Teva: Neither Flag nor Ship

It’s time to stop looking at the pharmaceutical giant as an Israeli miracle. It’s just another company in a capitalist world.

It’s hard to complain about Teva Pharmaceuticals, which this week announced the dismissal of 5,000 employees worldwide, including some 800 in Israel. Most of the gripes about the company since it announced its streamlining plan come from the realms of morality and emotion, and can essentially be summed up as “it’s not nice” or “this isn’t the way to behave” – claims that can be easily refuted by seemingly rational economic arguments.

At a time when it has billions of dollars of debt hanging over it, when the patent on its only significant original drug, which is responsible for about half its profits, is about to lapse, and while it is still profitable and standing on its own two feet, Teva is doing what any company that wants to survive in the global market must do: cut costs. The company isn’t a criminal, and it isn’t violating any law.

It’s not nice to fire workers when the CEO earns NIS 12.7 million a year, but Teva’s board of directors is entitled to employ whomever it thinks will lead the company to a better place, at whatever salary it pleases. It’s not nice to fire Israeli workers after Teva benefited from tax breaks worth about NIS 12 billion from 2006-2011, but it received these benefits legally, by meeting the export criterion, not by meeting the employment criterion. It’s not nice to fire workers when the company is distributing dividends and offering to buy back stock, but Teva is no different from any other private company, in which shareholders’ interests take precedence over those of the workers.

And this is the source of the deep disappointment over Teva, which is being judged with a severity that would never be applied to Google or Intel: the fact that it is just another company in a capitalist world, and not the national miracle we were sold – “the flagship of Israeli industry,” an ethos that was nurtured for years by economic policymakers, the business sector and their emissaries in the media.

A few years ago, a television series aired on “The world of Israeli industry.” I especially remember the episode devoted to Teva and its legendary chairman and CEO, the late Eli Hurvitz. This episode, which was packed with clichés (“the Jewish brain,” “Israeli chutzpah,” “small and smart”), epitomized the way Teva was marketed to the Israeli public, and in consequence, how it was perceived by this public: as an Israeli miracle – like the Dead Sea, perhaps – that was marching the nation toward a better future.

But now, Teva – whose CEO, Jeremy Levin, is South African and whose chairman, Phillip Frost, is American – comes and says: Sorry, I’m nothing of the sort. I’m neither a flag nor a ship, but a global corporation, whose income is derived 80 percent from overseas, and whose function is to maximize the profits of its shareholders and the executives who work for them.

This statement is a wake-up call for anyone who is still engrossed in some patriotic romantic dream: Teva doesn’t represent Israel, but itself and its shareholders, and it is no longer interested in the role of national icon, because that role no longer brings it any benefits. Just like that collection of foreign players known as the Maccabi Tel Aviv basketball team doesn’t represent Israel, the Jewish people or the descendants of the Maccabees, but instead efficiently services a strong global brand.

There’s no reason to declare war on Teva or to try to intervene in its business plan. But there’s good reason to stop the masquerade and understand that in the Israel of 2013, which prostrates itself before the rule of the corporations, economic viability takes precedence over all else, including national sentiment. And if that’s the situation, and it is acceptable to our economic policymakers, no one has the right to blame those Israelis who leave the country for reasons of convenience, or to demand any kind of fortitude on national Israeli grounds.

And who knows? Maybe a government or army working from China at a third of the cost could provide better service to that company known as the State of Israel.

Teva's headquarters in Jerusalem.
Bloomberg