Give pharma sector a break, says KPMG
Most national governments believe that pharmaceutical companies can cope with being squeezed, but the reality is that they are showing all the signs of an industry that is running into trouble, according to John Morris, global head of pharmaceuticals at business advisory firm KPMG. 'Governments are squeezing them on prices, on patent lives, on prelaunch testing, on drugs to poorer countries and by enabling faster, stronger generic competition,' he says.
But KPMG's analysis shows that despite the positive messages - mostly based on the industry's own hype - the reality is that not only are the major pharma companies failing to find the new drugs that will enable them to maintain revenues and profits, but the revenues and profits of many of the major players have not been growing at the strong rates that people have long been accustomed to.
'While the major companies are down-playing the severity of the problems facing them - since they need to keep investor support - it is becoming clear that they are starting to suffer seriously,' Morris contends. 'If the pharmaceutical companies go into decline, then everyone will lose. Patients will lose, as the rate of new drugs coming to market slows even further; governments will lose à some losing out on one of their strongest r&d industries, most losing tax revenues, and all failing to improve patient care; and investors will lose, including the many pension funds who have invested in pharmaceuticals as a safe haven.'
The challenge facing governments is to decide if now is the time to ease some of the pressure - economic, technical or intellectual property - in the hope of at least maintaining innovation into the future, and how politically to achieve this. 'On one hand, various studies and committees have been tasked with restoring and revitalising pharmaceutical and biotech activities in Europe. On the other hand, national governments are squeezing big pharma on prices - and failing to resolve the issue of parallel trade, which has a similar effect,' Morris points out.
A more thoughtful analysis of the aggregate effect over the past decade of tougher government stances on technical standards, intellectual property and price controls, he suggests, would provide insights for identifying realistic reform packages. This would sustain the innovative capacity of the sector through what may be a critical period.