A new study warns that the U.S. pharmaceutical industry, long one of the economy's most profitable sectors, is losing ground in international and domestic markets and has dropped sharply behind in the research needed to fuel new growth.
The National Academy of Engineering study, to be released next week, says that despite steady growth and annual sales in excess of $30 billion the U.S. drug industry has a poor long-term prognosis. It prescribes a series of regulatory reforms to help the industry meet growing foreign competition.
Because of the drug industry's high-technology status and historically strong performance, the study said, it has "maintained an image of immunity" to the deterioration that has racked other sectors of the American economy, such as automobiles, steel, textiles and consumer electronics.
"Unfortunately," the study said, "this image is apparently exaggerated and probably false."
Because it takes many years to develop new drugs, the deterioration in American research "will not be visible in product markets for several years and not fully felt for as long as two decades," the study reports.
Critics of the report said the academy's panel was biased in favor of the large drug companies.
"That the most consistently profitable industry in America needs more protection is inconceivable," said William Haddad, of the Generic Pharmaceutical Manufacturers Association.
Haddad said he is seeking a congressional investigation into the makeup of the academy's research panel.
An academy spokesman said that "every effort is made" to ensure that research panels are balanced. The study was funded solely by the National Science Foundation, the spokesman said.
The study says symptoms of impending problems for the industry include a falling U.S. share of worldwide pharmaceutical research and development expenditures from more than 60 percent in the 1950s to less than 30 percent today and a falling U.S. share of world pharmaceutical exports, from 30 percent in 1960 to less than 15 percent today.
Some suggested remedies are likely to stir controversy. The report recommends, for example, that manufacturers be allowed to export drugs not yet approved for use in the United States and that mergers now prohibited be permitted.
Other recommendations include faster review of new drugs by the Food and Drug Administration and restoration to the patent owner of the years of exclusivity for a drug that companies lose in satisfying FDA testing and review requirements.
Fred Wegner, a spokesman for the 14-million-member American Association of Retired Persons (AARP), said his group took issue with many of the report's recommendations.
"We're strongly opposed to patent term restoration," he said. "It allows drug companies to charge higher prices for a longer time, yielding still-higher profits that one can only hope will be spent on new research. There's nothing in the proposed patent legislation that would require higher R&D investment."
Wegner also disputed the study's assertion that continued expansion of drug productivity took place "alongside price increases that have been more moderate than the rate of inflation."
Wegner said that the industry raised its prices "three times the inflation rate last year," citing 1982 Consumer Price Index figures showing a rise in prescription drug prices of 12 percent against an overall inflation rate of 3.9 percent.