Global pharmaceutical industry is facing, perhaps, one of the worst ever crises today. This industry thrives on a steady stream of new molecules from its research pipelines and their success as blockbusters in the market place. It is here the global pharmaceutical industry is finding the going extremely tough. Very few blockbusters have come into the market from top pharmaceutical companies for some years now. The rate of new launches has plunged drastically from an average of 1.5 product per year from the top 20 companies during the last decade to less than one new product per year since 2000. As per the latest figures from the US FDA, new product launches by pharmaceutical industry fell to a low of 21 molecules in 2003 from 36 in 2002. And the global pharmaceutical industry had the largest number of 53 approvals for new molecules in 1996. Some of the top pharmaceutical companies did not even get a single product approval in 2003. Merck, for instance, despite its $3 billion annual research budget and R&D staff of 10,000, launched just three new drugs between 2000 and 2004. At the same time, the cost of drug discovery and development continues to rise. A recent study by Bain & Company estimated that the cost of development of a new drug to commercialization has reached 1.7 billion dollars while success rate of compounds entering preclinical stage has declined by about 50 per cent. The picture is quite alarming for an industry which is spending close to 18 per cent of its turnover of on research and development.
International pharmaceutical companies have been looking at mergers and acquisitions as a short-term solution to overcome the pipeline crisis. The hope was that combining pipelines of two companies should enable the merged entity to reduce overall staffing, other R&D costs and increase productivity. The spate of mergers which had taken place in the global pharma scene during the period 1996-2003 is a clear indication of this desperate trend to consolidate for survival. Some of the notable mergers were that of Hoechst and Rhone-Poulenc Rorer to form Aventis at a cost of 22 billion dollars in 1999, Glaxo Wellcome with SmithKline Beechem at a cost of 76 billion dollars in 2000 and Pfizer's acquisition of Pharmacia at a cost of 60 billion dollars in 2002. But, nothing tangible has been achieved after these mergers and acquisitions. The struggle for the blockbusters continues at escalating R&D costs. One other strategy pharma giants are adopting now is buying out of late stage drug candidates. Most of the best phase III drug molecules have been, thus, bought over and prices of such products are shooting up in the market. A fundamental issue which has not been adequately addressed by global pharma giants, is the poor productivity in R&D. Drug discovery and development is an extremely complicated task with so many variables and causes for failures. A large number of technologies including genomics, introduced in R&D during the last ten years, have not been found that productive. This could be one main reason for lesser number of new molecules. It would be, therefore, wise for pharmaceutical industry to integrate the existing technologies in R&D and find newer and more efficient ones to maintain its growth.