By Malorye Branca
November 15, 2003 | It is common knowledge that without three to five successful new drugs per year, most big pharmaceutical companies won't survive. Or is it?
According to U.K. consultant John Ansell, that widely quoted figure stems from flawed analysis that has become dogma over the years. In a recent study for Decision Resources' Spectrum series, Ansell concludes that for most companies, 1.5 new launches per year would sustain an 8.5-percent growth rate — the average for the past few years. (Ansell, J. "Quantifying New Product Need: Productivity Targets Considered at Company Level," Decision Resources, Spectrum, Pharmaceutical Industry Dynamics, June 25, 2003.)
The conventional "three to five" estimate originated from a 1996 study by Jurgen Drews and Stefan Ryser that quantified the pharmaceutical "innovation deficit." (Drews, J. and Ryser, S. "Innovation Deficit in the Pharmaceutical Industry." Drug Information Journal 30, 97-108; 1996.) That study assumed that drugs earn sales for just about six years, after which sales tend to drop precipitously. Drews and Ryser estimated the number of new launches needed was about three. Since then, people have just extended that number. Now three to five is the figure most often quoted.
Six years was "a commonly used industry standard" for such calculations at the time, Ansell says. But his own analysis reveals that most modern drugs reap sales for about 12 years, meaning fewer drugs are needed to keep profits up.
Based on existing pipelines, the next few years will be difficult. But Ansell anticipates a turnaround sometime near 2007.
"Some companies will come up short of products and have to merge," he says. "But the survivors should do quite well."
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