Big Pharma's Big Problem contd. - "economically unsustainable"

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Big Pharma's business model is "economically unsustainable", according to a report by accountants PricewaterhouseCoopers. The study suggested drug companies' reliance on heavy marketing of a few drugs in the hope of huge sales meant they were "operationally incapable" of acting quickly enough to produce innovative treatments demanded by global markets.

The top pharmaceutical companies are expected to lose 14%-41% of their existing revenues by 2012 as patents expire. Pfizer will suffer the expiry of patents for Viagra and Lipitor, the world's best-selling medicine, leading to the loss of about 41% of its revenues. AstraZeneca is expected to shed about 38% of its sales and GSK sees the patents of its two best-selling drugs - Advair and Avandia - expire by 2012, with a predicted loss of 23% of revenues.

According to Steve Arlington, the main author, drug companies spend twice as much on research and development than 10 years ago, yet produce half as many drugs: 40 to 45% of medicines in phase 3 clinical trials, the last stage, now failed.

Shares in pharmaceutical companies have not performed well, sales and marketing costs have increased, as have legal and regulatory constraints and the reputation of the industry has been tarnished by high-profile cases such as Vioxx, Merck's painkiller that has provoked thousands of lawsuits.

Healthcare providers and payers are keen to reduce the amount they pay for treatment. People are living longer but not necessarily healthier lives, leading to predictions of a global pharmaceuticals market that will more than double in value to £660bn by 2020.

Dr Arlington said the pharmaceutical industry would have to change to capitalise on these opportunities, partly by shifting its investment focus towards research and less on sales and marketing. "It must focus mainly on the development of medicines that prevent or cure. But in all cases, the drugs will have to demonstrate tangible benefits and tackle unmet medical needs."

The pharmaceutical industry needed to come together with other relevant players - governments, patients and investors - to discuss the best way forward.


The report concluded the industry would have to move fast to make changes, or face another round of mergers and acquisitions with leading companies falling into private equity hands.

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