How Big Pharma plans to stay big

The days of exponential growth for the pharmaceutical industry are past. Sales growth has been leveling off since the 1990s. Companies simulate growth by buying smaller companies and firing employees.

What will Big Pharma look like as it moves into the future? FierceBiotech provides a summary of a forecast offered by industry expert, Steven Burrill. The three-pronged strategy: Globalization, more biotech acquisitions, and generics.

Globalization

Now that growth in the US, Europe, and Japan has leveled off, companies are targeting “emerging” markets, such as Brazil, Russia, China, and India. This is not good news for US and European consumers. Burrill urged companies to concentrate on drugs that treat the most common diseases in emerging countries – drugs that may be of little importance to the health care needs of highly developed nations.

Acquisitions

Pharma is often referred to these days as biopharma, due to the rampant acquisition of so many biotech companies. We can expect acquisitions to continue.

More drugs from biotechs – valuable as they may be – contribute to escalating costs. Drug prices increased 9.1% last year, the biggest increase in 10 years.

Generics

Drug patents at big companies are expiring. This will cost the industry an estimated $32 billion in lost sales in 2011 and another $32 billion in 2012.

Generic drugs make up 75% of US prescriptions. One solution for the industry is “branded” generics: Selling medications no longer covered by a patent for a price that’s higher than the cost of regular generics, but lower than the cost of the actual name brand drug. The drug industry believes there’s a market for branded generics among consumers who worry about counterfeit medications or about uneven quality control for unbranded generics. Branded generics also sell well in emerging markets.

To counteract the problem of expiring patents there’s also the pay-for-delay strategy: Brand-name pharmaceutical companies pay generic competitors to delay offering a generic version of a drug for a number of years. The Federal Trade Commission argues (PDF) that this is a bad deal for consumers: “Consumers … miss out on generic prices that can be as much as 90 percent less than brand prices. For example, brand-name medication that costs $300 per month might be sold as a generic for as little as $30 per month.”

Pay-for-delay was declared illegal in 2003, but since 2005 appellate courts have “misapplied” antitrust law to allow it to continue.

Pets, consumer products, and personalized medicine

Pharmaceutical companies have largely sold off the consumer side of their business, but now they’re rethinking that move. Marketing band aids and cough medicine, which sell with predictable regularity, may protect companies from fluctuations in the sale of prescription drugs.

And then there’s pets. The sale of drugs for animals is rapidly increasing. In 2003, Americans spent $11 billion on drugs for their pets. That number is now five times larger.

Personalized medicine is another avenue for expansion. Gene testing can determine which cancer patients are most likely to respond to specific drugs. This is a promising new market for the pharmaceutical industry, though it will require highly specialized marketing.

The pharmaceutical industry has been crying poor lately, complaining about what a hard time they’ll have maintaining growth and profits without their usual stable of blockbuster drugs. Never fear. Big Pharma will find a way to remain big.

Resources:

Photo source: 24-7 Press Release

Maureen Martino, Live From BIO: The future of pharma growth, FierceBiotech, May 6, 2010

Tracy Staton, The pharma trifecta: Generics, new markets, and personalization, FiercePharma, April 27, 2010

FTC staff, Pay-for-Delay: How Drug Company Pay-offs Cost Consumers Billions (PDF), January 2010