Examining Challenges Drug Industry Will Face In Coming Years

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"Over the next few years, the pharmaceutical industry will hit a wall," the Wall Street Journalreports in an examination of challenges that face large pharmaceuticalcompanies. In future years, some of the "top-selling drugs in industryhistory will become history as patent protections expire," with genericcompetition "expected to wipe $67 billion from top companies' annualU.S. sales between 2007 and 2012" -- an amount equal to "roughly halfof the companies' combined 2007 U.S. sales," according to the Journal.

Meanwhile,the "industry's science engine has stalled," as the "century-oldapproach of finding chemicals to treat diseases is producing fewer andfewer drugs," the Journal reports. Datamonitorestimates that annual revenue for the pharmaceutical industry between2011 and 2012 will decrease for the first time in at least fourdecades.

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In response to those issues, pharmaceutical companieshave begun to reorganize. "In five years, many may look verydifferent," the Journal reports. According to the Journal,many pharmaceutical companies will "be in new businesses," their "coststructures may be slimmer and more flexible" and some "familiar namesmay disappear in mergers." A number of pharmaceutical companies alsohave entered research initiatives or partnerships to developbiotechnology medications and have expanded their generic medicationbusinesses. Some pharmaceutical companies also have indicated they willseek to outsource manufacturing capabilities to help reduce costs.

Inaddition, the "dearth of new products has led the industry to investheavily in marketing and legal tactics that squeeze as much revenue aspossible out of existing products," the Journal reports.

RichardEvans, a pharmaceutical industry consultant and a former Wall Streetanalyst, said, "The era that created the modern pharmaceutical industryis over." Sidney Taurel, chair of Eli Lilly, said, "I think the industry is doomed if we don't change" (Martinez/Goldstein, Wall Street Journal, 12/6).

Reprinted with permission from kaisernetwork.org. Youcan view the entire Kaiser DailyHealth Policy Report, search the archives, and sign up for email deliveryat kaisernetwork.org/email. The Kaiser Daily HealthPolicy Report is published for kaisernetwork.org, a free service of The HenryJ. Kaiser Family Foundation.

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