Roiling Financial Sector: Will the Same Chaos Happen to the Pharma Industry?
The week of Sept. 15, 2008 will be remembered for some time in the annals of the U.S. and particularly on Wall Street. Is U.S. government intervention to stop the market free-fall the right approach? Was it enough?
The answer to these questions may not really emerge for some time and even more U.S. government intervention may be necessary. One of the main roots of the free-fall (the downslide in the U.S. housing market) continues somewhat unabated with the number of foreclosures increasingly daily.
For a brief period, the spotlight is surprisingly off pharma, biotech and health care (even though the latest figures show that health care insurance costs to employees will increase about 9 percent in 2008). Given all the turmoil on Wall Street, perhaps even the problems of the battered U.S. car and airline industries pale in comparison.
Unlike the investment banking industry (Lehman Bros., Merrill Lynch, etc.), the U.S. pharma industry has some advance notice of its potential demise and has time to prepare. I am referring to the potentially devastating effect of patent expirations that will wipe out huge amounts of sales and income quickly if a company has not prepared.
According to a Forbes article on May 2, 2007, there is about $160 billion worth of drugs expected to lose patent life by 2016.
This event is not news to the industry. In fact, Pfizer and Merck have already lost substantial sales in the last few years with the patent expirations in 2005 of Pfizer’s antidepressant Zoloft. Zoloft had annual sales of $3.3 billion in 2005 and Merck’s cholesterol drug (Zocor) has annual sales of $4.4 billion in the same year. In 2008, several top drugs lose their patent exclusivity.
See more here
, including tables showing drugs going off patent in 2008 and stock performance of big pharma companies.