The most momentous day on the 2011 calendar may be in November when Ranbaxy begins flooding the market with generic Lipitor, long the industry's top-selling brand. The patent expiration of this superstatin marks the end of an era when pharmaceutical empires could be built and sustained by the production of one or two annual blockbusters for the primary-care markets.Drugmakers will be casting about for strategies that free them from the current vicious cycle of cost-cutting, loss in productivity, sales shortfalls, and stock devaluations. "Fewer companies will make it without restructuring, moving into new businesses, major acquisitions for their pipelines—and just plain luck," says Murray Aitken, IMS's Healthcare Insight leader. "There still hasn't been enough cost cutting to provide companies with a base for future profitability."
The most dramatic trends in healthcare are toward market efficiency and the alignment of price with value. Pricing reform is inevitable with runaway healthcare spending finally on the nation's agenda. How each company responds to these new pressures will reveal its priorities, ranging from the bottom line to public trust. No one would be surprised if facing this profit-cramping market, pharma quietly raised prices by 10 percent or more in 2011 as it did last year in the months leading up to the passing of the Affordable Care Act. Longer term, the industry has little choice but to meet the growing demand for drug pricing accountability head on—by showing that the health outcomes provided by drugs are also economic benefits. "The question a pharma must answer in order to price its drug is no longer, Is it safe and effective?" says Carolyn Buck Luce, Global Life Sciences Sector Leader at Ernst & Young. "The new question payers are asking is, How do we know it is worth paying for?"
Industry leaders are in the unenviable (if well compensated) position of having to make the right decisions in the context of not only a disruptive 2011 market but also a transformation of the healthcare industry by decade's end. "Pharma is moving from being a product industry based on a drug to an outcomes industry based on the insight you get from all the information that went into making that drug," says Buck Luce. In this brave new world, pharma may generate the information as it designs the drug, but unless it develops new capabilities fast, it may lose control of that information—and its value—to more innovative players.
For an industry that has remained unprepared, year after year, for a well-known patent cliff, preparing itself for the only dimly grasped perils and potentials of a totally metamorphosed market is akin to trying to jump over your own shadow. But that is the state of pharma in 2011.
What follows are snapshots of the coming year's eight main events.