Credit crunch bites R&D

It was interesting to hear about the EU Commission conduct dawn raids on a number of pharmaceutical companies in mid-January as part of an investigation into possible anticompetitive behaviour, which could possibly be preventing new drugs and cheaper generics from entering the market. Pfizer, GlaxoSmithKline, Sanofi-Aventis, AstraZeneca, Merck Sharp & Dohme, Johnson & Johnson, Wyeth, Sandoz and Teva confirmed they had been the target of the raids and were now cooperating with regulators — both in Europe and the US.

More of this story is covered in the news section, but the timing (from a drug manufacturer's point of view) couldn't have come at a worse time. The number of drugs approved by FDA last year was the lowest since 1983 and many firms are running out of ideas on how to fill their emptying pipelines. The trend of buying companies that show some promise is set to continue; indeed, Teva only recently announced a deal to acquire biogenerics firm CoGenesys.

While falling prices across the globe have been partly to blame, R&D productivity has remained flat. According to the US Government Accountability Office (GAO), annual R&D spending by the pharmaceutical industry increased 147%, to $60 billion, between 1993 and 2004. At the same time, the number of new drug applications to FDA grew by only 38%, and has generally declined since 1999. Moreover, only 32% of the NDAs were for new drugs.

2008 is set to become a very important year for the industry. A possible recession in the US and a global credit crunch are going to be major factors in the amount of money available, and, as shareholders tighten their purse-strings, the pharmaceutical industry (which has traditionally been recession-proof) could find with even less money for R&D.

Gurminder Marwaha

gmarwaha@advanstar.com