Yesterday (08Jun11) The Wall Street Journal reported (subscription may be required) that Pfizer will cut an additional $1 Billion – mostly in administrative costs. These cuts come after cuts to sales and R&D. What’s driving all of these cuts is two-fold: loss of sales of their products to generics and failure to obtain approval for new drugs.
The pharmaceutical industry has known for some time that there is a looming patent cliff. As big pharma is not getting new drugs approved, there are fewer drugs to come off patent. See the WSJ chart below. These latter drugs are the feedstock for generic companies. Thus, generic companies also need to adjust their business costs or perhaps they should look at 505(b)(2) as the new business model.