Squeeze on Big Pharma
Changes in US drug-coverage policies only add to uncertainty about the economic outlook for drug manufacturers. Now that Democrats
have extended their control in both houses of Congress, legislators are expected to push for measures that will squeeze pharmaceutical
prices and profits even more. Industry anticipates bills to limit direct-to-consumer advertising and to require greater transparency
in sales and marketing activities. A top Congressional priority is to enact legislation that expands FDA oversight of imported
medical products and foods, and that measure would provide a vehicle for numerous provisions related to drug safety and marketing.
In hopes of fending off even sharper attacks on Capitol Hill and increasing the patient population eligible for drug coverage,
industry has sought to mend fences with the majority party. Pharmaceutical companies greatly increased campaign contributions
to Democrats this year in a big shift from a 70–30 split in favor of Republicans in past national elections. The Pharmaceutical
Research and Manufacturers of America (PhRMA) actively supported SCHIP expansion and worked with local labor organizations
and nonprofit groups to promote healthcare-coverage programs on the state level.
A hostile Congress, curbs on revenues from Medicare and private insurers, plus increased competition from foreign imports
and generics only add to the gloom throughout the pharmaceutical industry. Leading drugmakers have been tightening their belts,
closing down plants, whittling down sales forces, and laying off thousands of workers. In recent months, cost cutting has
extended to research and development units as companies decided to concentrate on promising therapeutic areas and to drop
development work in unsuccessful disease categories.
The worldwide financial crisis has added to these woes, as firms have seen their stock values plummet. Cash-poor biotechnology
companies are caught in the credit squeeze as investors have become risk-averse and investment capital has dried up. The market
for initial public offerings for biotechnology companies has disappeared, prompting many emerging firms to sell out to major
manufacturers.
These developments prompted a fairly dour outlook from IMS Health for the global drug market. IMS predicted that US drug sales
will rise only 1–2% in 2009 to around $300 billion, which is similar to this year's growth rate. Rising unemployment and economic
uncertainty may curb patient visits to doctors. And a drop in the number of new drugs coming to market, along with patent
expirations and delays by insurers in deciding to cover new products, further dimmed prospects for expanded drug use.
The outlook is slightly brighter in Europe and Japan, where drug sales may be pushed by aging populations and demand for more
preventive care. But efforts to control costs through health-technology assessments, increased use of biosimilars, stronger
formularies, and price controls are expected to offset much of the expansion in industrial countries.
If the global pharmaceutical market achieves 5% growth next year, as IMS predicts, it will come from double-digit expansion
in key emerging nations such as China, Brazil, India, South Korea, Mexico, Turkey, and Russia. Pharmaceutical companies are
consequently boosting sales efforts in these high-growth markets in hopes of spurring demand for innovative medicines. However,
the US market accounts for a significant portion of worldwide pharmaceutical sales and an even larger proportion of industry
profits. The Obama victory generated cheers around the world, but its impact on drug development and sales remains to be seen.
Jill Wechsler is Pharmaceutical Technology's Washington editor, 7715 Rocton Ave., Chevy Chase, MD 20815, tel. 301.656.4634, jwechsler@advanstar.com
For more on this topic, see "How Will the 2008 Election Results Affect the Preemption Debate?".
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