Have We Passed "Peak Pharma"?

Peak Oil
The world output of oil has been increasing ever since we first figured out how to get it out of the ground. But oil isn't produced, in the sense of a sustainable conversion of one thing to another, it is extracted from a finite reservoir. Peak Oil is the point at which oil extraction volumes start to go down not up. The date of Peak Oil is controversial, but the consensus is that it is very soon or may even already be behind us.

This is a healthcare-focused blog so why am I dwelling on energy issues? There are health consequences of Peak Oil - health services and products in developed nations are heavily oil-dependent. As oil prices rise with decreasing supply, healthcare will have to adapt itself to the new reality. But it is more the Peak Oil concept itself that interests me, and I think the mountain metaphor works for the medical sector as well.

Peak Pharma
I wonder if the world has passed "Peak Pharma", at least in the sense of drug profits per patient?  Have we passed the most lucrative era for medicines? As companies move into developing markets and de-emphasise high-priced blockbusters their average prices, and therefore their revenue and profit per sale, will decrease and they will have to work harder and harder to make the same returns. Price pressure from local politicians, higher levels of authorised and unauthorised copies, increasing levels of counterfeits - all of these will mean that pharma cannot just translate its Western model to the developing world at a slightly lower price and hope to succeed.

Very basic market analysis shows that in 2007 the top 100 blockbuster drugs generated sales of $252.5 billion, accounting for 35.5% of the total global pharmaceutical market. As these drugs fall away, it will take a whole lot of work to just maintain the current business model. Companies who try to maintain their position and merely adjust the status quo slightly will fail.

The industry needs to accelerate its move to diversify away from a rigid, product-led model to a flexible, service/product hybrid. Relying on revenues from drugs alone is a sunset strategy.