E-drug: Pressure on profits drug companies
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[Copied as fair use. HH]
BMJ 2002;324:65 (12 January 2002)
Drug companies face pressure on profits
Deborah Josefson, San Francisco
Major pharmaceutical corporations in the United States are bracing
themselves for reduced profits as states, healthcare plans, and
consumers lobby for lower prices for prescription drugs.
Some manufacturers are also facing the expiry of patents on some
of their biggest selling drugs, which threatens to further erode their
profits. Among the expected casualties are such pharmaceutical
giants as Merck, Bristol-Myers Squibb, Eli Lilly, Schering-Plough,
and Pharmacia.
Popular prescription brand name drugs such as Glucophage
(metformin hydrochloride), Prozac (fluoxetine), Prilosec, marketed in
the United Kingdom as Losec (omeprazole), Clarityn (loratadine),
and Zestril (lisinopril) will soon face stiff competition from generic
equivalents.
Merck has already announced that its earnings in the coming year
will be flat, causing its stock price to plummet 9.4% on the day of
the announcement.
After decades of unprecedented growth, the pharmaceutical
industry is now confronting increasing resistance to previously
proven sales tactics, as insurers, consumers, and state funded
healthcare plans target the companies in an attempt to control
soaring healthcare expenditures.
Companies say that reduced profits will endanger investment in
research and development and may therefore impede future
healthcare progress.
Pharmaceutical companies in the US have traditionally been
consistently profitable. This is largely because the pharmaceutical
industry in the US is free to charge whatever the market will bear.
Until recently the market chose to bear nearly everything, with
health insurers and individual consumers footing the bill.
Unlike Canada and much of Europe, where the cost of prescription
drugs is regulated by government, the US has as yet no federally
imposed method for containing the cost of prescription drugs.
Action on proposed legislation on prescription drug benefits for
Medicare recipients has been suspended while Congress deals with
the aftermath of the terrorist attacks on 11 September.
Meanwhile prescription drug costs have been getting higher.
According to the National Institute for Health Care Management, a
non-profit making, non-partisan research group, spending on
prescription drugs rose an unprecedented 18.8% from 1999 to
2000, to $132bn (�92bn; 148bn) (BMJ 2001;322:1198).
Now individual states as well as insurers are banding together to
negotiate lower drug prices. Alaska, Oregon, Washington, Idaho,
and Montana, for example, are forming a purchasing consortium to
negotiate lower prices from manufacturers.
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