Makers of small-molecule drugs are in treacherous waters. The Scylla of generic-drug competition rears on the horizon, ready to bite into innovators’ profits. At the same time, companies’ research-and-development productivity seems to have been sucked down into Charybdis. How will drugmakers survive these perils?
They’re likely to pursue acquisitions, thus continuing the trend of the past few years. The burgeoning biopharmaceutical industry shows potential for yet more growth, making those companies tempting targets for small-molecule manufacturers. In public, pharmaceutical executives describe modest acquisition goals, sometimes mentioning price tags of $5 billion or less.
But David Snow, chief executive of Medco Health Solutions, doesn’t take these statements at face value. Any biotechnology manufacturer—even heavyweights like Biogen Idec and Amgen—could be a takeover target, he told the Reuters Health Summit. “You have to become awfully large to be unaffordable—there’s lots of cash, lots of capital out there for acquisitions,” he said, according to Reuters. Drugmakers who are still flush might see biopharmaceutical acquisitions as a safe path through rough seas.
Not so fast. Regulatory approval for these mergers might soon become tougher to obtain. Late last week, Senator Herb Kohl (D-WI) asked the Federal Trade Commission to examine pharmaceutical-industry mergers with care, lest they exacerbate the problem of drug shortages. “[F]ewer drug companies competing in a therapeutic class may lead to fewer prescription drugs being developed and sold within that class,” said Kohl, citing a study by the Government Accountability Office.
He also quoted a Washington Post article on the same topic. A smaller pool of drugmakers means “that when raw material runs short, equipment breaks down, or government regulators crack down, the snags can quickly spiral into shortages,” said the article. Patients would certainly be in trouble if mergers slowed innovation and made drugs harder to get.
So how will drugmakers stay afloat during these turbulent times? They might well need the cunning of Odysseus.