Friday, April 28, 2006

Big Pharma's Big Problem - Peter Rost's take on things

"I'll start off giving you some background. A few years ago I attended a closed meeting with consultants for Ernst & Young. They told the gathered drug executives that the industry was in trouble. Ernst & Young had added together the sales forecasts the drug industry had given to Wall Street and they told us, "if you are going to meet those numbers, you need twice as many drugs as you have in your pipeline. Your stock is going to tank during the next ten years." Of course, no drug executive ever told Wall Street and their investors about this data.

Today, the prediction has come true. Drug company stocks have tumbled. The biggest drug company, Pfizer, has lost 40% of its value in the last five years. Revenue for the first quarter in 2006 came in at $12.7 billion, down 3% from the first quarter of 2005. Growth suddenly went "poof."

IMS Health, an industry research firm, estimates prescription drugs worth $121.5 billion will come off patent between 2006 and 2011. That's half of U.S. drug sales.

So the drug industry is in a panic, because they don't have enough new drugs to fill the gap. The CEO's are trying to sound optimistic, to pump up their stock options, but they know that the "perfect storm" is coming. The good news for consumers is that drug prices will drop and many more generics will be available at low cost.

So what's going on here, could the drug industry really be in for a rough ride?

And, what is the drug industry doing about this?

Simple: Just like a bad student might contemplate cheating, the drug industry plans on big scale cheating.

Number one on the cheat sheet is to stop generics from coming onto the market."


Go here for the rest of Dr Rost's interesting piece in his Huffington Post blog.

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