Europe’s recession is causing major drug companies to decrease their forecasts and spending. After EU policymakers accepted a rescue fund in May totaling almost $1 trillion, countries have reduced or plan to reduce their health spending. Germany instituted a price freeze on drugs until 2013, Spain presented a 7.5% rebate on most name-brand products and Greece, whose fiscal collapse was the basis for the cuts, ordered drugmakers to slash prices by up to 27%. The crisis will add to the pressure drugmakers already face from generic competition. Medicines that generate more than $142 billion in sales will face such competition in the next five years, equipping countries with more leeway to insist upon price reductions from drugmakers. Sanofi-Aventis is decreasing sales forces and establishing a multiproduct sales force. Merck & Co., for which the European measures are expected to reduce revenue by about $300 million in the second half, aims to curb expenses. Eli Lilly & Co. estimated in July that the European actions will decrease its revenue by $90 million this year and $150 million next year. Impending patent expirations and price cuts to older medicines increase the importance of new drug development, possibly paving the way for companies to form more partnerships or acquire new products.

Source: Bloomberg News