Pharmaceutical Industry

In a deal that would create the world's ninth-largest drug company, U.S. pharmaceutical giant Upjohn Co. and Sweden's Pharmacia AB said Sunday that they will merge in an exchange of stock valued at $13 billion. The planned merger, which would result in a company with $7 billion in annual revenue, is the latest in a series of consolidations sweeping the industry as concern about high health-care costs forces drug companies to seek economies of scale. Upjohn, based in Kalamazoo, Mich.

It sounds like simple economics. As drug companies continue their merger frenzy, there will be less competition, resulting in less innovation and higher prices for consumers, right? Not necessarily, say industry watchers, who point out that other factors, such as the growth of health maintenance organizations and the public's demand for more non-prescription medicines, continue to push prices downward. Sunday's $13-billion proposed linkup of Sweden's Pharmacia and the United States' Upjohn Co.

Upjohn Corp. has launched the first-ever program-length commercial for a prescription drug, pushing pharmaceutical marketing to a new level but raising anew concerns about the appropriateness of pitching such drugs directly to consumers. The infomercial is for Rogaine, an anti-baldness drug that has never met the sales expectations that accompanied its introduction seven years ago.

Without a hint of arrogance or condescension, drug industry entrepreneur Alejandro Zaffaroni politely explains the multibillion-dollar merger and acquisition frenzy now sweeping the pharmaceutical industry: The world's biggest drug companies have lost faith in their abilities to create profitable new drug therapies. Their costly innovation infrastructures no longer reliably yield either breakthroughs or blockbusters.

With professional investors pumping billions of dollars into Amgen Inc. stock last week on rumors--later denied--of a takeover that would have cost at least $12 billion, ordinary folks must wonder what connection there could be between mega-deal speculation and lower prices for prescription drugs and medical treatments. But there is a connection, just as there is a more obvious link to fresh investor interest in biotechnology, an industry scarcely 20 years old that speaks volumes about U.S.

Drug manufacturers will no longer have to pledge to charge a "reasonable price" for new drugs and other technologies that result from collaborative research agreements with the federal government, the National Institutes of Health said Tuesday. The requirement, inspired by public uproar over the original high price of the AIDS drug AZT, "has driven industry away from potentially beneficial scientific collaborations with (federal) scientists," NIH Director Harold Varmus said in a statement.

It's shaping up as the battle of the bellyache. Three of the world's most popular prescription drugs--ulcer medicines called Zantac, Tagamet and Pepcid--are being or are expected to be introduced as powerful over-the-counter ways to block stomach acids. Experts believe the drugs have the potential to revolutionize the $1-billion-per-year market for antacids, which has not seen a major innovation since the 19th Century.

In a deal that would create one of the nation's largest makers of generic drugs, Corona-based Watson Pharmaceuticals on Thursday agreed to buy Circa Pharmaceuticals in a stock-swap deal valued at nearly $600 million. The acquisition would become the latest in a string of drug industry mergers as former rivals join forces in the face of government and corporate efforts to cut costs.

Milan Panic was upset. He was reading stories last winter about an outbreak in Southern California of RSV, a respiratory ailment that afflicts children, and never saw a word about the only drug that treats serious RSV cases--the drug his company makes. A born salesman and autocratic leader, Panic ordered his staff at ICN Pharmaceuticals Inc. to put together a full-page advertisement for him to edit and approve.