sector Overview:

The pharmaceutical industry is one of the biggest in the world with annual sales of over $600bn. ‘Big-pharma’ companies such as Pfizer, GSK, Novartis, Sanofi-Aventis and Merck can and do generate multi-billion dollar profits. However, much of the industry is under increasing pressure to produce ‘blockbuster’ drugs that will generate annual sales of over $1bn. While sector research funding has doubled since 1991, the number of new product launches has halved over a similar period and there are understandable concerns over future profitability. Despite higher R&D investments, many of the top 10 pharma firms have been posting lower margins recently and around only 25 truly novel drugs are being launched each year. Patents are the core currency of innovation in this sector. As they expire, competition from generic drug makers is expected to threaten one fifth of the sector’s annual sales. Corresponding efforts to be stronger in the use of patents to fend off generic competition leave the drug companies accused of driving up overall healthcare costs or depriving the developing world of life-saving medicines.