US pharma in massive churn

The Viagras and Zolofts, the Lipitors and Nexiums are in trouble. Such blockbuster drugs that have earned billions for their creators, pose ...

The Viagras and Zolofts, the Lipitors and Nexiums are in trouble. Such blockbuster drugs that have earned billions for their creators, pose a problem to their makers as their patents will soon expire, opening their formulas to generic copycats and threatening the future profits for drug companies desperate to produce the next generation of stars for the medicine cabinet.

That situation underlies this week8217;s announcement by Merck 038; Co Inc that it will lay off 7,000 employees, one-tenth of its work force, and shutter five of 31 manufacturing sites to save 4 billion through 2010.

Other pharmaceutical companies, including Pfizer Inc and Wyeth, have also cut jobs and closed plants during the past year to head off expected declines in profits.

8216;8216;The blockbuster model really is not going to be sustainable.8217;8217; said Christopher-Paul Milne, assistant director of the Tufts Center for the Study of Drug Development in Boston.

For one, it many years to develop a new drug after securing approval from regulators. And there8217;s no telling which will be hits. That uncertainty, coupled with other industry issues, has caused some pharmaceutical giants to begin branching out.

Over the last few years, many of the big pharmaceutical companies have set up partnerships with biotechnology businesses that make niche drugs, theorising that money can be made by offering many small products rather than a few major ones. Others have looked to new scientific methods that could be used to resurrect formerly failed products.

The impetus for Merck8217;s announcement on Monday appeared to be the impending 2006 patent expiration of Zocor, a cholesterol medication that was the second-biggest seller in the world last year with 5.9 billion in sales, and problems with the painkiller Vioxx. Merck had looked to that drug as its next potential gold mine, but instead had to pull if from shelves last year amid accusations it increased the risk of heart attacks and strokes.

Story continues below this ad

A generic version of Zocor could cause a dip in sales not only for Merck, but for its cholesterol competitors such as Lipitor, a Pfizer drug that had worldwide sales of about 12 billion in 2004. That category of drugs was the biggest-seller worldwide last year, combining for about 30 billion of the industry8217;s total 500-plus billion in annual sales. Other blockbusters, according to industry consultants NDC Health of Atlanta, include AstraZeneca PLC8217;s Nexium, the heartburn medication dubbed the 8216;8216;purple pill8217;8217; that recorded 3.6 billion in the US sales last year, and Pfizer8217;s depression medication Zoloft, with sales of 3 billion.