U.S. Pharma Industry Evolution

Last week’s news about Pfizer’s $17 billion deal to acquire Hospira, a leading generic injectibles and biosimilars company, shows some of the tectonic shifts taking place in the U.S. pharmaceutical industry. This is a big deal for a number of reasons. It demonstrates where some of the biggest growth opportunities are for pharmaceutical companies; hospital products, injectibles and biosimilars, which are generic copies of biological therapies. With an estimated $100 billion in biotech drugs losing patent protection in the next five to ten years, biosimilars represent a huge opportunity for pharma.

Perhaps the biggest signal of the changes taking place in the U.S. pharmaceutical industry is the fact that some industry analysts see Pfizer’s acquisition of Hospira as another step toward the company’s plan to split into separate businesses. Pfizer’s CEO, Ian Read, has talked about splitting the company into three separate units, one focusing on older medicines and generics, and two others focusing on developing innovative treatments. Analysts are speculating that Pfizer adding Hospira to the company’s generics business will give that unit the strength it needs to be a stand alone business.

We’ve talked before about the need for the pharmaceutical industry to find a new strategy in the face of increasing pressures brought about by the changing U.S. healthcare system. Pfizer has become the world’s largest global pharmaceutical company through a series of major acquisitions. If pharma industry analysts are right, and Pfizer is in fact preparing itself to be split up, we are at the beginning of a total change in direction from the pharmaceutical industry’s standard business model over the past 20 years.