AmerisourceBergen sees end in sight for industrywide generics woes

Generic drug prices have continued their downward spiral thanks to pressure from consolidated purchasers. But one distributor sees light at the end of the tunnel.

AmerisourceBergen expects generics prices to sink between 7% and 9% in its current fiscal year, which wraps next December. But as CEO Steven Collis told Reuters, price erosion is "still high, but it’s not getting worse, which we think is a positive."

For some companies, though, it is getting worse. Teva, the world’s largest generic drugmaker, said Thursday that erosion on its base business rose to 10% from 6% for the third quarter. And as far as the future is concerned, interim CFO Mike McClellan cited a "lack of visibility in this incredibly changing environment" that keeps botching the company’s financial forecasts.

Bernstein analyst Ronny Gal, for one, tweaked his models after the call; he now expects to see the generics business’ gross margins fall to mid-40% by the middle of next year, and he shaved 31 cents off his earnings per share forecast, too.

"Teva is now finding itself in a very challenging spot," he wrote to clients, noting that "they don’t have a lot of margin for error right now."

Elsewhere around the industry, heavyweight Sandoz, a Novartis division, also faced "steady and fierce" Q3 price erosion of 7% in the U.S., Bernstein’s Tim Anderson wrote last week. Last month, the company announced it would have to scale back or nix production of some generic drugs, and, as a result, close a 450-employee plant in Broomfield, Colorado.

Other generics players, such as Impax and Amneal, have chosen to weather the storm by joining forces.