The pharmaceutical industry is turning to layoffs and outsourcing in a bid to survive declining profits and drug failures, independent research has found.
Rising healthcare expenditures have become a major concern to European governments. While these concerns have been eased by price regulations and generic manufacturers reducing costs for governments, companies have increasingly been choosing to develop less cost-effective drugs.
John Paul, research analyst for industry consultants Frost & Sullivan, said: “One accusation directed towards these companies is that they have been focusing on developing drugs for the so-called ‘costly’ diseases, which have a very low patient population to cater to.
“While acquiring an orphan drug status has its own advantages, the cost of developing and marketing such a drug outweighs the revenue it would generate.”
In addition, the drug approval process for “small molecule” drugs is failing to improve, with costs increasing and the possibility of lawsuits and withdrawal becoming higher.
Together with the impending patent expiries of several top drugs, pharmaceutical companies are being forced to look for efficiencies in their operations.
Pharmaceutical companies have realised that their strength lies in the later stages of product development and are cutting their costs by outsourcing both their manufacturing and research and development activities, particularly to Asia, Mr Paul added.
Copyright PA Business 2008