Nasdaq-traded shares of Israeli generic drugmaker Teva Pharmaceutical Industries closed down almost 10% yesterday at $32.27, as a bout of frenzied trading was sparked by news that Merck & Co is planning to cut the price of its cholesterol-buster Zocor to help stave off copycat competition when the drug loses its patent armour on Friday.
In a completely unprecedented move, Merck has inked a deal with US healthcare insurance giant, United Health Group, under which its members will have to dig deeper into their pockets for a month’s supply of generic Zocor (simvastatin) than for the actual brand, according to media reports.
Worldwide sales of Zocor were $4.4 billion last year, but Merck has already said it expects these to decline to $2.3-$2.6 billion in 2006 because of generic competition, and so is doing everything it can to keep its revenue streaming in.
Teva investors fear that the move could substantially punch into sales of generic Zocor but, according to a Reuters report, George Barrett, Teva North America’s Chief Executive, believes the impact will be limited, largely because the programmes involved apply to less than 5% of the population covered by health insurance programs.
But the news will no doubt have caused the jitters at producers of copycat drugs around the world, which will be watching closely to see if this new battle tactic to protect branded drugs' market shares will catch on.