Tuesday April 24, 06:49 AM
Generic cost cutting gives pharmaceutical industry big headache
PARIS (AFP) - Cost cutting in government health budgets and the expiry of patent protection hit the global pharmaceuticals industry hard last year for the second time, and worse is to come, a new study says.
Corinne Segalen, the president of IMS Health (NYSE: RX - news) , France, told a news conference when publishing its annual sector study that the industry had had a "tumultuous" year, as it began to feel the impact of developments that would weigh on the industry for the next decade.
"The worst is yet to come," Segalen said, saying the restrictive impact on potential earnings and sales in 2006 had been a record.
According to the IMS Health study, published last week, the world pharmaceuticals market grew by seven percent over the year to clock up 643 billion dollars (472 billion euros) of sales.
While this represents a slight improvement compared to 2005, when the industry grew 6.8 percent, it is lower than the two digit-growth figures struck in the years up to 2003, IMS said.
After registering 14.5 percent growth in 1999, the industry slowed to 10.4 percent in 2003 before dipping below the 10-percent growth mark in 2004 to eight percent.
The loss of patent protection and increased impact of generic medicines constrained earnings to the extent of 18 billion dollars, after 14 billion dollars in 2005, she said.
Pharmaceutical firms are expected to see a similar dip in their revenues this year, before losing a mighty 24 billion dollars in 2008, and 25 billion in 2010 due to the loss of patent protection.
Segalen pointed to the example of cardiovascular drugs, which she said would be 80 percent dominated by generic medicines by around 2011.
The pharmaceutical industry also has to face up to decisions by governments drastically to cut health spending," she said.
The study also pointed to the impact on growth of more in-depth discussion of the benefits and risks of medicines, along with an inexorable development of distribution networks and a growth of restructuring and mergers, in particular for medium-sized companies.
Three major mergers took place over the year between Merck (MERK.JK - news) and Serono, Altana (Xetra: 760080 - news) and Nycomed and UCB and Schwarz Pharma (Xetra: 722190 - news) .
Over the year sector growth was driven by the United States which still accounts for one half of the world market. However, the market is starting to balance out with 27 percent of the growth taking place in low revenue countries.
Sector growth was at 8.1 percent in the United States, the first growth registered there since 2003 as the market benefited from an increase in health reimbursements by Medicare.
The market grew 3.5 percent in France, 4.1 percent in Britain, 11 percent in Brazil, while it declined in Japan by 0.7 percent.
A total of 31 new compounds were marketed in 2006, after 30 in 2005. Among them seven, of which the obesity drug Acomplia made by Sanofi (Paris: FR0000120578 - news) -Aventis and the Champix anti-smoking drug of Pfizer (NYSE: PFE - news) have the potential to become "blockbusters", the name for medicines generating more than a billion in sales, IMS said.
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