The recent announcement that Teva Pharmaceuticals will lay off roughly 2,400 employees–approximately 8% of its global workforce–is a significant development in a sector already under strain. This move aims to save $700 million by 2027 as Teva attempts to rebalance its role as both a generics manufacturer and a player in branded pharmaceuticals.
It reveals a deep challenge facing generics manufacturers in the U.S. and globally: the current market structure does not reward the cost-saving potential of generic or biosimilar drugs. Instead, it privileges the profit margins of expensive branded medications.
Teva’s layoffs aren’t just a corporate adjustment, they’re a symptom of a drug market that’s fundamentally out of balance. We need to rethink how we reward innovation, control costs and structure distribution. Lasting change will require curbing PBM influence and redesigning incentives to reward value and competition.
Teva’s layoffs highlight a stark reality: generic drugs no longer offer a reliable path to growth in the U.S. market. PBMs, regulations and pricing incentives have warped the system to the point where generics and biosimilars–once seen as the key to sustainable drug costs–are no longer viable business models.
In a country where generics account for nearly 90% of prescriptions but only a small fraction of total drug spending, manufacturers face razor-thin margins and limited commercial upside. Unlike branded drugs, generics do not benefit from formulary placement incentives, advertising or preferential reimbursement.
This issue is compounded by global pricing distortions. In Europe, generic drugs are often priced higher than in the U.S., allowing manufacturers to capture reasonable returns abroad. But in America’s free-market healthcare system, companies ironically find themselves unable to compete due to PBM-driven pricing strategies that reward high list prices and rebate structures over net-cost affordability.
At the heart of the dysfunction is the pharmacy benefit manager. PBMs were originally intended to negotiate lower prices on behalf of employers and health plans. But as I discuss in a previous column, over time their profit model has shifted toward maximizing rebate revenue, most of which is derived from expensive branded medications.
PBMs claim to support cost savings and patient affordability. Yet in practice, they often exclude generics and biosimilars from formularies if these alternatives don’t come with a lucrative rebate. As a result, lower-cost competitors are blocked from market access, despite having met rigorous FDA approval standards. The rebate-driven model warps clinical decision-making, inflates costs and ultimately harms patients and taxpayers.
The branded pharmaceutical sector deserves credit for high-risk innovation. Developing a new drug takes upwards of $2 billion in investment and years of research, with no guarantee of success. It’s reasonable for manufacturers to recoup those costs, and then some, on successful assets.
But that justification becomes murky when the financial system continues to reward branded products long after they’ve lost exclusivity, purely because of channel economics. When a biosimilar or generic alternative becomes available, the transition should be smooth, guided by comparative value and patient benefit.
Instead, branded products often retain dominance through financial agreements with PBMs, payers and providers, rather than clinical necessity. There is a place for both branded and generic drugs in a functioning market, but the rules must be rational and transparent.
Teva’s layoffs, like the recent downsizing at Biogen and Bristol Myers Squibb, are not isolated incidents. They are predictable consequences of an industry that has become dependent on distorted incentives and short-term financial engineering. The U.S. drug pricing system rewards the wrong actors, discourages healthy competition and drives up costs without corresponding improvements in value or outcomes.
The solution is not to vilify pharmaceutical manufacturers. Rather, we need to create a competitive, value-based market–one that rewards innovation, encourages adoption of cost-saving alternatives and removes the financial bottlenecks imposed by intermediaries.
If we’re serious about controlling drug costs, ensuring patient access and maintaining global leadership in pharmaceutical innovation, we must take a hard look at the economic levers shaping the industry. That starts with realigning the roles of manufacturers, PBMs and policymakers.
Teva’s restructuring should be a wake-up call, not just for generics manufacturers, but for the entire healthcare ecosystem. The system is not broken beyond repair, but it is misaligned in ways that threaten sustainability, affordability and public trust. Rebalancing these forces is a national security and public health necessity.
