German chemical and pharmaceutical company Merck KGaA has set up a dedicated business unit in the USA to advance its generic drug business in the world’s largest pharmaceutical market.

The move comes at a time of growing competition in the fast-growing, $45 million dollar generics market, with the top two companies – Israel’s Teva Pharmaceutical Industries and the Sandoz subsidiary of Switzerland’s Novartis – aggressively acquiring smaller companies in order to gain a competitive advantage [[26/07/05a]] [[07/06/05e]].

Bigger is considered better in generics, because healthcare payers are increasingly trying to do deals with single providers of pharmaceuticals to cut costs.

Merck’s generics business – ranked third in the marketplace behind Teva and Sandoz - had sales of 465 million euros in the second quarter of this year, a rise of 13% year-on-year [[22/07/05f]]. However, in North America Merck’s Canada-based Genpharm business has suffered from aggressive competition and pricing pressure.

The new US unit, called Genpharm LP, will be located in New York and will provide Merck with ‘direct access to US customers’, according to the company. Meanwhile, it removes the threat that continuing wrangles in the USA regarding pharmaceutical re-imports from Canada might have an impact on the North American business [[05/05/05d]].

Genpharm will be headed by Robert Mauro, who will serve as president and head up all of Merck’s generics activities in the US, with the exception of specialty respiratory products company Dey Inc. Mauro joins Merck from a short stint at the helm of ill-fated generics house Able Laboratories, which was forced to cease all production and recall its entire product line earlier year this after serious quality control problems were uncovered at its production facility in New Jersey [[24/05/05f]]. Able has since filed for bankruptcy protection.

According to figures from IMS, generics’ share of the $500 billion world drugs market is growing fast - as a raft of former blockbuster agents lose patent protection and cash-strapped health systems limit their spending on prescription medicines. Generic drugs now account for 30% of volume consumption in the US, Canada, Germany and the UK.