Wall Street Journal Examines Challenges Drug Industry Will Face In Coming Years

Main Category: Pharma Industry / Biotech Industry
Article Date: 07 Dec 2007 - 5:00 PDT

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"Over the next few years, the pharmaceutical industry will hit a wall," the Wall Street Journal reports in an examination of challenges that face large pharmaceutical companies. In future years, some of the "top-selling drugs in industry history will become history as patent protections expire," with generic competition "expected to wipe $67 billion from top companies' annual U.S. sales between 2007 and 2012" -- an amount equal to "roughly half of the companies' combined 2007 U.S. sales," according to the Journal.

Meanwhile, the "industry's science engine has stalled," as the "century-old approach of finding chemicals to treat diseases is producing fewer and fewer drugs," the Journal reports. Datamonitor estimates that annual revenue for the pharmaceutical industry between 2011 and 2012 will decrease for the first time in at least four decades.

In response to those issues, pharmaceutical companies have begun to reorganize. "In five years, many may look very different," the Journal reports. According to the Journal, many pharmaceutical companies will "be in new businesses," their "cost structures may be slimmer and more flexible" and some "familiar names may disappear in mergers." A number of pharmaceutical companies also have entered research initiatives or partnerships to develop biotechnology medications and have expanded their generic medication businesses. Some pharmaceutical companies also have indicated they will seek to outsource manufacturing capabilities to help reduce costs.

In addition, the "dearth of new products has led the industry to invest heavily in marketing and legal tactics that squeeze as much revenue as possible out of existing products," the Journal reports.

Richard Evans, a pharmaceutical industry consultant and a former Wall Street analyst, said, "The era that created the modern pharmaceutical industry is over." Sidney Taurel, chair of Eli Lilly, said, "I think the industry is doomed if we don't change" (Martinez/Goldstein, Wall Street Journal, 12/6).

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