Pharma sector would benefit from greater dialogue

10 January 2005 16:51  [Source: ICIS news]

Pharmaceuticals sector performance is under pressure of that there is little doubt – and more so in the US than in Europe or Japan.

 

The challenges are obvious: the drive by purchasers to push down pharmaceuticals prices; increased costs and seemingly unproductive research pipelines. And analysts are not necessarily positive on the sector either, for the next few years at least. Highly rated drug companies have a great deal to live up to and, in a competitive, high risk environment, have a great way to fall.

 

In a late 2004 pharmaceuticals review, international credit ratings agency Moody’s was essentially downbeat on the sector. Moody's ratings for pharmaceuticals are among the highest for any industry group. But the ratings outlook for large US pharmaceutical companies is negative while it is stable for European and Japanese firms.

 

Reasons for the caution are clear. Patent expirations are the key challenge for many firms and more so for the US giants than their more locally focused and smaller European and Japanese counterparts. Moody’s talks of near term product launches from ‘late-stage’ pipelines not necessarily being able to offset the risks of patent expirations and the challenges of generic competition they represent.

 

Companies perhaps have to demonstrate more clearly how their research effort will translate into returns in the market place. The fact that one company spends more on research than another is by no means the best measure of research productivity. Research and development (R&D) efficiency and productivity remain critical for all global players in this business.

 

Consultants Charles River Associates (CRA) highlighted the issues in a study for the European Commission (EC) published in November 2004. It pointed to the fact that the current seeming hiccough in late stage research pipelines is more due to bottlenecks in the registration process than anything else. It is not so much a case of drug companies struggling to find new active molecules; rather, registration-process related issues are stemming the flow of new pharmaceuticals into the market place.

 

A solution is not immediately obvious but greater dialogue between companies and the regulators is one way to tackle the issue. This is the backbone of the ‘critical path’ debate which seeks to focus policy on the pathway between research and product development and activities like the design of clinical trials. It is noteworthy that Moody’s suggests that consolidation and globalisation has had little positive impact in pharmaceuticals – mega-mergers have not demonstrated increased productivity in research and development. Corporate integration is challenging, the ratings agency acknowledges.

 

Companies are spending more on research and product development but falling foul of a system that has led to bottlenecks in phase III drug trials and new product acceptance. In many ways this is a global phenomenon and not specific to either the US or Europe and Japan.

 

Pharmaceutical industry challenges have changed markedly in recent years and are not always clear cut although it is apparent that the sort of techniques used in basic research have yet to be developed in applied research. The accepted use of biomarkers in the regulatory process, for instance, CRA suggests, would give the industry greater certainty and increase the efficiency of the development process.

 

The industry is beset with problems not necessarily of its own making but problems that need to be addressed. Greater communication throughout the development and regulatory process would benefit sector companies greatly. More formalised processes are a way forward and would help firms demonstrate that they can lift research and development efficiency and productivity still further.

By: Nigel Davis
+44 20 8652 3214

< previous article(VIDEO - ICIS news Asia Lunchtime Bulletin 16 October 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly