Mid-Summer Days' Review

This season, boosterism is out; hedging is in. Yet a realistic assessment of the pharma market, even under the shadow of terror and war, reveals new opportunities. For every ominous sign or setback, a potential line of offense exists. Despite the press of a slow economy, nervous investors, customer consolidation, and cost-shifting in healthcare, the industry remains rich in resources, growth, and opportunity. Here are some of the market forces, issues, and opportunities for the pharma universe this year:

Stock markets, reflecting the industry's slower performance in 2001-2002, show unprecedented volatility, amplified by shareholder skittishness over international war-mongering. Opportunity: A readjustment in inflated shareholder expectations for pharma growth and profit-long four to five times higher than for all other industries.

Managed care and insurance companies seek to flatten the recent spike in pharma spending. Employees face tough choices if they wish to obtain the latest therapies. Opportunity: Price-based competition among products that offer new science, cost-effectiveness, and accessibility.

Consumerism remains powerful. DTC advertising works to increase patient requests and physician prescribing. Ironically, the same ads that raise the profile of pharma companies subject them to harsh criticism for profligate media spending. Opportunity: Subtler forms of DTC that lead consumers by the product rather than directly to it. Consumers will choose the media and the content. It won't look expensive, but people will consider it highly valuable.

Professional marketing code. After years of pressure to bring ethical standards to pharma marketing, PhRMA has finally done just that. Industry people are scrambling to interpret the new code, because it could prohibit common sales practices such as company-paid dinners, seminars, and "consulting fees." Opportunity: Creative experimentation and a need for professional guidance as the code plays out. Companies that took the high road will gain over those who didn't.

Politics increasingly surrounds the industry. Medicare Rx, patent legislation, stem-cell research, and the industry's own high-powered lobbying dominate the US discussion. Globally, industry's pricing of AIDS medicines highlights the political repercussions of individual company decisions. Opportunity: Premium on corporate wisdom, public relations, and company reputation.

Media image and public reputation are now dramatically measurable. Opportunity: The competitive advantage of being on the right side of the issues that matter most in the public eye, such as medical progress, cost, access, and sensitivity to tough economic conditions.

Accounting and investment have become huge factors in industry competition. Disappointing research productivity in major companies has led to an explosion of partnering and licensing now undergoing special scrutiny in the wake of Enron and ImClone. Opportunity: As the former gold rush slows to a deafening roar, regional and community development groups, along with thousands of biotech companies, vie for pharma business all over the world. Even under the strictest accounting, pharma's investment expansion will continue well into the future.

As the summer sun sets, it is time to gather strength for the winter days to come. Down the road lies the known and the unknown. But strength you will need to make the trip.