Big Pharma is getting out of the drug business – even as the wealthiest generation of humans ever, and ostensibly the drug companies’ best customers ever, the baby boomers, begin to retire.
Experts tell Moneynews.com that the move away from traditional drug products to patented biotech procedures is radical move of talent and capital, attributable to the changes in the economics of medicine.
Biotech, not drugs, is the future of the industry, they say.
Bristol-Myers, for instance, became the latest to announce lay offs. It will cut 4,800 jobs and shut down half of its 27 manufacturing plants across the globe. Merck and Eli Lilly made similar, earlier announcements of lay offs as drug patents expire in coming years,
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In the short-term, outlook is strong: Lilly, for instance, expects seven of its products will reach $1 billion in sales each.
But its patents for blockbuster drugs like Zyprexa and Cymbalta will expire within five years, cutting sales dramatically. Together, those two drugs account for well a third of total revenues.
"Drug companies are moving into biotech for a number of reasons,” says Dr. Gary Liberson, a member of the management team in the life sciences and health care practice of the PA Consulting Group. "They’re seeking a balanced portfolio.”
Biotech offers another, potentially more lucrative angle: While generics generally eat up profitability of a drug, biotech is easier to defend as intellectual property.
"Biologics have a longer period of patent exclusivity, due to their difficulty in production,” says Liberson.
What’s more, in the coming decade, new biotechnology developments could start to simply replace many medication-oriented therapies.
Newer biotech products are in the development pipeline, and going through clinical testing and FDA approval processes.
These expensive, next-generation therapies will be targeted at the aging U.S. baby boomers – who are exactly the people who could afford to finance the new science.
"Implanted devices in the heart and brain will control otherwise chronic conditions that would only be partially treated with ongoing medication therapy,” says Dr. Gabriela Cora, managing partner of the Florida Neuroscience Center.
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