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Drug companies warned on growth
Andrew Jack, FT Syndication Service

London: The world's top pharmaceutical companies need to redouble their efforts to justify the cost-effectiveness of their medicines in future years in order to survive, IMS Health, the drug industry consultancy, warned recently as it predicted slowed growth for the sector in 2006.
Companies will have to do more to justify the value-for-money offered by their medicines as US healthcare reforms kick in from the start of next year, said Murray Aitkin, senior vice-president for corporate strategy.
"We see companies continuing to under-invest in Phase 4 trials to demonstrate their products' superior profile," he said, in a reference to continued monitoring and trials on patients after a new treatment has already been approved by regulators as safe and is launched on the market.
His comments came as IMS Health, which is currently facing an uphill struggle in its own negotiated takeover by VNU, the Dutch market research and media group, published estimates for the pharmaceutical sector projecting sales up 6.0-7.0 per cent to $650m in 2006, compared with 7.0-8.0 per cent growth for the current year.
Mr Aitkin argued that President George W. Bush's medical modernisation act would likely boost drug sales by 1.0-2.0 per cent next year as Americans on Medicare were recruited for the first time next year into programmes offering to cover the costs of medicines.
However, he said that by 2008, the US would probably start trying more aggressively to ensure that any drugs showed strong therapeutic advantages and cost savings, in a move that could hit a number of patented products and drive healthcare providers towards greater use of generics.
For the first time, the IMS Health data suggest that oncology drugs will next year overtake statins, which lower blood cholesterol levels, as the top-selling therapeutic category with up to $35bn in sales, reflecting growing numbers of patients, pricing strategies and more limited competition than among statins.
The IMS forecasts suggest US growth will remain strong at 8.0-9.0 per cent, slightly reducing its share of total worldwide sales to 43 per cent.
Continued pricing pressure will cut European growth slightly to 4.0-5.0 per cent, and cuts in Japan will reduce its growth to almost zero.
However, China will grow by up to 18 per cent to more than $13bn, making it one of the world's top 10 markets, with strong growth in other emerging markets including Latin America and Eastern Europe.
The generics market will rise to an estimated 18-19 per cent of the total drugs bill next year, up from 12-13 per cent in 2005.