Drug companies target overseas growth

AN AGEING, wealthy population and government subsidies: you would think the Australian pharmaceutical industry would be grinning.

But although the country's listed pharmaceutical wholesalers, API and Sigma, had a great 2012 - up 81 per cent and 36 per cent respectively - hundreds of job losses were confirmed in the final months of the year from drug companies Pfizer Australia, GlaxoSmithKline, Eli Lilly and MSD Australia.

The cuts came as the federal government sought to reduce soaring health costs and global blockbuster drugs, such as cholesterol treatments, came off patent to face tougher competition from generic manufacturers.

Brendan Shaw, chief executive of industry body Medicines Australia, recently noted that the Pharmaceutical Benefits Scheme, which subsidises Australians' cost of medicines, had soared from a $173 million annual cost to the government to $9 billion.

But since its inception in 1972, patient contributions to the PBS had remained at about 0.1 per cent of gross domestic product, he said in a speech last year.

Beyond the local market, the industry is pinning its hopes on the growth of neighbours.

The Bureau of Statistics says medicinal and pharmaceutical products accounted for more than $4 billion in exports in the year to June 2012, up from $3.74 billion in the 2011 fiscal year.

Forecasting firm IMS Health had predicted global spending on medicines would reach $1 trillion this year, driven by emerging markets including China, India and Thailand, Dr Shaw said.

"Economies like China are growing rapidly, their middle classes are growing rapidly and those middle classes will be demanding healthcare products and services like medicines to keep them healthy," he said.

"In the Australian prescription medicines industry we've seen the knock-on effect of these changes already, such as AstraZeneca's decision to keep its Sydney manufacturing plant open, and actually expand it, to meet the rising demand for asthma and [chronic obstructive pulmonary disease] medicines in China."

The most recent financial accounts show Eli Lilly reported a $12.78 million profit in 2011, down from $16.37 million the previous year, due to "zero sales growth" and increasing operating costs.

Profit at Pfizer Australia Holdings and its controlled entities fell to $61.15 million for the year to November 30, 2011, from $72.6 million.