Large Canadian pharmaceutical companies know all too well the pressures of getting their products to market. Canadian law grants 20 years of patent protection to companies that develop new drugs — a window of time designed to allow developers of breakthrough medicines to see a fair commercial return on their investment. Yet many Canadian players lose more than half of that window due to complex regulation, human resource issues, supply chain problems, and other jams along the product pipeline. Once a drug comes off patent, generic manufacturers can begin producing and selling their own version of the drug at a fraction of the cost to the consumer. These companies in turn face their own challenges, which include marketing and distribution.
In December 2007, the Wall Street Journal reported that, starting in 2010, the pharmaceutical sector will face the biggest wave of patent expiration in the industry's history. Experts predict that generic competition will wipe out $67 billion from big pharma's US sales between 2007 and 2012 as more than three dozen blockbuster drugs see their patents expire. Amounting to nearly half of all drug companies' combined sales in the US for 2007, this shift of revenue will undoubtedly have a huge impact on Canada's life sciences and pharmaceutical industry as well. In addition, the first biotechnology patents have started to expire and biogenerics have become a reality for some companies.
The balance in the marketplace between large pharmaceuticals and their generic equivalents works as long as there are numerous new blockbusters coming out of the product pipeline. Unfortunately, between 2002 and 2006, the industry as a whole brought 43% fewer new chemical-based drugs to market than in the last five years of the 1990s — despite more than doubling their R&D budgets. If blockbusters don't bring in a healthy return on R&D and other spending, then the whole sector — big pharma and generics — will suffer.
These trends undoubtedly represent a seismic shift in how the industry will operate in the years and decades to come. Canadian companies large and small will have to do business differently — which may involve locating alternative revenue streams, acquiring new corporate leadership or organizing targeted mergers and acquisitions.
If blockbusters don't bring in a healthy return on R&D and other spending, then the whole sector will suffer.
PwC's life sciences and pharmaceutical professionals have their finger on the pulse of your industry. Whether you're a large pharmaceutical looking for help with research and development or a small generic looking to get into new markets, our people can help you find solutions to the challenges facing your sector in the years ahead.