I'll start off giving you some background. A few years ago I attended a closed meeting with consultants for Ernst & Young. They told the gathered drug executives that the industry was in trouble. Ernst & Young had added together the sales forecasts the drug industry had given to Wall Street and they told us, "if you are going to meet those numbers, you need twice as many drugs as you have in your pipeline. Your stock is going to tank during the next ten years." Of course, no drug executive ever told Wall Street and their investors about this data.
Today, the prediction has come true. Drug company stocks have tumbled. The biggest drug company, Pfizer, has lost 40% of its value in the last five years. Revenue for the first quarter in 2006 came in at $12.7 billion, down 3% from the first quarter of 2005. Growth suddenly went "poof."
IMS Health, an industry research firm, estimates prescription drugs worth $121.5 billion will come off patent between 2006 and 2011. That's half of U.S. drug sales.
So the drug industry is in a panic, because they don't have enough new drugs to fill the gap. The CEO's are trying to sound optimistic, to pump up their stock options, but they know that the "perfect storm" is coming. The good news for consumers is that drug prices will drop and many more generics will be available at low cost.
So what's going on here, could the drug industry really be in for a rough ride?
And, what is the drug industry doing about this?
Simple: Just like a bad student might contemplate cheating, the drug industry plans on big scale cheating.
Number one on the cheat sheet is to stop generics from coming onto the market.
According to the Washington Post, "The brand-name drug industry is aggressively working to keep blockbuster drugs widely used by the elderly from being sold in cheaper generic versions when their patents expire."
"There's an agenda to prevent generics from getting to the market as soon as they could," said Mark Merritt, president of the Pharmaceutical Care Management Association.
Pfizer's CEO, Dr. Hank McKinnell, in his book "A Call to Action" is very clear on his objective: He calls for a doubling of drug patent life [page 185] which would result in a drastic reduction of new, low-priced generic drugs.
And according the International Herald Tribune, the White House is pushing bilateral and regional trade agreements in which poor countries are forced to enact "superpatents" that prolong U.S. drug makers' monopolies and limit the circumstances under which the patents can be broken.
The International Herald Tribune quotes Pedro Chequer, the head of Brazil's national AIDS program: "If you prevent countries from using generic drugs, you are creating a concrete obstacle to providing access to drugs. You are promoting genocide, because you're killing people."
The trade deals are often negotiated in secret and attract little notice. But they have already been signed with poor countries overwhelmed by AIDS, among them six in Central America. And negotiations are now beginning with several nations that also are overwhelmed by the AIDS virus, from Thailand to five southern African countries, including South Africa and Botswana.
When a life-saving industry cheats, people may die. When the White House, through bullying, helps the cheaters, the result may be genocide, according to a quote in the International Herald Tribune.
IMPORTANT LEGAL DISCLAIMER HERE