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Demand for low-cost generic drugs sparks building boom on LI

Lina Ortiz, left, and Judit Bonilla, right, package

Lina Ortiz, left, and Judit Bonilla, right, package the bottles on one of the production lines at Hi-Tech Pharmacal in Copiague. (June 18, 2013) Photo Credit: Johnny Milano

Consumers' greater use of low-cost generic drugs to combat ever-higher medical bills has sparked a building boom that is creating more than 2,000 jobs at pharmaceutical manufacturers on Long Island.

Since 2010, 12 drug companies have announced expansion plans, totaling $387 million in building purchases, factory additions and new equipment. Most are in Suffolk County.

Governments have bet big on the pharma industry, offering tax breaks and grants of at least $43.5 million -- much of it from New York State.

"Pharma right now is the shining star, the bright hope in local manufacturing," said Bill Wahlig, head of the Long Island Forum for Technology, a Bethpage-based group helping to modernize plants. He estimated there are 65 drugmakers here.

Yet, pharma's increased economic clout has occurred organically rather than as part of a grand development plan. Several of today's major players began 30 years ago or so as suppliers to the former Rugby-Darby Group Cos. of Rockville Centre, once the country's largest seller of generics.

Executives and industry experts said soaring health care costs and declining insurance coverage are behind the construction and hiring boom. Consumers are seeking savings through generic prescription drugs versus brand name, and store brand instead of brand name for pain relievers, cold medicine and other over-the-counter remedies.

"The average person doesn't know this industry is thriving on Long Island because the companies aren't household names, and they never will be because their products go into bottles with someone else's label on them," said Kenneth Adams, Gov. Andrew M. Cuomo's economic development czar. "But when you pick up the store-brand ibuprofen or ask for your prescription to be filled with a generic, it's Long Island inside."

The boomlet in drug manufacturing comes as Nassau and Suffolk counties struggle to keep businesses and quality jobs. Employment growth has been strongest at low-wage businesses such as stores, restaurants and hotels.

Jobs at drug companies and other chemical producers on Long Island increased 24.5 percent, or 2,443 positions, between 2006 and last September, according to the most recent data from the state Department of Labor, while total factory payrolls dropped 14 percent, or 11,690. Nearly 73,200 people worked in manufacturing last year, 12,417 at drug and other chemical plants.

Drugmakers' expansion projects coincide with the implementation of President Barack Obama's national health care reform, which seeks to expand coverage and tame spiraling costs. Company executives said it was too early to know the impact.

Pharma isn't going to replicate the high-paying jobs lost recently at Northrop Grumman Corp. and other aerospace companies.

Pharma workers earn $49,519 per year, on average, compared with $66,667 for defense workers, according to a Newsday analysis of data collected by industrial development agencies.

Still, pharma jobs are improving the standard of living for some.

Stephen Moloney, 40, can afford a two-bedroom apartment instead of a one-bedroom, and to take his 12-year-old son to Yankees games and on vacation because he was hired by Amneal Pharmaceuticals LLC in November. Amneal makes generic prescription drugs.

As a facilities engineer, Moloney is paid about $45,000 per year before overtime. He had been working in the home-construction industry, which has suffered ups and downs.

"In my old job, we were down to working two or three days a week with no benefits and no growth," he said. "With Amneal, you know the paycheck will be a certain amount every two weeks; it's stable. And there's medical insurance, sick time and paid vacation."

Moloney is among 400 people that Bridgewater, N.J.- based Amneal is hiring for its Suffolk operation, the largest of the local expansion projects.

Chief executive Chintu Patel said the project, involving an addition to the South Yaphank factory, will cost $100 million, or double what was initially forecast. It also is 77,000 square feet larger, making the Horseblock Road building 520,000 square feet in total.

But Patel doesn't appear worried, saying about 5 percent of all U.S. prescriptions are filled with Amneal generics, a majority of them made in Suffolk.

He also said the privately held company has benefited from recent patent expirations on brand-name drugs, a phenomenon called the "patent cliff" because without patent protection brand-name products must compete with low-cost alternatives, and often are quickly eclipsed by them.

Eighty-four percent of all U.S. prescriptions were dispensed as generics last year, IMS Health reported. Generics also caused the first-ever drop in spending for prescription medicine.

While others are shifting production overseas, Amneal is bulking up domestically despite having difficulty finding skilled workers. And the factories aren't likely to be moved because when the U.S. Food and Drug Administration approves a drug for sale, it also approves where the drug will be produced.

Patel said, "We have a huge R&D center in Yaphank and we cannot file from one location and move the product somewhere else . . . it would be very time-consuming."

LNK International Inc., one of the industry's largest local employers, is also getting bigger. Its workforce of 1,700 people is spread over eight locations, mainly in Hauppauge.

Executive vice president Joseph J. Mollica II said the company produces over-the-counter drugs that are sold under the store brands of major chains, such as CVS, Walgreens, Walmart, Target and Costco.

As part of a $13.6-million expansion, he said privately owned LNK recently bought a ninth building and vacant land for another. It has hired more than 200 people with another 100 to go.

The company's growth means job security for John McLellan, 50, who supervises mechanics who set up and maintain production machines on the day shift at three LNK plants.

The Farmingville man was hired in July 2012 after his employer of 13 years left for Illinois. He said he earns $65,000 to $70,000 per year.

"There's a lot of potential here for employees," said McLellan, "and they [LNK's owners] want to stay on Long Island."

Not all pharma companies have that commitment.

The Japanese owners of OSI Pharmaceuticals, developer of brand-name cancer drugs, closed its laboratories in Farmingdale last month, eliminating 115 jobs. The move was a blow to dreams of commercializing local drug inventions; OSI began 30 years ago based in part on research done at Cold Spring Harbor Laboratory.

In March, Spirit Pharmaceuticals, a generics company headquartered in Centereach, bypassed Long Island in deciding to move production from India to South Carolina, investing $12.2 million and creating 296 jobs there.

These events upset government officials, who have identified pharma as crucial to Nassau-Suffolk's future.

State aid is helping Hi-Tech Pharmacal Co. to enlarge one of six buildings in Amityville and to purchase one in Copiague. Company executives said they were wooed by Texas and Louisiana but preferred to stay put.

Hi-Tech Pharmacal was the third-fastest growing public company in the United States two years ago and No. 22 last year, according to Fortune magazine. The company's sales in fiscal 2012 were $230 million.

Hi-Tech Pharmacal's performance was powered by Fluticasone nasal spray, a generic version of the prescription Flonase used for allergies and sinus infections. The company makes other treatments for colds and the flu as well as brand-name over-the-counter products for diabetes and allergies.

Its $50-million expansion will add about 110 people to a workforce of 290; most have already been hired.

"We're diversifying away from just being a generics company," chief financial officer William Peters said. "But within generics, we are going after a larger number of products . . . We think we can really grow in the next two to four years."

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