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Week-in-Review editorial: out with the old.

A lack of new drugs, declining sales of blockbuster franchises and generic price erosion have resulted in many multinational pharmaceutical companies slashing workforces to save costs

A lack of new drugs, declining sales of blockbuster franchises and generic price erosion have resulted in many multinational pharmaceutical companies slashing workforces to save costs.

US-based stent manufacturer Boston Scientific has cut 2,300 jobs, US pharmaceutical firm King will cut 20 per cent of its US work force and Swiss pharmaceutical company Novartis is shedding 240 jobs at its corporate headquarters and over 500 from its US sales force.

The two biggest companies in pharmaceuticals and biotech, respectively, Pfizer and Amgen, are restructuring, which includes massive reductions in the numbers of employees. Pfizer announced earlier in 2007 that it was to cut 10,000 jobs, as Lipitor (atorvastatin), the world's best selling drug goes off patent in 2010.

BMO Capital Markets see the downsizing trend as encouraging, as they say that most of the big players are far too cumbersome, uncompetitive and sluggish in their response to market changes. As a result, say the analysts, the companies will be in much better position to capture healthier economics. On the flipside, JPMorgan analysts are worried that the job cuts will impact on research and development, sales support and pipeline growth prospects.

IMS Health's recently released 2008 Global Pharmaceutical Market and Therapy Forecast says that the global pharmaceutical market is expected to grow at five to six per cent in 2008, compared with six to seven per cent in 2007, and predicts global pharmaceutical sales will expand from between USD 735bn to USD 745bn in 2008.

While the figures seem positive as a whole, for the first time the seven largest markets will contribute only 50 per cent of overall pharmaceutical market growth, while the seven emerging markets of China, Brazil, Mexico, South Korea, India, Turkey and Russia will contribute nearly 25 per cent of global market growth, mostly on increases in generic drug sales.

The emerging markets are expected to grow from between 12 to 13 per cent in 2008 to reach between USD 85bn to USD 90bn. IMS says there is significantly greater access both to generic and innovative new medicines, as primary care improves and becomes more available in rural areas, and as holding private health insurance becomes more commonplace. Ongoing economic growth in the developing world will continue to shift the focus away from infectious diseases and toward cardiovascular, diabetes and other chronic illnesses.

The market is now more dynamic and changeable than it has ever been. The established pharmaceutical giants are now being forced to reorganise their internal structures and find creative ways in which to deal with increased competition and worldwide moves to curb healthcare costs. The old order is being challenged by the new: Big Pharma must rise to the challenge, but is it reacting fast enough?

30th September 2008


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