Bad News from Big Pharma

This post was written by Frank Barry

We have reached the long-awaited “patent cliff”. Lipitor, which Pfizer produces in Ireland, has just gone off patent and others are set to follow shortly. Big Pharma’s new product pipelines are sparse. Bloomberg reported on this a few weeks ago here.

I don’t think Chris Van Egeraat is quite as pessimistic as he appears to be in the article, and he tells me that the figures quoted come from Bloomberg’s database rather than from him.

Furthermore, Big Pharma is fighting back. And we know that mergers and acquisitions in the sector have increased in recent years, against trend, as the pharma companies diversify into biotech, from which the new innovations are likely to emerge. (See the section on pharmaceuticals, pps. 16-17, here).

But worrying all the same!

4 Responses to “Bad News from Big Pharma”

  1. Johnny Foreigner Says:

    All around the world people who can’t afford these drugs are now gaining access to generics. Enormous numbers of additional lives will be saved through e.g. reduced risk of strokes and heart attacks in people taking statins. The use of generics will increase in this country as well reducing our pharma bill substantially.

    From an employment persepective Ireland is well placed to benefit from any increased investment in biotech research by Big Pharma.

    All in all, a good news story.

  2. Michael Hennigan - Finfacts Says:

    Pharma and medical devices account for 60% of Irish merchandise exports — about 20 firms.

    R&D expenditure continued to drop in 2010 to an estimated three year low of $68bn, which is in stark contrast to the growth rate leading up to 2008.

    New drug success rates continue to decline. 

    Last February, Pfizer, the world’s biggest drugmaker and Ireland’s biggest exporter - - the company accounts for 10% of Ireland’s merchandise exports - -  dealt a huge blow to the to the UK’s research sector, when it announced it planned to shut its R&D facility in Sandwich, Kent, potentially affecting 2,400 jobs. The facility as a research centre dated from the early 1970s and in June, the drug giant announced a partial reprieve with a revised plan to retain some of its “pharmaceutical sciences operations” at Sandwich, a move which will preserve about 350 jobs.

    Last year, the US Food and Drug Administration (FDA) ’s drugs division approved just 21 novel medicines — less than half the level seen in 1996 and 1997.

    Roughly the same number of drugs were approved by the FDA in 2008 as were approved in 1950.

    At the same time, the cost of funding a breakthrough drug is rising by 13.4% annually. The average cost of bringing a product to market rose by more than 25% to more than $1bn this year, from $830m in 2010. Ten of the top 12 firms have seen a dip in returns from research and development (R&D), resulting in an overall drop to 8.4% from 11.8% last year.

    Between 2010 and 2015 products with sales of more than $142bn will face copycat competition.

    The biotech industry as a whole first made a profit in 2008, after 42 years.

    It’s a lottery as most biotech firms never make a profit but that does not stop the Irish Government from dreaming.

    Successful biotech treatments are very expensive. Not good news when most governments are strapped.

    More than half of academic medical research findings cannot be reproduced in industry settings. In effect, much of the published research cannot be relied on - - results are in effect subject to fraud in some cases, variouses biases in other cases including the desire to improve funding chances.

    Bayer, the German chemical giant, last year halted nearly two-thirds of its target-validation projects because in-house experimental findings failed to match up with published literature claims.

    Drugs companies are facing the same challenges as computer firms did a few decades ago.

    Acquiring young companies is one route but it’s argued that the coming decade is one where the leading companies not only don’t know what’s going to happen, but they can’t know what’s going to happen, because so many of the conditions under which they operate are in such an unusual state of flux.

    I always like to end on an optimistic note!

  3. Brian Woods Snr Says:

    @MH: ” … …but it’s argued that the coming decade is one where the leading companies not only don’t know what’s going to happen, but they can’t know what’s going to happen, because so many of the conditions under which they operate are in such an unusual state of flux.”

    Also known as “Limits to Growth”. Happens. Its our ‘finite system’. The current financial debacle is a shining example, helped in small part by …

    “fraud in some cases, variouses biases in other cases including the desire to improve funding chances.”

    Neat, succinct and accurate. Cheers.

    Brian.

  4. Tony Owens Says:

    There are baked-in problems related to control of IP in the pharma industry. Unlike many other sectors in pharma IP is filed far in advance of a very lengthy and risky development, validation and certification process for both the formulation and the manufacturing process. This exposes the industry to huge commercial as well as technical risk. On top of this, changing demographics and the impending end of healthcare budget growth are constraining the scope for recouping the huge investments required to traverse the route from research lab to validated new product introduction.
    The prevailing pharma business model has reached the point of diminishing returns. Something new and disruptive will arise in its place and in fact a number of contenders already have.
    Therapeutic treatments based on farming and processing of naturally-occurring herbal extracts also pose both a threat and an opportunity to the prevailing tech-heavy business model and bear watching in the coming decades as the world acclimatises to a world of limits.

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