Pharma sector faces major challenges as blockbuster drugs decline

17 February 2009 15:40  [Source: ICIS news]

By Andy Brice

LONDON (ICIS news)--The pharmaceutical sector is entering its most significant transition period for decades – not prompted by the current financial gloom but by the decline of blockbuster medicines, a consultant said on Tuesday.

“The poor financial climate is not the problem,” said Edouard Croufer, director of chemical practice at global consultancy Arthur D Little.

“Unlike other sectors, I’d say that pharma is not being affected by what is happening now; the problem started three to four years ago with the progressive disappearance of the blockbusters, which were an enormous cash cow," he added. 

“It became obvious that they needed to change their strategy and look to products for niche diseases and those far more difficult to treat. With those diseases being so much more specific you don’t have multi-billion dollars of sales and such a big market.”

As a result, mass job losses have become endemic as major producers revise their business plans, said Croufer.

Leading players including GlaxoSmithKline, Pfizer and AstraZeneca have all announced thousands of lay-offs in recent months. The bulk of the losses are in the marketing and sales departments.

“It’s now a much more fragmented market,” he said. “Since the cost of discovery is unchanged with a significant amount of expense over the period, and you have a much smaller market, your cash flow is going to be lower.

“It all means that they need to reduce costs; you don’t need such a huge sales force – instead you need a very specific team. All of the top 20 pharma companies globally have been shrinking their workforce in the past few years.”

This is not the first time the pharma industry has seen this scale of job cuts; there was a similar cull in the mid-1990s, noted Croufer. However, although thousands of staff lost their jobs, it coincided with the launch of many blockbuster products which saw many rehired.

With the dearth of new blockbuster medicines and the move to smaller specialist drugs, the latest cuts could be far more damaging to the sector, he warned.

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By: Andy Brice
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