It would be tempting to say that Big Pharma executives are reading from the same script when they talk about the year ahead. The same words tend to surface: "tough," "headwinds," "challenges," "pressures." But they don't need the same script, because times are tough--that word again--all over. All the problems pharma has foreseen now are coalescing into a brute reality.
"The challenges we face are not new; we've seen them coming for some time," Eli Lilly chief John Leichleiter pointed out in a Bloomberg TV interview. Abbott Laboratories chief Miles White told analysts, "I don't expect it to get better. I don't expect the pressures to ease up." Novartis CEO Joe Jiminez said, "We are facing more headwinds in 2011 than in 2010," echoing AstraZeneca CFO Simon Lowth's assessment that 2011 will be "challenging for the industry and for the company."
Across the board, companies are blaming the usual suspects for their gloom: Pricing pressures from increasingly budget-conscious governments, especially in Europe; drug discounts associated with U.S. healthcare reform; and patent expirations on longtime high performers such as Novartis' heart drug Diovan and Eli Lilly's antipsychotic Zyprexa.
AZ figures U.S. reform will cost it almost $700 million this year, while Lilly expects a $400 billion to $500 billion hit. Price cuts across Europe won't be a picnic, either. But the bigger pain comes from generic competition, which stands to cost drugmakers billions.
Diovan is a $6 billion drug, and Novartis also loses protection on the blockbuster cancer drug Femara. Lilly's Zyprexa is the company's biggest drug, with $5 billion in 2010 sales, or 22 percent of its revenue; Lilly expects "severe erosion" in sales. AstraZeneca expects flat overall revenue for 2011, or even a decline, as generic competition for its breast cancer drug Arimidex heats up; it lost patent protection in the U.S. last year, and loses exclusivity in Europe next month.