand to continue selling its generic drugs, and minimize the risk of competitors through collaborating with other partners. In the meantime, focusing on more specialized drugs with patent protection and limiting the potential for the emergence of new competitors is another source of revenue the company is seeking now.