Generic Drug Stocks - A Buying Opportunity

The generic Tagamet (cimetidine) and Glucotrol (glipizide) markets are turning out to be very different from the generic naproxen and alprazolam markets, according to Jerry Treppel and Edward Neugeboren of Kidder Peabody, who suggest this gives credence to the hypothesis that the latter two products were an aberration in the generic drugs market, and not the beginning of an unpleasant new pattern.

Mylan seems to be the big winner in both the generic Tagamet and Glucotrol arenas, they say. The severe price cutting of the naproxen and alprazolam markets never moved to niche tablets and capsules, liquids, creams, ointments or injectables, but Wall Street has tended to lump all generic markets together.

The investment community has also not realized that the wave of generic patent expirations has yet to appear on the market, and that generics are the single largest beneficiary of the growth of pharmaceutical benefit managers, the analysts conclude. They feel that PBMs have neither the desire nor the ability to decide which generics get used, even if the PBM is owned by a large drug company - but the pharmacist does.