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Drug Company Empire Ready to Fall
Last review: 08/12/10
The $500 billion drug company dynasty finally appears ready to fall as the industry struggles to save face among continual reports of serious problems with well-known drugs. Meanwhile, drug research and development is on the decline and the industry is struggling to find new medicines.

Pfizer, AstraZeneca and Eli Lilly, all major players in the drug company market, each disclosed major problems with popular medications -- all in the span of about half a day:

  • Pfizer announced an increased risk of heart problems in people taking the painkiller Celebrex (one of the world's best-selling medicines).
  • AstraZeneca reported that lung cancer drug Iressa, which was approved in the United States in 2003, did not prolong lives in a trial.
  • Eli Lilly warned that Strattera, an ADHD drug, might cause severe liver injury.

The news pushed stocks down, causing the market value of the three companies to decline by more than $30 billion.

But it's not just these three companies that need to worry -- all major drug companies are at risk of similar declines. Although spending on drug development has nearly doubled to about $33 billion, new drugs approved by the Food and Drug Administration (FDA) have declined significantly from 53 in 1996 to 21 in 2003.

The major threat to companies (aside from growing negative publicity due to dangerous side effects)? If fewer drugs are produced, investors will want to cut the companies' research spending. Meanwhile, governments may force companies to cut drug prices to support programs like Medicare and Medicaid.

The result? A less profitable industry that produces fewer new drugs.

The drug companies are not going out without a fight, however. In an attempt to save their falling dynasty, drug makers have been:

  • Pursuing aggressive ad campaigns to doctors and patients
  • Increasing drug prices
  • Attempting to extend patents on existing medications

The efforts have been a mixed blessing for the industry. While they've protected drug company profits in the meantime, they've also irritated the industry's target market -- both consumers and governments alike -- and have even caused a political reaction in the United States and Europe.

New York Times December 18, 2004

Dr. Mercola's Comment:

As we all know with the Vioxx debacle, Merck is stumbling badly.

The even better news is that the major drug companies Pfizer, AstraZeneca and Eli Lilly have each disclosed serious problems with popular medicines. This follows on the heels of the world's largest drug company, Pfizer, announcing that their blockbuster drug Celebrex also has cardiovascular side effects. No surprise here as I said this many years ago.

No major drug company is exempt from the problem. The number of new drugs approved by the Food and Drug Administration has declined sharply since the mid-1990's, falling from 53 in 1996 to 21 in 2003, even as the industry has nearly doubled its annual spending on drug development, to about $33 billion. Apparently the decline in drug research and development has been an open secret among analysts and scientists for years. They are offsetting their weakness in creating profitable new drugs by:

  • Pursuing aggressive campaigns to market existing drugs to doctors and patients
  • Imposing big price increases
  • Making efforts to extend patents on existing medicines

Since the industry as a whole earns half a TRILLION dollars a year, they do have a LONG way they can fall before they really start to "hurt." Heck, Merck will lose $50 billion with Vioxx and they are still kicking strong.

Fortunately, as a result of this news Pfizer lost nearly $25 billion.

Pfizer is spending $7 billion EVERY year on new drug development alone. Collectively, all drug companies spend $16 BILLION to market their drugs to physicians every year and another $3 billion for direct-to-consumer advertising. That gives you some idea of how much money is involved here.

However, there is a strong indication that the fuel feeding this fire, new drugs for chronic diseases, is slowly starting to dwindle. With providing a broader and deeper appreciation of the central issues involved to more of your friends and relatives, by passing my newsletter to them, we can accelerate the process.

Folks, we are indeed making a difference, and just like the writing on the Berlin wall, the drug company's wall is clearly starting to crumble. And it won't be a moment too soon.

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