Whining All The Way To The BankJoseph Weber
For more than a year, drug executives have been talking a gloomy game. Between the growth of managed care and the specter of health-care reform, they've been lamenting the end of the industry's glory days.
Tough times? Hardly. As third-quarter results roll in, many big drug companies are reporting banner sales and earnings. And that could renew calls for reform of the drug industry.
PROZAC NATION. The latest numbers are impressive (table). Once downtrodden Eli Lilly & Co. posted an 18.7% gain in third-quarter total sales, to $1.8 billion. Paced by a 21.2% gain in drug sales, Johnson & Johnson boosted its quarterly sales 15%, to $4 billion. And Merck & Co. had a 49% gain, to $3.8 billion, mainly because of its acquisition of Medco Containment Services Inc. Even without Medco, Merck's sales would have been up 15%. Profits also were generally strong: J&J was up 16%, to $525 million; Lilly 8%, to $319 million; and Merck 11%, to $785 million.
A major factor in the industry's sudden pickup: a surge in sales of antidepressant drugs such as Lilly's Prozac. Prozac had a staggering 74% rise in third-quarter sales, to $545 million. That was in part because wholesalers were stocking up to beat a Sept. 21 price hike. But analysts figure Prozac look-alikes from Pfizer Inc. and SmithKline Beecham also logged gains of about 50%.
Plenty of other new products sold well, too. J&J's schizophrenia drug, Risperdal, which is safer and cheaper than rivals', has logged more than $100 million in sales since its February launch. Pfizer got a boost from a half-dozen new products. And Schering-Plough's healthy results largely came from gains by Claritin, a knockoff of Marion Merrell Dow Inc.'s antihistamine, Seldane.
Still, the drug industry's hot quarter is sure to spark controversy. Critics say Prozac and other antidepressants are being overused. Others contend that the industry is overstating its woes to avoid reform. "The strength of the industry's performance this quarter raises doubts" as to whether it is truly in a crisis, says Senator David H. Pryor (D-Ark.).
Drugmakers without big new blockbusters are far less perky. Upjohn Co.'s sales slipped 4%, to $839 million, while net profits before restructuring charges slid 18%, to $126 million. But given how well the winners are doing, drugmakers may have to counter renewed charges that they're too healthy for the public's good.
The Drug Boom INCREASE 3RD-QUARTER SALES FROM BILLIONS PRIOR YEAR JOHNSON & JOHNSON $4.04 15% ELI LILLY 1.82 19 MERCK* 3.79 49 PFIZER 2.07 11 SCHERING- PLOUGH 1.13 6 DRUG INDUSTRY** 21.18 15 *1994 numbers include Medco acquisition **11 major companies DATA: STANDARD & POOR'S COMPUSTAT, COMPANY REPORTS