PHARMACEUTICAL TRENDS AND PROSPECTS

As government measures to contain health care costs virtually everywhere in the developed world begin to take hold, pharmaceutical companies will increasingly have to rely on new, innovative and genuine therapeutic advances for most of their profits, says Global Pharmaceuticals: Trends and Prospects, a new study from Financial Times Management Reports. "Me-too" drugs will be less attractive for them to develop, and this may well erode a vital source of income since these products, which are relatively cheap to develop, provide a revenue stream which allows the massive investment that the discovery of genuinely innovatory drugs requires.

The study's author is Sarah Rickwood, pharmaceuticals analyst and manager of a health care practice at Datamonitor. She believes that a further possible consequence of the inexorable rise of R&D costs, plus a squeeze on resources, could be further industry consolidation, as the size and resources necessary to remain a viable research-based company grow ever larger. Alliances with biopharmaceutical companies will produce takeovers, as these smaller firms find it increasingly difficult to fund their R&D, she says, and alliances for other purposes will also become increasingly popular.

In some ways, the research-based prescription drug industry is a victim of its own success, says Ms Rickwood; heavy R&D investment has produced numerous product success stories. But with the need to reform health care financing in almost all developed countries, drug companies have come under intense scrutiny because of the prices they charge for their products and the high profits which they have historically made. While pharmaceuticals do not represent the major part of any country's health care budget, they are regarded as a part in which savings can be made.