Which company sells more pharmaceuticals in Ireland than any other? Pfizer, you might say? No. GSK then? Wrong again. In fact, it’s none of the top 10 branded drug companies.
Rather it is Israeli generics business Teva – a company which barely had a presence in the State a decade ago – which now sells more medicines here than any of its more vaunted rivals.
It’s a source of pride for Sandra Gannon, who runs a business that now sees its products used by someone in Ireland every six seconds.
Teva's Irish expansion has been delivered largely on the back of another generics company, Ivax, which it bought in a $7.4 billion deal in 2006 that transformed Teva from being the #1 generics business in the US market to the largest player worldwide.
In fact, the Waterford plant dates back even further, with British generics business Harris Pharmaceuticals establishing the respiratory products business in 1985. Ivax bought Harris in 1990.
Waterford remains critical to the enlarged Teva, acting as its respiratory business R&D hub and accounting for roughly 5 per cent of the group’s $20 billion in annual sales.
The Ivax acquisition also brought Gannon on board. The graduate in international marketing and languages had opted to stay in Ireland when she graduated at a time when most of her multilingual peers sought work abroad.
“I decided to stay and got the job in Waterford straight out of college at a time when the commercial presence was being set up and very quickly decided I liked pharma,” says Gannon.
To develop her career, she decided she needed to get out on the road and have some experience selling pharma products. At the time, the only sales beat available was one embracing the Border counties of Cavan, Monaghan and Louth, along with half of Northern Ireland.
“Looking back now, it was probably naivety and an absolute determination that I wanted this job. [In those days], you would rarely see a southern-registered car up in Belfast but I drove up there day in, day out, through the Border checkpoints, and parked my car in extremely loyalist areas of the city because I wanted that job and I wanted to be good at it, and the risks, to a certain degree, the benefits outweighed the risks in my mind,” she recalls.
She admits though that her father – a Garda serving in a Border town – nearly lost his mind “because he knew very well the risks his daughter was taking”.
Having made her mark, Gannon moved on to product management in the UK. As Teva was sizing up Ivax, she was working on turning around an Ivax subsidiary in Sweden. The Teva move was timely as, expecting her first child, a more settled role in Ireland suited.
The challenge for Gannon and other executives in Teva’s new Irish business was that the market for generics in Ireland was not like that in other European countries.
Accounting for between 6 and 7 per cent of prescribed medicines at best back then, generics had a low profile in a market dominated by the products of branded pharmaceutical companies which had been the darlings of the foreign direct investment effort, leading, Gannon believes, to a “bias towards originator companies”.
“But we could also see from experience working in other markets and looking at the inexorable rise [in the cost] of the medicines bill that this could not continue,” Gannon says.
“And the mechanism that almost every other market was using to control costs and make some budget room for innovation was the enhanced use of generics.”
Even before the financial crisis here and globally, Teva’s Irish management team was of the view that change would come quickly.
“The spending could not go unchecked and we said [that] probably the only mechanism to ensure we would use more generics was through pharma substitution rather than doctors changing prescribing habits that were ingrained.”
Austerity only accelerated the inevitable as she sees it, with generic substitution coming into play last summer under the Health (Pricing and Supply of Medical Goods) Act, followed in October by the introduction of reference pricing.
Dominant player
Teva was ready, having drafted Gay Byrne as part of an "Understand Generics" campaign to educate patients and pharmacists, and to address fears about cheaper replacement drugs.
“The last figures I pulled out show that generics now account for 31 per cent of the market in terms of volume, and Teva is now the dominant player in terms of market share in the overall market. Our market share is 23 per cent of the generics market, or about 7 or 8 per cent [of the market overall],” Gannon notes.
While Teva, or Ivax, was ahead of the curve in establishing an R&D base at its Waterford plant, the economics of generics means Teva, which now employs 467 people between its sales base in Dundalk and Waterford, is unlikely to add further to its Irish manufacturing operations.
“With generics, and particularly what we would see as relatively uncomplicated medicines, you can see that price is where it is at,” she says. “It has to be low cost because that is what payers are demanding from the generic companies. So that means developing countries as the biggest proportion of costs in manufacturing are those of headcount, and we are a high-cost, high-wage country relatively speaking.”
But that’s not to say that she sees no opportunity. With the worst impact of the dreaded patent cliff beginning to recede, she argues that the next generation of patent expiries will be more complex medicines, with biosimilars – follow-ons from biologics but requiring their own trials and validation process unlike traditional generics – and complex generics offering opportunity for states such as Ireland.
“Given the presence of the biopharma industry in Ireland, biosimilars would seem to me like an obvious choice, retaining value for much longer than solid dose products.
“We have the capabilities, we have the infrastructure, we certainly have the know-how and, obviously, we have the corporate tax rates which would make this a very attractive place.”
But it is a market that she feels is being ignored.
“Right now, the landscape in terms of biosimilars is very fragmented, so there is no country that is seen as the leader in biosimilars products. But there is scope there for someone to say we will take ownership of that industry.” To date, Gannon says she has seen no sign of it engaging Irish policymakers.
Ageing population
Teva is not all about generics. Reflecting an increasing blurring of the line between branded and generics across the industry, roughly 50 per cent of the Israeli group's revenues come from branded, patented products. Gannon says the 50:50 split "allows us to understand [both sides] better".
“Patents are there to protect innovation and we absolutely agree that should be the case. Innovation is getting harder and more expensive. The unmet needs are much smaller and much more targeted and therefore the cost of recoupling that innovation is getting harder all the time.
“If there was no protection, people would not innovate.”
She believes payers – particularly hard-pressed State agencies such as the HSE and the Department of Health – “need to start accepting the medicines bill will inexorably rise”.
“There was about a 2 per cent increase in consumption last year. That is going to increase, it has to because of the population ageing and living longer. And then obviously, the purse strings have been opened to allow for innovative products to be brought into the system.
“And all those things are going to drive a slow and inexorable rise of the medicines bill again as it will in every state. I don’t believe there is any state that is going to be able to control spending at current levels.”
She argues, however, that recent price comparisons have been unrepresentative – dating largely to a period before reference pricing.
Having said that, the small size of the Irish market and the more advanced generics model elsewhere, including the UK, means prices will inevitably be higher here, she says.
And she argues strongly that both patients and payers need to be more realistic about the cost of drugs, which currently account for around 10 per cent of the overall health budget.
“One of my key bugbears is what value do you put on medicines any longer. People will spend €3 or €4 on a cappuccino but they seem unwilling to pay the same on a month’s supply of a drug.
“I think, given the compexity of the industry, and given that in the pharma industry there is a huge burden of risk on the manufacturer at all points in time, I think that needs to be paid for.
“We seem to have this expectation that medicines should be less than a price of a bar of chocolate and I think that is unrealistic.
She is caustic too about the balance of revenue generated for companies and for the State in the prescription drug market.
“You look at the prescription charges that patients are now paying. The patient is paying €2.50 for a product – such as Teva’s salbutamol inhaler for asthma – that is being reimbursed at around €3.30, ultimately the State is getting paid almost as much as the pharma company that put the drug on the market, that takes all the risks, the transport charges, all the continued regulatory costs, the pharmacovigilance costs . . .”
While competition from generics and, more recently, generic substitution and reference pricing have delivered significant savings, Gannon cautions that this will continue only for so long.
“With the access we want to have in Ireland – we are used to having access to meds and allowing the clinicians decide if that medicine is appropriate and efficacious or not – I cannot see how we can maintain our drugs budget at the level it is at currently and I would like to see a proper engagement around what the medicines budget is going to look like not just next year but in four years’ time, five years’ time,” Gannon says.
However, as with all other players in the health system, she has no readily accessible prescription for where, within the health system, the money will come from to meet the rising bill for drugs.
"All I can say is I don't believe we can continue to make savings and give access and to continue to expect the generics industry to drive any savings. As the reference pricing model becomes more mature, the opportunities to make savings in that area are going to be less and less. A lot of those savings have been made."
CV:Sandra Gannon
Name: Sandra Gannon
Age: 45
Position: General manager, Teva Pharmaceuticals Ireland
Family: Married to "very supportive" husband Michael, they have two young sons.
Outside interests: "My two children consume a lot of my time," she says. She is an avid rugby fan, does yoga "to get rid of the stress" and has recently resumed running.
Something you might expect: Having established Teva as the leading supplier of prescription medicines in Ireland, she believes the generic versus branded debate has moved on, with the focus now shifting to next generation medicines such as biologics and biosimilars.
Something that might surprise: Among her major recent achievements, she cites her mastering of the unsupported headstand – shirshasana – "one of those things in yoga that I always thought was for the twentysomethings before deciding why it should be impossible for me. It took many years of trying and many broken mirrors . . ."
