It may still carry a defensive tag, but the pharmaceuticals industry won't escaped unscathed as economies around the world are pitched into recession. Drug industry executives warned this week of growing pressure from payers on prices and weakening sales of medicines, as some cash-strapped patients start to split dosages or skip prescription refills altogether.
"In the past you've always heard that the pharmaceutical industry was kind of not a part of any kind of economic situations that you had," Merck & Co Inc Chief Executive Richard Clark told the Reuters Health Summit in New York. "I don't think that's the case anymore. I think this is so bad that you're actually going to see these kind of unfortunate decisions made."
Compared with sectors like autos and retail, healthcare is much better placed to weather the downturn, since consumers still need treatment even when times are tough. But its safe haven status is only relative.
Tim van Biesen, a partner at consultancy Bain & Co, expects around 100 US companies with assets over $100 million to go bankrupt through 2010, nine or 10 of them in healthcare. "Is it slightly more resistant than retail? Of course, right? So there are degrees of severity here; but it is no longer the sector to hide in," he said. Most vulnerable are suppliers of elective or optional treatments, like Botox maker Allergan Inc, which warned last month of a looming revenue slowdown.
But sales of a wide range of prescription medicines are also at risk, including long-term treatments for asymptomatic conditions like high cholesterol, according to Greg Wasson, president of US drugstore chain Walgreen Co.
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"The pharmaceuticals industry is certainly not immune from the effects of the recession," Jeff Kindler, chief executive of Pfizer Inc, the world's biggest drug maker, told the Reuters summit.
"There's anecdotal evidence that would suggest that some people are not taking their medicines or other important aspects of healthcare treatment by virtue of the economy." The impact, for now, is greatest in the United States - the world's biggest and most profitable drugs market - where patients pay for a significant proportion of treatment.
In Europe, where most health care is provided by the state, the short-term hit might be less, but the prospect of falling tax receipts in 2009 and squeezed government budgets has executives worried.
"There is a tendency for governments not to cut back on the benefits they have generated for their own citizens, but if it becomes a big 'U' or a big 'V' (-shaped recession) then all elements of the economy are going to be affected," said Schering-Plough Corp CEO Fred Hassan.