Pharmaceuticals no longer good investment, says Forbes
Pharmaceutical companies' shares were among the most stable and investments for the last few decades, but drugs are now predicted to yield less "return on the dollar" than they did.
According to an article in Forbes, based on a Reuters wire, a study released in the US, the day the medicare overhaul was signed into law, revealed that costs for producing and marketing one drug can be set at $ 1.7 billion, if all cost factors, including failed drugs that never completed the development stage, are considered.
Of course this seems to be an awful lot of money, considering that most drugs don't even work as intended, in a high percentage of the population, a fact well known in pharmaceutical circles but only recently revealed in a public discourse by a high executive of GlaxoSmithKline.
According to BBC, another drug giant - US-based Wyeth - is to close down one of two factories in Singapore, because of a serious slump in the sales of drugs used in Hormone Replacement Therapy, which has been blamed for causing several serious adverse effects, including cancer.
Could it be that public awareness of pharmaceuticals being among the major causes of death in the US and elsewhere, is finally catching up with the long hidden reality of a pharmaceutical business based on profits for drugs sold, rather than on health?
The Truth About the Drug Companies
The Once-Solid Foundations Of The Big Pharma Colossus Are Shaking says Marcia Angell, a former editor of the New England Journal Of Medicine in her upcoming book...
Drugs Cost More, Return Less to Investors-Study
Mon December 8, 2003 05:34 PM ET
NEW YORK (Reuters) - The cost of bringing new prescription drugs to market has skyrocketed in recent years while the return for investors is significantly lower, according to a study released on Monday by Bain & Co. consulting firm.
The independent study, released on the day that a $400 billion Medicare overhaul was signed into law, says it now costs pharmaceutical companies nearly $1.7 billion to bring a new drug to market.
That figure includes not only the price tag for discovery, development and launch, or advertising and marketing, of a drug, but also factors in the cost of failed prospective drugs that never make it to market.
That represents a 55 percent increase over the average cost of new drugs for the five years from 1995 to 2000, according to the Bain study.
Recent surveys have pegged the cost of bringing a new drug to market at about $800 million. But that figure did not factor in the price of failed drugs.
The Bain study further says that based on forecasts of commercial performance and the rising costs of development, marketing and defending drugs from outside challenges, new drugs may deliver only a 5 percent return on investment. That is significantly lower than the average 9 percent return from 1995-2000, according to Bain.
Only one out of six new drug prospects will likely deliver returns above their cost of capital, the study says.
"If those data prove to be true, then the dollars invested in pharmaceutical R&D (research and development) are going to be substantially lower over time, because money chases returns," said Deutsche Bank analyst Barbara Ryan.
Among the factors Bain & Co. suggest may force major drug makers to rethink the business model that had brought them so much success in the past is a decline in research and development productivity.
Only one new compound now reaches the market for every 13 discovered and placed in preclinical trials, compared to one in eight from 1995 and 2000, the study said.
It also cited pricing pressures from insurance companies, aggressive patent challenges and shorter exclusivity periods before cheaper generics hit the market -- factors that combine to limit the total revenue potential of new drugs.
Deutsche Bank's Ryan said it remains to be seen what the actual payoffs down the road will be for drugs that have not yet come to market.
"But there's no question we are in a tough period for the industry," she said.
(c) Reuters 2003. All Rights Reserved.
Drugs giant hit by HRT slump
US pharmaceutical giant Wyeth is to close one of its two Singaporean plants after a global collapse in demand for hormone-replacement therapy (HRT).
Last year, researchers announced that women who took HRT faced a higher risk of illnesses such as breast cancer and heart attacks.
One of the two Wyeth Singapore plants produces only HRT drugs. Although capable of producing 1 billion pills a year, the plant is currently making just 120 million.
The Singapore plant, which serves the Asian and Latin American markets, will be closed down in stages.
By June 2004, the factory should be completely closed, with the loss of 200 jobs.
Wyeth's second plant in Singapore, which produces nutritional supplements, will be unaffected by the shake-up.
Research into the hazards of HRT is not yet seen as conclusive, and many still argue that the treatment can provide significant health benefits.
But concerns over the therapy has so far persuaded almost three-fifths of women to stop taking HRT, according to surveys.
A recent comment on drug profits in The Times:
December 15, 2003
Drug firms 'make unhealthy profits'
By Oliver Wright, Health Correspondent
THE Government has allowed pharmaceutical manufacturers to put financial gain before the health of consumers when deciding where to spend billions of pounds of research money, a report has found.
The study, from the influential King’s Fund think-tank, said that many treatments and therapies went untested because it was not in the interests of the drugs industry to fund clinical research.
It called for a task force to be created to consider how to compel drug companies to do trials that were in the interests of the wider community. It also recommended that the amount of public money spent on clinical trials be increased.
Getting the Right Medicines? was published after Allen Roses, a senior executive of the drugs company GlaxoSmithKline, last week said that more than 90 per cent of drugs work effectively in just 30 to 50 per cent of patients.
Anthony Harrison, the report’s author, said the Government’s focus on the pharmaceutical industry had created a situation where research to protect and promote health attracted far fewer resources than research to find new, profitable drugs.
This meant that millions of pounds were pumped into researching statins, the drugs used to lower cholesterol, while simple measures to improve health, such as exercise and diet, were given less attention.
“We want to see a relationship develop between government and the pharmaceutical industry that is geared towards the promotion of health, not just the promotion of wealth,” Mr Harrison said.
The King’s Fund said it was particularly concerned that drugs companies were not made to test their products against other forms of available treatment.
While the NHS spent Ã‚Â£380 million a year on anti-depressants, almost no research was done into whether they were more effective than counselling. Little research had been done into cheap drugs such as aspirin, widely believed to have beneficial effects on a number of serious diseases such as bowel cancer and senile dementia.
The King’s Fund was also concerned that some groups, including women and the elderly, were deliberately excluded from clinical trials.
See also recent (January 2005):
New York Times - January 1, 2005
Lilly Shares Fall on Report About Prozac Documents
posted by Sepp Hasslberger on Tuesday December 9 2003
updated on Friday December 3 2010
URL of this article:
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