ImageOne of the many outcomes of the recent BIO International Conference in Atlanta was the perception and comment by industry experts (such as Steve Burrill of Burrill & Company) that Big Pharma companies are becoming dinosaurs.

While the pharmaceutical industry hasn’t yet hit the wreckage status of the Western automobile industry, bad times are coming quickly. This is due to the massive loss of income and sales as a result of patent expirations of blockbuster drugs, the decline in prescriptions, doctor visits and the overall consumer spend decline for health care because of the economic recession.

Though the cost of prescription drugs represents only 10 percent of the total expenses of U.S. health care, the perception to consumers is that it represents much more. The industry is more of a lightning rod for U.S. government action and intervention in pricing – as well as new product approval – more so than other more expensive components of health care (such as hospitals).

In spite of the long development and high cost of drug development, pharma companies are infinitely more profitable than the automotive industry. That may change in the next five years, though, due to the patent expiration situation and potential U.S. government health care reforms. There is a healthy appetite for generic pharmaceuticals that will soon apply to the expensive biotech drugs.

According to the report, insurance companies are also seeking to save money by shifting more and more prescriptions to generics. Blue Cross Blue Shield reports a rise in generic drug use from 53 percent to 65 percent in 2008, which saved at least $2.5 billion for medical insurance plans and its members.

IMS Health (the major pharmaceutical market research firm) estimates that the global pharma market – with 2008 sales of $773 billion – is expected to slow down from 4.8 percent to 2.5 percent to 3.5 percent in 2009 with the U.S portion of this market declining 1 percent to 2 percent due to all the reasons mentioned above.

The only reason the global market is showing any growth is due to the fast growth of emerging markets such as India, China, South Korea, Brazil, Mexico, Russia and Turkey, according to the report. The growth of the market varies significantly around the world.

global-pharma-market-2008Nevertheless, the Big Pharma dinosaurs haven’t yet hit the wall of obsolescence. Those that have diversified in other areas of health care (such as Abbott Labs, Johnson & Johnson and Baxter) seem to be weathering the recession much better than the drug pure plays. Also, those companies that have more quickly embraced biotechnology (products and culture) are also surviving better.

Let’s take a look at the sales results for 2008.


Of the top 25 companies, 10 are from the U.S., four are Japanese, three are German, two are British, two are Swiss, one is French, one is Danish and one is Israeli.

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