Prospects for pharmaceutical companiesFor top pharmaceutical companies, the period from 2003 to 2009 was marked by a robust 7.1% growth rate. But the leading branded pharma companies will see growth slow to just 1.3% from now to 2015, independent market analyst company Datamonitor said in a new report. Behind the "sharp declines in branded sales" and the "rapid deterioration in growth," is the loss of patent exclusivity on many drugs.

Indeed, the much-dreaded "patent cliff" will shift gears in 2011 and get steeper, with a growing number of major drugs losing patent protection and their manufacturers forced to compete with cheaper generics. At the same time, "The difficulty in developing new products, particularly those that can generate sufficient sales to compensate for blockbuster expiries, has compounded this problem," Simon King, pharmaceutical company analyst at Datamonitor said in a statement.

King points to a shift among drugmakers "away from blockbuster-centric growth strategies towards diversification into other areas of the market." Indeed, over the last year, pharmaceuticals have been investing more in areas such as generics, vaccines, biological drugs and highly specific drugs such as those to treat rare diseases.

A Few Will Buck the Trend

Datamonitor predicts that companies "insulated from generic competition, or able to offset it via revenue growth sourced from a high biologics focus or the targeting of niche indications and areas of high unmet need will therefore emerge as the best performers." Of the Big Pharma companies, only Bayer, Novartis (NVS), Roche (RHHBY) and GlaxoSmithKline (GSK) will apparently be generating above-average growth over the period to 2015.

But while Datamonitor focuses on the patent-cliff implication, another aspect is likely to add to pharmaceutical companies' headache: government cost-cutting. In the post-Great-Recession age of large deficits and sovereign debt problems, governments are trying to cut back on everything, including health care. The U.S. health care insurance reform is but one example.

Countries across the European Union have introduced austerity measures that feature health care spending cuts, including specifically tackling the power of pharmaceutical companies to set prices in Germany. Bailed-out Greece and debt-ridden Spain also included severe health care reductions in their austerity measures. Hungary's economic reform, to be announced next month, could include 30% cuts to the national drug-reimbursement bill.

"Enormous Downward Pressure"

And just Thursday, Bloomberg reported that the U.K. has told the drug industry in the summer that the prices of new medicines would be lower than companies wanted. Alan Maynard, a health economist at the University of York, expects "enormous downward pressure on drug prices and volumes," Bloomberg quotes.

It's also not surprising then that many drug companies have turned to emerging markets in search for growth, as their health care budgets are increasing, not shrinking. With less growth and shrinking research and development budgets, it will be critical for pharmas to find enough incentive to continue with innovative research.

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gritzsl

If you really believe the Big Pharma's are going to have issues with revenues you are kidding yourself. They will buy up the generic producers and raise prices. That would be especially true in the US where there is little if any price controls on Big Pharma companies. Europe has and will continue to limit what can be charged. Good for their citizens bad for Americans. The Big Pharma companies will look at the US customers as their cash cow. As its always been, what a shame.

January 24 2011 at 1:27 PM Report abuse +1 rate up rate down Reply
David

With more baby boomers retiring, and aches and pains showing up. It will be a boom time for Big Pharmas. Get your facts straight Melly!

January 24 2011 at 12:27 PM Report abuse rate up rate down Reply