Predictions Dire for U.S. Pharmaceutical Industry

    By Kevin E. Noonan --

EvaluatePharma, a London-based company providing forecasting and industry analysis to the biotech and pharma sector, released a report today predicting the big pharma landscape in 2014, based on industry trends, current and prospective drug pipelines, acquisitions and partnering and the predicted "patent cliff" that will occur as blockbuster drugs come "off-patent" and are subject to generic competition.  And the picture looks bleak for U.S. innovator pharmaceutical companies.

As published today on The Wall Street Journal's Health blog, EvaluatePharma predicts the following changes in pharma company rankings based on prescription and over-the-counter sales between 2007 and 2014:

For comparison, the ranking of the top 10 companies based on actual data for prescription and OTC sales for 2006 is:

According to the company's website, forecasts are based on "SEC filings, annual and quarterly reports, presentations to analysts and investors, company press releases, supplemented with information from additional sources, notably the FDA and US PTO websites as a source of patent information."  Its database is purportedly updated monthly, and contains information on over 900 biotech and pharma companies.  In addition to its forecasts, the company sponsors industry conferences in the U.S. and abroad.

There are a large number of assumptions built into these projections, but they reinforce the apprehension felt by many about the health of the U.S. innovator pharmaceutical industry.  These projections must be kept in mind when policymakers address again, as they certainly will, the need for patent "reform" pressed with such urgency by the IT industry in its efforts to rid itself of the patent thicket that its business model fosters.  Congress and the new administration must recognize that as important as the IT industry is to the U.S. economy, increasing the expense or time to market of the next electronic gadget is ultimately less important than fostering an environment conducive to developing the next generation of drugs that will reduce morbidity and mortality in an aging population.  Recent history has shown that such policy decisions can have large effects on the pharmaceutical industry:  the hesitancy with which Europe and Japan accepted patentability of biotech inventions over the last twenty years led to a decline in pharmaceutical innovation that inverted the relative prosperity of U.S. and foreign innovator drug companies (see "The Continuing Value of Biotech Patenting").  The resulting  burst of innovation by U.S. drug companies is now approaching the end of its life cycle.  It would be tragic if current concerns of the commercial few endangered the capacity for native U.S. innovator drug companies to create the next generation of blockbuster drugs.

Comments

[Michael Samardzija]

I agree with you assessment. However, I believe that this is only one part of the problem. The other part is that Big Pharma must alter its business model from being blockbuster-centric to adjusting to the personalized medicine trend. As tests are developed that will predict the individuals likely to respond to a specific treatment, the population for whom those treatments will be prescribed will decrease significantly. Big Pharma must adjust to this segmentation of their market if it hopes to survive and thrive.

[Kevin E. Noonan]

Dear Michael:

I agree, but only insofar as the FDA adapts, too. For example, if an innovator determines that individuals with a certain phenotype should (or should not) be administered the drug, then safety and efficacy studies involving individuals outside these groups should not be required (although there would have to be a label warning to that effect). In that case, the costs of doing the clinical trials should be decreased, and the success rate of lead compounds should increase, and then (but only then) would there be an economic basis for pharma to eschew the "blockbuster" approach.

Until then, pharma's detractors need to recognize that much of what they don't like about pharma's business practices are the consequence of a system aimed towards minimizing harm to the public from FDA-approved drugs. The Bush administration has the wrong solution - use preemption as a way to prevent harmed individuals from suing in tort. (Of course, ultimately the taxpayers will pay the price for this system.) The right solution is to try to make the approval process more efficient, and your ideas need to be part of that.

Thanks for the comment.