Global pharmaceutical industry is heading towards a major crisis with its future prospects turning to be quite gloomy. The financial performances of top pharmaceutical companies has been quite poor for some years now as their sales and profits are declining because of tough generic competition and expiration of several patents. More patent expiries including that of world's largest selling drug, Lipitor, are expected by 2011. A Pharmabiz study of financial performances of top 15 international companies confirms this weakening trend in the global pharmaceutical industry. The growth in pharmaceutical sales of top 15 pharma companies was just 1.2 per cent at $369.72 billion in 2008 as against $365.46 billion in the previous year. The net profit of these companies also grew by only 1.2 per cent at $94 billion in 2008 as against $93 billion in the previous year. Decline in overall growth in sales and profit of the industry was mainly on account of a drop in sales in the US, the largest pharmaceuticals market of the world. The pharmaceutical sales in the US, excluding that of Bristol-Myers, declined by 7.1 per cent to $148.345 billion in 2008 from 159.626 billion dollars in the 2007.
The global pharma appears to be caught in a vicious circle today with very few blockbusters coming out of its laboratories with its R&D productivity on the decline. If global pharma has to remain in business it has to produce blockbusters by spending huge investments on research. But, despite huge spending on R&D, most of the big companies are failing to get successful products and that is forcing them to cut R&D spending. This is confirmed by the Pharmabiz study. Of the 15 international companies, seven companies cut down their R&D expenditure during the year 2008. That is something which has never happened before. GSK's research spending came down by 19.8 per cent to $5.33 billion from $6.64 billion in the previous year. The R&D expenditure of Amgen and Sanofi-Aventis declined by 5 per cent and 3.5 per cent during last year. Pfizer continued to remain the highest R&D spender during 2008. However, its research spending also declined by 1.8 per cent to $7.94 billion from $8.08 billion in the previous year. Desperation in the R&D area is driving global pharma companies to major acquisitions of companies at huge costs to maintain the market share and profitability. Pfizer's acquisition of Wyeth in January this year at 68 billion dollars, Merck's acquisition of Schering Plough for 41 billion dollars and Roche's take over of Genentech at 47 billion dollars are all indications of this trend. For the short term, this strategy may work but for the long term global pharma has to seriously think of ways of getting new products with least side effects into the market. As there is growing resistance to chemical based drugs, pharmaceutical companies have to seriously think of new frontiers such as biotechnology and stem cells for developing safe drugs and treatments in future.