The worldwide drug industry is ailing.
Three major drug companies - Pfizer, AstraZeneca and Eli Lilly - each disclosed serious problems with important medicines yesterday, throwing a spotlight on the fact that the $500 billion drug industry is stumbling badly in its core business of finding new medicines.
The decline in drug research and development has been an open secret among analysts and scientists for years. But drug company executives have insisted that their industry is fundamentally healthy and their expensive research efforts will pay off.
They have tried, meanwhile, to offset their weakness in creating profitable new drugs by pursuing aggressive campaigns to market existing drugs to doctors and patients, impose big price increases and make efforts to extend patents on existing medicines. Those tactics have protected their profits but irritated consumers and governments that pay for drugs, causing a political reaction in the United States and Europe.
After yesterday's news, the intensity of that reaction seems likely to increase.
In less than 12 hours, Pfizer said that it had found increased risk of heart problems for people taking Celebrex, a painkiller that is one of the world's best-selling medicines. AstraZeneca reported that a trial of Iressa, a lung cancer drug approved in the United States last year, showed that the drug did not prolong lives. And Eli Lilly warned doctors that Strattera, its drug to treat attention deficit disorder, usually in children, had caused severe liver injury in at least two patients.
Investors punished all three companies, sending Pfizer stock down 11.2 percent, AstraZeneca down 7.7 percent and Eli Lilly down 2.4 percent. Collectively, the declines reduced the market value of the three companies by more than $30 billion, worsening the industry's weak performance this year.
The sequence of events is a sign that the companies must confront their difficulties in finding new drugs, said Richard T. Evans, an analyst at Sanford C. Bernstein, a Wall Street research firm.
"Their R.&D. productivity is just terrible," he said.
No major drug company is exempt from the problem. The number of new drugs approved by the Food and Drug Administration has declined sharply since the mid-1990's, falling from 53 in 1996 to 21 in 2003, even as the industry has nearly doubled its annual spending on drug development, to about $33 billion.
Complicating the process, many drugs already on the market do a reasonably good job, so the bar that new therapies must cross is high, especially because most are expensive.
If companies cannot reverse the trend, investors will almost certainly demand that they cut their research spending. Meanwhile, governments, faced with growing drug costs for publicly financed programs like Medicare and Medicaid, may well alter regulations on drug marketing or force the companies to cut prices, Mr. Evans said. A result in the long run may be an industry that is less profitable and less able to produce new drugs for patients.
Still, experts note that progress comes in fits and starts and the flood of newly discovered biomedical information could lead to many new drugs. But traditional drug companies have not yet had much luck with biotechnology, though they have licensed some drugs from biotechnology companies.
While they struggle with new technologies, the companies are facing a steady stream of patent expirations on their most profitable drugs. To combat that, Pfizer and some other companies have used mergers or acquisitions to grow. But those deals do nothing to increase their overall ability to produce new medicines, critics say, and may even hurt the industry as merging companies struggle to integrate their laboratories.
Dr. Jerry Avorn, professor of medicine at Harvard Medical School and author of "Powerful Medicines: The Benefits, Risks and Costs of Prescription Drugs" (Knopf, 2004), said the absence of new drugs had caused companies to try to stoke demand for their existing medicines by marketing them directly to consumers.
"If you don't have a lot of breakthrough drugs in your pipeline, and you're a company, you need to market the hell out of the drugs that you do have," Dr. Avorn said. As a result, many people are taking drugs that have only a moderate benefit for them, or no benefit at all, he said.
At the same time, companies are not closely monitoring the side effects of the medicines that they already sell, because they fear that information about side effects will discourage patients from using new medicines, Dr. Avorn said.
On the surface, the industry seems relatively healthy. Sales are rising strongly both in the United States and worldwide, with revenue up about 9 percent in 2003, to more than $490 billion, according to IMS Health, which tracks drug sales.
More ... http://www.nytimes.com/2004/12/19/weekinreview/19kola.html (registration required)
Three major drug companies - Pfizer, AstraZeneca and Eli Lilly - each disclosed serious problems with important medicines yesterday, throwing a spotlight on the fact that the $500 billion drug industry is stumbling badly in its core business of finding new medicines.
The decline in drug research and development has been an open secret among analysts and scientists for years. But drug company executives have insisted that their industry is fundamentally healthy and their expensive research efforts will pay off.
They have tried, meanwhile, to offset their weakness in creating profitable new drugs by pursuing aggressive campaigns to market existing drugs to doctors and patients, impose big price increases and make efforts to extend patents on existing medicines. Those tactics have protected their profits but irritated consumers and governments that pay for drugs, causing a political reaction in the United States and Europe.
After yesterday's news, the intensity of that reaction seems likely to increase.
In less than 12 hours, Pfizer said that it had found increased risk of heart problems for people taking Celebrex, a painkiller that is one of the world's best-selling medicines. AstraZeneca reported that a trial of Iressa, a lung cancer drug approved in the United States last year, showed that the drug did not prolong lives. And Eli Lilly warned doctors that Strattera, its drug to treat attention deficit disorder, usually in children, had caused severe liver injury in at least two patients.
Investors punished all three companies, sending Pfizer stock down 11.2 percent, AstraZeneca down 7.7 percent and Eli Lilly down 2.4 percent. Collectively, the declines reduced the market value of the three companies by more than $30 billion, worsening the industry's weak performance this year.
The sequence of events is a sign that the companies must confront their difficulties in finding new drugs, said Richard T. Evans, an analyst at Sanford C. Bernstein, a Wall Street research firm.
"Their R.&D. productivity is just terrible," he said.
No major drug company is exempt from the problem. The number of new drugs approved by the Food and Drug Administration has declined sharply since the mid-1990's, falling from 53 in 1996 to 21 in 2003, even as the industry has nearly doubled its annual spending on drug development, to about $33 billion.
Complicating the process, many drugs already on the market do a reasonably good job, so the bar that new therapies must cross is high, especially because most are expensive.
If companies cannot reverse the trend, investors will almost certainly demand that they cut their research spending. Meanwhile, governments, faced with growing drug costs for publicly financed programs like Medicare and Medicaid, may well alter regulations on drug marketing or force the companies to cut prices, Mr. Evans said. A result in the long run may be an industry that is less profitable and less able to produce new drugs for patients.
Still, experts note that progress comes in fits and starts and the flood of newly discovered biomedical information could lead to many new drugs. But traditional drug companies have not yet had much luck with biotechnology, though they have licensed some drugs from biotechnology companies.
While they struggle with new technologies, the companies are facing a steady stream of patent expirations on their most profitable drugs. To combat that, Pfizer and some other companies have used mergers or acquisitions to grow. But those deals do nothing to increase their overall ability to produce new medicines, critics say, and may even hurt the industry as merging companies struggle to integrate their laboratories.
Dr. Jerry Avorn, professor of medicine at Harvard Medical School and author of "Powerful Medicines: The Benefits, Risks and Costs of Prescription Drugs" (Knopf, 2004), said the absence of new drugs had caused companies to try to stoke demand for their existing medicines by marketing them directly to consumers.
"If you don't have a lot of breakthrough drugs in your pipeline, and you're a company, you need to market the hell out of the drugs that you do have," Dr. Avorn said. As a result, many people are taking drugs that have only a moderate benefit for them, or no benefit at all, he said.
At the same time, companies are not closely monitoring the side effects of the medicines that they already sell, because they fear that information about side effects will discourage patients from using new medicines, Dr. Avorn said.
On the surface, the industry seems relatively healthy. Sales are rising strongly both in the United States and worldwide, with revenue up about 9 percent in 2003, to more than $490 billion, according to IMS Health, which tracks drug sales.
More ... http://www.nytimes.com/2004/12/19/weekinreview/19kola.html (registration required)