Who Wins With Generic Lipitor Recall?

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Some things you take with a grain of salt, both figuratively and literally. But how about a grain of glass? Some consumers who take generic Lipitor made by Indian drugmaker Ranbaxy Pharmaceuticals could be doing just that. 

Ranbaxy announced last week that it was recalling certain batches of atorvastatin calcium, the generic version of cholesterol drug Lipitor. These batches could contain small particles of glass less than 1 mm in size, according to the company. 

This is clearly bad news for Ranbaxy and even worse news for consumers affected by the recall. Are there any winners? Probably. Let's look at the possible beneficiaries from this bad news.

Generic alternatives
Recalls like the one just announced could cause additional fears about the safety of generics in general. If this happens, one winner at Ranbaxy's expense could be the company that launched Lipitor in the first place: Pfizer (NYSE: PFE  ) . 

Pfizer continues to offer brand-name Lipitor at a discount. Consumers concerned about the quality levels of generics could insist on the "real thing." Pfizer would stand to benefit from such an increased level of worry. There is also another way that Pfizer could make more money as a result of Ranbaxy's recall. The company partners with Watson Pharmaceuticals (NYSE: WPI  ) on an "authorized" generic version of Lipitor. Watson could increase its revenue as patients who still need to take generics because of their insurance plan provisions use the company's generic drug rather than Ranbaxy's.

However, Pfizer would make even more money in that scenario. The New York Times reported last year that Watson must pay Pfizer around 70% of its profits for the generic version of Lipitor.

Another generic manufacturer, Mylan (Nasdaq: MYL  ) , could also reap rewards from the recall. Mylan began selling its generic atorvastatin calcium drug in May.

One company that could be viewed as a loser in the ordeal is Israel-based Teva Pharmaceuticals (NYSE: TEVA  ) . Teva shared profits with Ranbaxy for the first six months of sales of its generic version of Lipitor. However, the company opted out of making its own version. Had it decided otherwise, Teva could have been in a prime position to profit from Ranbaxy's woes.

Beyond the recall recoil
We really don't know what the long-term implications from the recall might be. Perhaps prescribers and patients will gravitate to other cholesterol drugs such as AstraZeneca's (NYSE: AZN  ) Crestor. Some thought that the rise of generic versions of Lipitor would hurt Crestor sales. However, sales have held up well and could even get a bump from the Ranbaxy recall.

Pfizer could turn its short-term gains into sustained success if consumers choose to go with brand-name Lipitor or the company's authorized generic version. On the other hand, worries stemming from the recall could blow over quickly with the free-for-all battle resuming.

Ranbaxy loses to some extent no matter what happens, though. Consumers lose as well. But the biggest loser to me is the Food and Drug Administration. Every time something like this happens, the credibility of the agency comes into question -- for good reason.  It knew of other problems with Ranbaxy several years ago but allowed the company to move forward with generic Lipitor. 

The FDA simply needs to get its act together. Hopefully, it will. But I might be just looking at the shard of glass as half full.

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