PwC to pharma: Adapt and invest or die

In a remarkably critical report, PricewaterhouseCoopers analysts are urging pharma companies to shift money from marketing into research and tie drug prices to efficacy or face a collapse of an unsustainable business model. PwC's "Pharma 2020: The Vision" says the pharma business model is "economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets."

Drugs are coming off patent faster than the pharma companies can replace them, the report warns, as research fails to deliver. Companies have managed only a marginal increase in R&D spending as a percentage of their budget in recent years while sales and general administration costs have surged. In the meantime, PwC adds, the industry's reputation has been badly tarnished. Interestingly, the report also says that companies will move away from the classic model of drug development that ends in regulatory approval to "live licenses" that allow for narrow product launches followed by gradually expanding approvals as drugs are continuously tested. And regulators around the world will collaborate more on the approval process, possibly moving to a single global process by 2020.

On a brighter note, however, PwC says that worldwide sales of pharmaceuticals will double by 2020, hitting $1.3 trillion. The growth will be driven by aging populations, rising levels of obesity and a surge in demand from emerging markets.

- read this release from PwC
- here's the report from the Financial Times

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