Media release from Datamonitor

Expert Comment, Dr Tijana Ignjatovic, Healthcare Analyst at Datamonitor:

Melbourne, 28th April 2010 - "So far, companies including Johnson & Johnson, Eli Lilly, Abbott, Amgen and Gilead have already given guidance on the effects that can be expected on their performance this year. For example, Johnson & Johnson estimates that its 2010 impact will be at the top of the range for the overall pharmaceutical industry, with an estimated $400-500m reduction in sales, or 3% of the company's 2009 US pharma revenues. The magnitude of the impact in 2010 is primarily based upon the level of US sales, in particular, those derived from the Medicaid program. According to our analysis - looking at companies with a high US sales dependency in their prescription pharma business - Forest, King, Cephalon, Amgen and Shire can be expected to be amongst the biggest losers while Big Pharmas Bayer, Sanofi-Aventis, Novartis and Roche will suffer a reduced negative impact on their 2010 sales performance, due to their relatively low focus on the US market.

"The recently passed healthcare reform law is already impacting pharma and biotech companies in the US, mainly due to introduction of higher rebates on drugs sold through the Medicaid program. While the rebate increase is valid from January 2010, reform law measures that are set to benefit pharma by increasing the number of insured individuals will start to have an impact only in 2014. In 2011 pharma will face further downward pressure on drug prices when the 50% discount for patients in the Medicare Part D donut hole is enacted. With the sector already facing a major negative impact of the patent cliff in 2011, reform law provisions that will have a negative impact on the sector could not come at a worse time. Companies will have to weather a perfect storm before they can see much of the upside of reform law."