In a deal aimed at shoring up drug prices, pharmaceutical giant Pfizer’s off-patent drug business, Upjohn, is set to merge with Mylan, maker of emergency allergic reaction treatment EpiPen.
Pfizer and Mylan have been grappling with declining prices of generic drugs and increased competition. The EpiPen got its first generic competitor in August when the Food and Drug Administration approved Teva Pharmaceuticals’ alternative.
And Pfizer’s Lipitor, which once held a tight trip for the title of world’s best-selling drug, has slumped once it came off patent.
The average retail price of the 390 best-selling generic drugs fell 9.3% in 2017 after falling 19.3% in 2016 and 17.7% in 2015, according to a report by the AARP Public Police Institute released in April.
With their powers combined, Upjohn and Mylan will be better positioned to negotiate higher prices with the health care sector’s other major players, including pharmacy benefit managers and insurers, said Marianne Udow-Phillips, executive director of the Center for Health and Research Transformation at the University of Michigan.
“This is probably the skeptic in me, but I never think these deals are likely to be good for the average consumer,” she said. “They’re not making as much profit as they wanted. … Generally the goal is to combat the falling generic prices.”
EpiPen competitor: FDA approves first generic EpiPen in blow to Mylan
To be sure, consumers aren’t likely to be affected too much in the short term, she said. Also, uncertainty regarding public policy issues continues to hover over the industry.
The new company will have about $19 billion to $20 billion in revenue in 2020, including’s Pfizer’s Lipitor cholesterol drug and Viagra erectile dysfunction treatment pill.
Mylan Chief Financial Officer Ken Parks said in a conference call that the company is still expecting “high-single-digit price erosion” from 2019 to 2020.
Michael Goettler, who currently serves as group president of Upjohn and will become CEO of the combined company, said the combination “is exciting news for patients” and “creates a one-of-a-kind new champion for global health.”
Without Upjohn weighing it down, Pfizer aims to refocus on high-profit brand-name drugs and advanced biological treatments, some of which command extremely high prices.
Deal details: Pfizer will combine its off-patent drug business with Mylan
“That’s really where they see their profit margins coming,” Udow-Phillips said.
The deal marks the latest in a series of moves enabling Pfizer to restructure its operations. The company last year announced a deal with GlaxoSmithKline to combine their consumer health divisions into a joint venture.
The effect of the Pfizer-Mylan deal on Pfizer’s remaining operations could improve the company’s chances at revenue growth but also compromises its product diversity, according to S&P Global Ratings, which downgraded Pfizer’s credit rating from AA to AA- after the deal was announced Monday.
For Mylan, however, the arrangement is “a Goldilocks scenario” – that is, just right, Mizuho Securities analyst Irina Koffler said in a research note Sunday night following reports of a potential deal.
Together, Upjohn and Mylan will get a new name at a later date.
Mylan CEO Heather Bresch, who came under political scrutiny in Washington in 2016 when she defended price hikes for the EpiPen, will retire.
Mylan Chairman Robert Coury will serve as executive chairman of the new company.
Pfizer CEO Albert Bourla will remain in his post.
Pfizer shareholders will own 57% of the new company, while Mylan shareholders will own 43%.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.