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We tend to think of the pharmaceutical market as being pretty much recession proof. Just as people have to eat, making the food sector reasonably resilient even in troubled times, so people continue to get sick, whatever the state of the economy. Indeed, there are many reports that link a recession to all sorts of illnesses, notably depression, anxiety, cardiac disease and other maladies.
And of course, the current economic troubles have coincided with the outbreak of the swine flu pandemic. This has not just created high demand for drugs such as Tamiflu, but has also seen a general focus on health and hygiene, with, for example, a huge increase in sales of hand sanitisers and similar products.
Nevertheless, the pharmaceutical sector remains under the same sort of cost pressures as any other market. Indeed, one could argue that pharmaceutical companies have extra pressures to contend with, particularly in terms of the lengthy development process and equally long and stringent regulatory approval that any new drug has to undergo. While the rewards for finding the next breakthrough drug can be enormous, for every drug that succeeds, there are many more that do not make it. The new product development process can be long and expensive, with no guarantee of success at the end. This makes the need to maximise throughput and efficiencies once a drug is in production of paramount importance.
The days when a manufacturing plant could run a patented drug at no more than 50 to 60 per cent capacity, since the value of the product meant costs were not a critical factor, are generally a distant memory. Even where there is high demand for products, competition is fierce and the emphasis for every company is on maximising returns while minimising costs. |
