NCPA - National Center for Policy Analysis


December 6, 2007

Some of the top-selling drugs in pharmaceutical industry history will be gone as patent protections expire, allowing generics to rush in at much-lower prices, and pushing pharmaceutical companies up against the wall, says the Wall Street Journal.


  • Generic competition is expected to wipe $67 billion from top companies' annual U.S. sales between 2007 and 2012 as more than three dozen drugs lose patent protection.
  • That total is roughly half of the companies' combined 2007 U.S. sales.
  • Already, as the Dow Jones World Index rose 75 percent in the six years ended Nov. 29, the FTSE Global Pharmaceuticals Index has fallen 19.8 percent.

The rise of generics wouldn't matter so much if research labs were creating a stream of new hits.  But that isn't happening, says the Journal:

  • During the five years from 2002 through 2006, the industry brought to market 43 percent fewer new chemical-based drugs than in the last five years of the 1990s, despite more than doubling research-and-development spending.
  • At the same time, the industry's science engine has stalled; the century-old approach of finding chemicals to treat diseases is producing fewer and fewer drugs.

Some believe the industry, which grew out of the European chemical business of the late 1800s, has remained too reliant on that foundation, says the Journal.  The future, many believe, lies in biotechnology.  Unlike traditional, chemistry-based drug development, biotechnology uses biological tools to create entire proteins, often similar to those that occur in the human body.  This approach has yielded successful drugs to treat diseases such as anemia, cancer and rheumatoid arthritis.

Source: Barbara Martinez and Jacob Goldstein, "Big Pharma Faces Grim Prognosis," Wall Street Journal, December 6, 2007.

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