“The operating environment for pharma is worsening rapidly." That's a quote from a Morgan Stanley research document, cited in The New York Times story this morning, headlined, "Patent Woes Threaten Drug Firms."
This is what a Serious Medicine Crash looks like.
The reality is that the pharma sector has suffered a severe de-capitalization--and it's likely to get worse. As the Times piece notes, the stock prices for Pfizer and Merck have fallen some 60 percent in the last decade, even as the S&P index has risen 19 percent. And that's why Big Pharma is laying off thousands--including researchers.
This shrinkage is due in part to a drying-up pipeline of the new-drug pipeline--a drying-up exacerbated, of course, by the trial lawyers and the FDA--and also to other factors, such as the rise of generics. Some 75 percent of prescriptions drugs consumed in the US are generic; in addition, governments are imposing ever-tougher price controls, around the world and now, increasingly, in the US. As the Times observes:
The drug industry has long said that Americans fueled the research engine, spending much more per capita on prescriptions than in any other nation, and paying the highest prices for prescribed medicines.
In other words, just as the US dollar has been the reserve currency for the world, and the US military has been the "reserve defense" for the world, so too the US drug market has been the "reserve pharmacy" for the world. That is, demand here in the US provided the economic surplus to the pharma companies to make the drugs needed.
But that "reserve pharmacy" role seems to be ending. Here's a look at this chart in the Times, based on the same data depicted in past postings at SMS. As we can see, expenditures up, drug approvals down.
Ultimately, American leaders--and world leaders--are going to have to figure out a new way to inject capital into the pharma sector. Not for the sake of next-gen lifestyle drugs such as Viagra or botox or Latisse, but for the sorts of drugs needed to combat premature death and disability. Alzheimer's, for example, is a worldwide problem; if hundreds of millions of people suffer premature dementia, that's going to be a lot more expensive to treat than it would be to preempt.
The world may or may not be able to agree on a lot of things, but surely Serious Medicine is one area in which every human being has a stake.