Posted by: Ranveer Bassey22 MAY 2011
If you knew that, on a date inthe future, you'd be thrown off a cliff, you'd probably be a little scared and wouldtry avoiding it. Metaphorically, that'sexactly the situation pharmaceutical companies find themselves in.
Theirs is known as the patentcliff and represents the period that patents expire on multiple blockbusterdrugs. It's estimated that, by 2016, the industry will have lost approximately £70bn of annualrevenue to generic competition.
Ploughing billions into researchhasn't yielded the strong drug pipelines needed to bring new drugs tomarket. Why is anyone's guess, but Iimagine the combinatorial chemistry approach - or the‘stack-them-high-and-hope-one-works' approach - that was once hailed as theoracle of new drugs hasn't been as successful as hoped. Further adding to the industry's woes is thatrestrained healthcare spending in the developed economies has been puttingdownward pressure on prices.
The industry has responded inseveral ways. The most understandableresponse has been cost-cutting, which has manifested as a restructuring ofresearch away from less lucrative therapeutic areas with smaller markets andstrong generic competition. This was thereason Pfizer gave for the headline-generating closure of its Sandwich site. Seemingly, following the expression "if youcan't beat them, join them", many companies have been manufacturing their owngenerics. Novartis has been developing Sandoz,their generic subsidiary, since 2003.
Another interesting shift hasbeen towards emerging markets. Thesehave typically been ignored in the past due to poor healthcare access and aweak patent protection environment. Nowthe emerging markets are too lucrative to ignore, especially set againstanaemic growth in the developed economies. Emerging markets are expected to account for 48% of industry growth by2013.
Biologics represent a new areafor expansion. It's predicted the marketwill grow at a rate of 13% per annum compared to 1% for small organic moleculedrugs in future. Given this, it's easyto see why biologics are seen as the knight in shining armour for the industry. The innovation mostly comes from smallbiotech companies, which are often bought out. There's been a spate of these recently with Genzyme bought by Sanofi-Aventisand Genentech bought by Roche.
The pharmaceutical industry facespressures at the moment but you needn't get your tissue out to wipe away theirtears. There will always be value increating methods of improving health - by whom and how will be the only real changes.