Coming Soon To Drugstore Near You— Lower Prices, Lower Quality

IMS Health, the world’s leading pharmaceutical intelligence and data mining firm, is out with its annual report on the generic pharma industry, and the news doesn’t look good for the R&D-based Big Pharma segment where the branded pharmaceuticals are researched and produced.

Generic pharmaceuticals sold $78 billion (globally) in the last twelve months, with $34 billion of that total coming from the U.S. market where generics now account for roughly 64% of the total domestic drug market volume. Past research has shown that about 90% of sales for a given drug will convert over to generics when the branded version goes off patent, and this becomes critically important when one considers the fact that branded pharmaceuticals currently generating $139 billion annually in the top eight world markets will lose their patent protection in the next few years through 2012. Most of these patented drugs are in the “blockbuster” category. The problem is that there are few, if any, potential blockbusters in the R&D pipeline waiting to take their place. For the last decade, Big Pharma has focused on growing mediocre “lifestyle” drugs into blockbusters through gargantuan advertising and marketing efforts, and they have given much less attention to the R&D needed to keep the new blockbusters coming. If one believes the IMS statistics, the wheels are now coming off the bus. This helps explain why Pfizer, once the darling of Wall Street, saw its stock trading earlier this week at exactly one-third of its stock price eight years ago.