This is a sobering reversal for an industry that just a few years ago was the world’s most profitable business sector. And it casts a spotlight on the systemic problems drug companies face: a drought of blockbuster drug breakthroughs and research discoveries; pressure from insurers and the government to hold down prices; regulatory vigilance and government investigations; thousands of layoffs in research and development; and a new federal program to eventually allow generic versions of expensive biologic drugs.
Morgan Stanley recently downgraded the entire group of multinational pharmaceutical companies based in Europe — AstraZeneca, Bayer, GlaxoSmithKline, Novartis, Novo Nordisk, and Roche — in a report titled: “An Avalanche of Risk? Downgrading to Cautious.’’ The analysts wrote, “The operating environment for pharma is worsening rapidly.’’
The same concerns apply to drug giants in the United States. They are all struggling with research failures as they scramble to replace their cash cows, such as Pfizer’s multimillion-dollar gamble on a replacement for the cholesterol-lowering drug Lipitor, which failed miserably in clinical trials. Drug companies cut 53,000 jobs last year and 61,000 in 2009, far more than most other sectors.
“This is panic time, this is truly panic time for the industry,’’ said Kenneth I. Kaitin, director of the Center for the Study of Drug Development at Tufts University in Medford, Mass. “I don’t think there’s a company out there that doesn’t realize they don’t have enough products in the pipeline or the portfolio, don’t have enough revenue to sustain their research and development.’’
While industrywide research and development spending has nearly doubled to $45 billion a year over the past decade, the Food and Drug Administration has approved fewer and fewer new drugs. Pfizer and Eli Lilly had major setbacks last year in once-promising Alzheimer’s drug experiments. Merck stopped testing its top acquisition from its merger with Schering Plough, a blood thinner that caused dangerous amounts of bleeding.
Drug company executives have begun addressing the calls for reinvention from analysts who say the industry became too dependent on a business model built around blockbuster drugs.
“We have to fix our innovative core,’’ Pfizer’s new president, Ian C. Read, said in an interview recently. To do that, the company is refocusing on smaller niches in cancer, inflammation, neuroscience, and branded generics — and slashing as much as 30 percent of its research and development spending in the next two years as its scientists work on only the most potentially profitable prospects.
Consumers should see a financial benefit as lower-cost generics replace the expensive elite drugs, but may suffer in the long term if companies reduce research and do not produce drugs that meet the public’s needs.
The federal government is also concerned abut the slowing pace of new drugs. Francis S. Collins, director of the National Institutes of Health, recently proposed a billion-dollar drug development center at the agency. “We seem to have a systemic problem here,’’ Collins said, adding that government research efforts were intended to feed the private sector, not compete with it.
Monday, March 07, 2011
"Panic Time" - Drug giants’ profits threatened by expiring patents - Duff Wilson NYT