Is Pharmaceutical Consolidation on Horizon?

Recently I had opined the following. Since then I keep reading views at other websites. [http://www.pharmatimes.com/WorldNews/article.aspx?id=14672]. I still believe that a consolidation is needed to quickly fill the pipeline. Industry is venerable and the only reason Venture Capitalists have not moved in due to the current credit crunch. Once the monetary crunch eases, we should see the beginning of consolidation. Increasing layoffs are suggesting that financial preservation is a must but it is coming at the expense of the basic knowledge base which is going to be difficult to replace. R&D and Manufacturing technologies need to be brought to 21st Century. Even with that, the basic business model will have to be revised. With increasing global effluence, market size will increase. In the increased market size the need for generics will be higher than the ethical drugs.

"If one sifts through and compiles the news about the pharmaceutical companies, a clear trend with respect to their shifting business model starts to emerge. Slowly but surely, major pharmaceutical companies are behind the scene inching toward being a combination of "Block Buster, Bio-tech and Generic" model. This is their last and the only hope. Merck is experimenting a new business model of selling patented drug (Januvia) at one-fifth the US price level in India. Glaxo is venturing in South Africa and Egypt. These are undeclared secrets. Daiichi Sanyo has bought Ranbaxy. I am sure others are in the works.

I believe Ethical pharmaceuticals are not very clear about what they want to be. As a result, they are dabbling with every opportunity they see i.e. riding many boats with the hope that one will take them to the promise land. If they clearly define their mission, they might just need one big and strong boat (it could be a combination of blockbuster, bio-tech and generic) to take them to the goal. This will allow them to properly focus their attention.

Competing with the Generic producers is going to be a challenge for the Ethical producers. Their knowledge base is shrinking through lay-offs. Their manufacturing technology is not current. If the Ethical companies do want to go in serve ethical and generic markets, they will have to have very efficient manufacturing technologies that can offset generic producers cost advantages. They can achieve this by collaborating and/or acquiring Indian or Chinese companies. With the globe shrinking, second option is more likely. If this happens, it will lead to an eventual global consolidation in the pharmaceuticals."