The Drug Industry: Business is Bad

In the Epilogue of HOOKED I reviewed evidence that shows that the glory days of the pharmaceutical industry may rapidly be coming to an end. Further evidence of this may be found in a recent article from The Economist (http://economist.com/business/displaystory.cfm?story_id=10026788&CFID=24605387&CFTOKEN=99289234).

The article describes the same tale of woe--many of today's blockbuster drugs are about to go off patent; Pfizer for instance is looking to lose a cool $13 billion in annual revenue when Lipitor goes off-patent around 2010. The pipeline that was supposed to be producing the next generation of blockbuster drugs has suddenly dried up--notwithstanding heavy new investments in research by most of the leading companies. More and more of the drugs the companies have been relying on for revenues have developed safety problems, either before or after FDA approval.

In an odd turn of events, The Economist reports that even safe drugs are being axed by the companies when their sales are disappointing. Exubera, for example, Pfizer's inhaled insulin, has been one of those poor revenue performers, but has shown no safety problems. Nevertheless Pfizer CEO Jeffrey Kindler decided to pull Exubera around mid-October in a bid to cut costs. (Just what do you say to thousands of patients who have been taking your drug, presumably doing fine with it, and having no bad side effects, when you suddenly yank it off the market?)

One thing that's new, says The Economist, is that the industry leaders have stopped bluffing their way through this downturn. You can now hear such folks as Novartis CEO Daniel Vasella admit openly that the industry has to change its business model in a basic way, and can no longer thrive solely on its top-heavy marketing operation.

But just what is this new business model that will come along and save the industry? The article is pretty thin on those details. Drug firms are starting to buy up biotech firms and medical-diagnostics firms in hoping of adding research muscle and diversifying. Beyond that there is really no news here as to what the industry might have up its sleeve--if anything.

In HOOKED, at the end, I try to make a case that these industry woes might provide an opportunity for meaningful reforms, in the direction of enhanced medical professionalism, if the companies feel vulnerable and are willing finally to admit that they have a problem. Certainly if the only result of these bumps in the road is that the industry goes down the tubes, that would be an outcome that cannot possibly help anyone. Poetic justice may be emotionally satisfying but never made a sick patient better.