Drug safety Although much in the headlines recently, this issue transcends sensational reports about specific products. Participants noted that demographic and economic trends are increasing the demand for health services, in general, and pharmaceuticals, in particular. As more complex treatments are used for more serious medical maladies, there is a growing expectation that these drugs have as few side effects as older, simpler medications. "However unrealistic, people will increasingly demand drugs to work with no problems," one participant said.

Price regulation & political environment Execs worry that potential US price regulation and the domestic political climate may lead to unwanted industry change. In the short run, these issues could limit patient access to pharmaceutical products; in the long term, they may hobble breakthrough drug innovation.

Lack of new drugs One senior commercial executive summarized the predicament cogently:"My main concern is, how do we come up with—and sell—new drugs that people can pay for?"

To discover how these 15 issues were related in the minds of executives,we applied a psychometric technique called factor analysis used in marketing, product management, and many other disciplines. This method of analysis is based on a simple idea: Sometimes answers to individual items are just that—often, however, they are the result of several underlying causes. Factor analysis provides us with the perceptual map that the industry leaders in our study have of the issues. We labeled these underlying factors pressure points (see "Under Pressure," at left).

Industry executives see six industry pressure points in the coming years:

Pressure Point 1: Society's Perception of Pharma & Pressure Point 2: Patient Safety We called the top two pressure points Patient Safety and Society's Perception of Pharma because of the range of specific issues that were linked to them: the industry's image, drug profits, generic drug usage, drug safety, costs of new drug development.

Pharma execs recognized that the costs associated with the tarnished image of the industry are driven in large part by society's perception that companies promote unsafe drugs. There are also more literal costs—not only the loss of revenue and profits from drugs that are pulled from the market (Baycol, Vioxx) but also the money spent on legal defense, which diverts resources from R&D and operations.

Pressure Point 3: Politics & Legislation With the shift in control of Congress, this pressure point deals with the impact of the political environment, the potential regulation of drug prices, and the impact of all this on profits.

Understandably, these issues cause a high degree of uncertainty. While executives have limited control over politics, legislative outcomes can range from the potential revisions to Medicare Part D to the threat of restrictions on freedom of the direction companies take on medical research. In a December Wall Street Journal interview, Sidney Taurel, CEO of Eli Lilly, proclaimed, "The potential for medical research is unlimited. We just need to make sure we don't interdict it by the wrong policies."

Attempts by Congress to dictate the direction of research could have a profound effect on the speed of development of cures and prevention of diseases. Laws establishing price controls are likely to decrease profitability—and the resources available for R&D. The potential ban of authorized generics—another item on the legislative agenda—would have an impact on the lifecycle strategies companies use to manage brands as they approach patent expiry.

Globally, the political environment offers conflicting opportunities for pharma. The largest developing markets are China and India, whose combined population exceeds two billion. However, two issues prevail: developing economies are unable to support high-priced technology to generate profits, and there is still limited protection in these markets for intellectual property.

Pressure Point 4: Regulatory Environment Increased regulation of drug development and drug marketing are the issues included in this pressure point. As the cost to bring a drug to market approaches the billion-dollar mark and time to approval exceeds 10 years, executives are seriously concerned about any potential increase in regulation.