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The Best Generic Pharmaceutical Stocks for Long-Term Investing

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May. 5 2022, Published 9:46 a.m. ET

Amid efforts to lower medical costs, generic drugs will continue to see strong demand. As a result, investors are looking to the generic drug industry for opportunities. What are the best generic pharmaceutical stocks to buy now?

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Medication expenses a huge burden to patients and a major concern for the government. The White House and Congress have proposed various measures to bring down drug costs, but they have yet to be approved. In the meantime, to lower healthcare costs, people are relying on less expensive generic drugs.

The global market for generic drugs is forecast to expand to $574 billion in 2027 from $414 billion in 2021. That presents a huge business opportunity for generic drugmakers.

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Why is generic medication important in controlling healthcare costs?

When a company first introduces a medication, it often gets years of market exclusivity. After the patent protection expires, other companies can introduce their own version of the original drug. Generic drugs, which work just like the original, require FDA approval before they can come to market. (There are also biosimilar drugs, which are versions of complex medications called biologics. Although they’re more difficult to develop, they present an even more lucrative opportunity for drugmakers.)

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Competition among drugmakers often leads to generic medication being cheaper (up to 80 percent less). Generic drugs have saved the U.S. healthcare system about $2.2 trillion in the past decade.

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What are the best generic pharmaceutical stocks to buy now?

As long as healthcare costs remain a burden, business is only going to boom for generic pharmaceutical companies. Companies with more resources and experience in the business can make the most of the opportunity. If you’re shopping for great healthcare stocks in the generic drug category, some of the best options to consider are:

  • Teva Pharmaceutical (TEVA).

  • Viatris (VTRS).

  • Endo International (ENDP).

Generic drug powerhouse Teva boasts a global reach

Israel-based Teva, the world’s largest generic drugmaker, has manufacturing facilities in America, Europe, and Australia. It has a large portfolio of generic medications targeting a broad range of conditions. The company also has a small portfolio of original medications. Teva generates about $16 billion in annual revenue.

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Viatris has Pfizer’s blessings

U.S.-based Viatris is the global generic drug organization formed from the 2020 merger of Mylan with Pfizer’s generic medicine unit, Upjohn. The company has a large portfolio of generic drugs, supplemented by some branded products. Viatris generates about $17 billion in annual sales.

U.S. healthcare powers Endo’s drug business

Although it's based in Ireland, Endo draws more than 90 percent of its sales from the U.S. The company develops generic medications targeting a wide range of diseases, as well as original, patent-protected drugs. Endo generates about $3 billion in annual revenue.

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