Why the Large Pharma Companies Are in Crisis

2010 has gotten off to a vile start for the large pharma companies. They were key players right from the beginning of the Obama administration's health care reform efforts - or, looked at another way, they were co-opted early - but are now facing a dead loss on their investment. And their problems did not lessen one bit during all the legislative wrangling. Drug discovery is still at what looks like an unsustainably low pace, regulatory and safety concerns are keener than ever, and patent expirations are still looming.

That's why we're seeing both AstraZeneca and GlaxoSmithKline announcing layoffs, yet again. (Well, GSK's announcement isn't out yet, but the wording of the sudden cancellation of a long-planned managerial retreat in the face of their earnings announcement leads to only one conclusion). More chemists and biologists are heading out unwillingly into the least welcoming market for pharma jobs in memory, and their places are being taken by either contract employees in Asia or (in some areas) by no one at all, as the companies contract their areas of research.

Those of us in the industry have mostly given up trying predict when this cycle will end. After all, people are still getting sick, and many of them have diseases that need better treatments than we now have. Somehow, though, we've gotten ourselves overextended, paying for large research organizations that haven't been able to deliver enough new medicines. But making the companies smaller doesn't seem like it'll help much, either. More and more, it's looking like the industry needs some new research (and financial) models - and more and more, it looks as if we don't have any idea of what those might be. Individual partnership financing for drug projects? Open-source research of some sort? Teaming up with disease foundations for early-stage research? More collaborations between rivals to disperse the risks? If you have any ideas, come on down. Now's the time.

Derek Lowe blogs from inside the drug labs at In the Pipeline.

This article available online at:

http://www.theatlantic.com/business/archive/2010/02/why-the-large-pharma-companies-are-in-crisis/35169/