Pfizer agreed Monday to combine its off-patent drugs division, which controls treatments like the statin Lipitor, with the pharmaceutical company Mylan, creating a potential powerhouse in the business of medicines without patent protections.

The transaction comes as falling prices increase pressure on generic drugmakers, a development that has been mostly overlooked in the United States as consumers grapple with the escalating price of branded treatments. The deal also raises questions about whether it will spur other acquisitions in the sector.

Generic drugmakers like Mylan and Teva have struggled, in part, because pharmacies and wholesalers have been teaming up, increasing their power to bargain for lower prices. That has forced such companies to consider mergers as a way of regaining leverage.

Pfizer has shifted its focus in recent years to treatments expected to enjoy patent protections for years. That has meant striking big deals to acquire promising new drugs, like its $10.6 billion takeover bid last month for Array BioPharma, a maker of specialized cancer treatments.

Pfizer’s shift also has prompted it to dispose of its lower-margin businesses. Last year, for example, it agreed to combine its consumer health-care division with that of GlaxoSmithKline.

Under the terms of the deal announced Monday, Pfizer will spin off Upjohn, which makes drugs whose patents have expired, and combine it with Mylan in an all-stock deal.


The combined business, which eventually will be renamed, is expected to have about $19 billion to $20 billion in annual sales. The companies anticipate an annual cost savings of $1 billion by 2023 as a result of the deal.

Heather Bresch, who had led Mylan when it was the target of outrage over the climbing cost of its EpiPen emergency allergy treatment in 2016, will step down as chief executive. She will be succeeded by the head of Upjohn, Michael Goettler.

Bresch, whose father is Sen. Joe Manchin, D-W.Va., spent nearly her entire career at Mylan and became chief executive in 2012.

She became one of the pharmaceutical industry’s most recognizable faces in 2016 when it emerged that she had received pay raises even as Mylan was raising the price of the EpiPen, a vitally important medicine.

Bresch, who was among the first in the industry to try to pin the blame for rising drug prices on rebates paid to pharmacy-benefit managers, survived the episode. She weathered other controversies as well, including in 2014, when Mylan executives angered many shareholders by moving their headquarters to the Netherlands from Pennsylvania to block a takeover by Teva that many investors favored. More recently, Mylan and other large makers of generic drugs were targeted in a price-fixing investigation that is continuing.

The transaction is expected to close by the middle of next year, pending the approval of regulators and Mylan shareholders.