Business

Kowa, Teva to form generic drug venture

Bloomberg

Teva Pharmaceutical Industries Ltd., the world’s biggest maker of generic drugs, and Kowa Co. have agreed to form a joint venture to gain a share of the growing market for cheaper medicines in Japan.

They expect the business, Teva-Kowa Pharma Co., to generate sales of $1 billion in 2015, Teva, based in Petah Tikva, Israel, said Wednesday. Each company will have a 50 percent stake in the venture, which will be operational in 2009.

Teva seeks to break into the $65 billion a year Japanese drug market as the country tries to reduce health care costs by developing more incentives for pharmacists to dispense generics.

The government wants cheaper copies to account for 30 percent of prescriptions by 2012 from 17 percent now. Achieving the goal would save ¥500 billion, an advisory panel to the Cabinet estimated in May 2007. Teva now generates more than 80 percent of its sales in North America and Europe.

“We spent three years doing analysis of the Japanese market,” Teva Chief Executive Officer Shlomo Yanai said in a press briefing in Tokyo on Wednesday. “We came to the conclusion that the best company for us to join together with is Kowa, with a high level of knowledge and reputation in the Japanese market. We can achieve our targets even faster.”

Details of the operation are still being discussed, the two companies said.

Japan’s health care system is based on a universal insurance program requiring working-age citizens and children to pay 30 percent of the cost of treatment, while seniors contribute about 10 percent. Generic drugs are generally priced 30 percent less than branded products.

The government aims to stem the cost of caring for one of the world’s most rapidly aging societies. Health care spending will swell 70 percent to ¥56 trillion by 2025 from ¥33 trillion in 2005.

The government adopted a plan this year to give pharmacists an incentive payment of ¥40 per prescription if cheaper generics account for at least 30 percent of the medicines they dispense over a three-month period.