Watson Pharmaceuticals (WPI) is the third largest generic pharmaceutical manufacturer in the United States based on total prescriptions dispensed.^[1] Watson is a firm in transition. As late as 2007, Watson's main products were easily replicable generics. While the market for these products has been expanding rapidly in recent years, competition has also increased resulting in downward pressure on Watson's margins.

In an effort to turn around its fortunes, the company has taken several steps to both lower costs and increase revenues. Watson has lagged behind its larger competitors in moving manufacturing to countries like China with lower labor costs. Since 2006, however, the company has acquired interests in several Indian and Chinese R&D and pharmaceutical manufacturing companies. Watson plans to move as much as 50% of its manufacturing capacity overseas in the next few years. In 2006, Watson also broadened its offering to include more controlled release drugs with the acquisition of Andrx. Andrx gives Watson access to 15 different controlled release technologies. Controlled release drugs generally require very specific chemical delivery technologies, putting them outside of the realm of expertise of most generic companies and making them less susceptible to competition and less price sensitive.

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