Post-Vioxx world tough on drug companies

The drug industry’s image problems are beginning to hurt pharmaceutical companies where it matters most – at the bottom line.
A year after Merck withdrew of its arthritis medicine Vioxx, which led to an industrywide credibility crisis, the Food and Drug Administration is blocking new medicines that might previously have passed muster.
Doctors are writing fewer prescriptions for antidepressants and other drugs whose safety has been challenged, such as hormone replacement therapies for women in menopause.
“A lot of the demand that the industry has created over the years has been through promotion, and for that promotion to be effective, there has to be trust,” said Richard Evans, an analyst covering drug stocks at Sanford C. Bernstein and Co. “That trust has been lost.”
A Harris poll last month showed that only 9 percent of Americans believe drug companies are generally honest, down from 14 percent in 2004. In contrast, 34 percent of people said they trusted banks, and 39 percent trusted supermarkets.
At some major drug companies, including Pfizer and Merck, sales are stagnant and profits are falling, leading to layoffs and – for the first time in many years – cuts in research budgets.
In the third quarter, U.S. sales of prescription drugs fell 3 percent at Bristol-Myers Squibb, 4.5 percent at Johnson & Johnson, and 15 percent at Pfizer.
Insurers and some states, meanwhile, are taking advantage of the backlash against the industry to try shifting patients to older, generic drugs, arguing that they work as well as newer and more expensive brand-name medicines.
But the drug industry is hardly in a crisis, and layoffs are occurring mainly on the margins.
Pfizer alone will make about $8 billion in profit this year, on sales of about $51 billion, and invest more than $7 billion in research and development.