A bitter pill

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Wyeth last year lost the patent lock for the antidepressant Effexor, a drug that has netted the company a massive $3.79bn in annual sales.

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Last January Wyeth announced the launch of Project Impact, a cost-cutting initiative aimed at improving company efficiency.

President of Wyeth Pharmaceuticals Joseph Mahady talks to Arabian Business about the challenges facing global pharmaceutical firms and his plans for weathering the economic storm.

Pharmaceutical companies have historically weathered economic downturns better than most. Like washing up liquid and toothpaste, medicine is one of life's essentials.

But traditionally drugmakers have not had to deal with a barrage of lawsuits, significant patent losses and a changing US administration, topped off with one of the worst global downturns seen in decades.

But Wyeth president Joseph Mahady takes it in his stride. "They [drugs] are not optional. People will struggle to pay for them but the beauty is that they change people's lives and that is always what has protected us in the past," he tells Arabian Business during his one-day trip to the firm's Middle East hub in Dubai's Healthcare City.

The global economic crisis is the latest in a series of blows dealt to US drugmakers who, according to market data firm IMS Health Inc, are set to lose $84bn of patent protection by 2012. Whereas patent losses would normally be cushioned by the release of new drugs to market, increased scrutiny from US drug regulators has seen drug approvals fall to their lowest level in 24 years.

In keeping with the unusual market conditions, pharmaceutical firms look set to break with another tradition: the idea that the industry is recession-proof.

"We are used to saying that drug companies fare fairly well during economic downturns," admits Mahady, who took the helm at Wyeth Pharmaceuticals in January last year. "[But] I don't think we've seen an economic downturn with a pharmaceutical environment like this."

The combination of challenges has taken its toll on Wyeth, with shares down 24 percent year-to-date. The firm has also registered a slowdown in drug consumption, particularly in its largest market, the US - despite data from IMS showing barely any decline in physician visits through to September.

Mahady lays the blame at America's underinsured healthcare system, where patients are often left to foot medical bills.

"I think in this environment you are likely to see consumption either decline or shift. Patients may try and stretch their medications out and we have data to suggest that patients are skipping visits to their physicians."

Last January, several months before the impact of the downturn was felt across the world, Wyeth announced the launch of Project Impact, a cost-cutting initiative aimed at growing the company into a more efficient machine. Under the proposal, Wyeth said it would slash its workforce by 6 percent by the close of the year. By 2010, the company would extend that cut to 10 percent.

"In the developed world, people are telling us that pharmaceuticals cost too much," Mahady explains. "We have always been proud we spend a lot of money and the way we read it is that the market is telling us we either need to succeed more or spend less.

Last month saw the drugmaker cut 276 jobs at its Puerto Rico plant.

While Project Impact is unlikely to affect Wyeth employees in emerging markets such as the Middle East, Mahady says its ideas will be utilised across the world.

"In areas like the Middle East, Russia, Eastern Europe and China, while we encourage Project Impact thinking... we are investing more. There is much more of a significant growth in healthcare [in those regions]."

Wyeth has had a presence in the Middle East for more than 50 years, but has registered its most significant growth since the introduction of its blockbuster vaccine Prevnar to market. The drug came endorsed with a World Health Organisation recommendation that all developing countries add the drug to their vaccine schedules.

Prevnar, the first immunisation for infants against pneumococcal bacteria, a common cause of pneumonia and ear infections, is now mandatory in countries including Kuwait and Qatar, and in Dubai and Abu Dhabi. Largely on the back of these national immunisation programmes, third quarter sales of Prevnar rose 13 percent to $717m.

"Wyeth is one of the few multinationals that is growing at the rate [it is]," Mahady claims. "It is a combination of incredibly good performance on our nutritional products and in two significant areas: Prevnar, which has had remarkable successes here, and then behind that Enbrel [a treatment for arthritis] and a couple of other products.

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