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Pharmaceutical Industry: Proportion of sales from newer drugs drops; $65bn spent in US on R&D in 2009; 200,000 jobs to go in 2009-2015
By Michael Hennigan, Founder and Editor of Finfacts
Jun 28, 2010 - 9:35:30 PM
The pharmaceutical industry continues to rely heavily on sales from an ageing portfolio of drugs, whilst the proportion of total sales from newer drugs has dropped, according to data released Monday from the 2010 Pharmaceutical R&D Factbook complied by CMR International, a Thomson Reuters business. In 2009, over $65bn was spent in the US on R&D and 200,000 jobs will be cut in the industry in the US, Europe and Japan in the period 2009-2015.
The new edition of the R&D Factbook shows that the majority of sales for the world's leading pharmaceutical companies are derived from the most mature drugs, with the top three drugs for a company on average contributing 44 per cent of total sales.
A large number of patents that are due to expire over the next five years. As patents expire on blockbuster prescription tablets like Pfizer's $12bn-a-year cholesterol medicine Lipitor and AstraZeneca's $5bn heartburn pill Nexium, cut-price generics will rush in and slash margins. Between now and 2015 products with sales of more than $142bn will face copycat competition, according to IMS Health, a leading global supplier of prescription drug data. It is the biggest "cliff" of patent expiries in the history of the pharmaceuticals industry.
Reuters reported earlier this month that Big Pharma doesn't have nearly enough new drugs in the pipeline to replace all those it is about to lose. Since 1950 -- virtually the dawn of the modern era of medicine -- a total of 1,256 new drugs have been approved by the US Food and Drug Administration (FDA). But the industry today produces roughly the same number of new medicines that it did 60 years ago.
The Factbook says that more than $65bn was invested in R&D last year in the US alone but the number of new drugs launched annually has fallen 44 per cent since 1997.
A general decline in success rates for new drugs also has taken its toll on productivity and indicative of this is a doubling of phase III terminations in the period 2007-2009 compared with those in 2004-2006. Further analysis of the data reveals that less than 1 in 10 drugs reaching 'first toxicity dose' can now expect to be successfully launched.
Key highlights from the 2010 R&D Factbook include:
The proportion of total sales from drugs launched within the last five years has dropped to below 7 per cent, compared with 8 per cent in 2008.
R&D expenditure dropped by 0.3 per cent in 2009, down from 6.6 per cent in 2008, and in stark contrast to the growth rate of previous years.
26 new molecular entities (NME) were launched onto the global market in 2009, an increase from 2008's 20-year low of 21.
17.9 per cent of global R&D expenditure was allocated to anti-cancer drugs, making it the therapeutic area receiving the largest proportion of investment.
Competition from the generics sector is increasing in particular due to contributions from companies based in India and China.
"The latest data shows that poor productivity in 2009 continued to be exasperated by the low success rate for drugs in late stage development and a decline in sales from new drugs launched within the last 5 years," said Hans Poulsen, head of consulting at CMR International. "The increase in NME launches compared with 2008 offers some positive news however, with data indicating a continued drop in overall success rates, it remains to be seen if the industry can reverse a 10 year trend in declining R&D output."
The information published in the Factbook is based on primary sources covering major pharmaceutical companies which account for approximately 80 per cent of the industry's global R&D expenditure.
More than 50% of Ireland's merchandise exports are from the pharmaceutical and medical devices sectors.
In the five years to 2009, exports increased by 26% but the payroll remained almost static at 40,000.
Sam Isaly, managing partner at OrbiMed Advisors -- which has some $5bn under management and is one of the world's largest healthcare investment firms -- told Reuters that he expects employment in the 14 Big Pharma companies across the United States, Europe and Japan to fall around 20 per cent between 2009 and 2015. That means some 200,000 jobs will disappear across the drugs business -- not only in research but also in sales and back office functions.
Is the pharma industry moving beyond blockbuster drugs? Alan Barge, head of oncology at AstraZeneca, discusses the issue with CNBC:
Pharmaceutical giant Pfizer is accused of pushing a pain pill, Bextra, to the masses and is forced to pay a total of $2.3 billion dollars in civil and criminal fines for its subsidiary, Pharmacia. The $1.3 billion dollar criminal fine is larger than any other case in US history: