Rx for Health

Few U.S. industries glow more warmly with health and confidence than the U.S. ethical drug industry, which has more than doubled its business since World War II. This week, as the American Pharmaceutical Manufacturers Association held its midwinter meeting in Manhattan, its 214 members, representing virtually every leading ethical drug house, had added reason for feeling robust. The industry is about to close its books on a record year, stands to run up sales of $1.7 billion and reap profits 15%-20% above 1956. Said Association President Francis C. Brown, president of Schering Corp.: "This has been the best year in history for the pharmaceutical industry--and we have no intention of stopping there."

The association's confidence is well founded. Profits of ten leading manufacturers of ethical drugs (i.e., those not advertised to the general public and usually sold only by prescription) reached $123,266,000 in the first nine months of 1957, or 17.5% above a year ago, and more than the entire industry's profits in full prewar years. Abbott was up 16%, Eli Lilly 12%, Chas. Pfizer 16%, Allied Labs 38%, Parke, Davis 41%, Mead Johnson & Co. 23%. Drug stocks, which have shown impressive strength in the market, are near their peaks for the year, and companies have been dispensing increased and extra dividends like vitamin pills.

Search in the Soil. The reason for the astounding success of the ethical drug industry is the one that has increased U.S. life expectancy nine years in the last two decades: a steady stream of new and wonderful drugs designed to conquer, relieve or prevent almost every ailment from polio to ivy poisoning. Such recent newcomers as the antibiotics, improved hormones, flu and polio vaccines and tranquilizers have become as commonly accepted as vitamins and aspirin. Tranquilizers alone topped $150 million in sales this year to vie with antibiotics as the industry's biggest seller. Some 70% of all prescriptions today are for drugs discovered in the past ten years.

To keep making new discoveries, the ethical drug industry spends proportionately more on research than any U.S. industry save electronics--an average 7% of its sales v. about 1% for other industries. Lederle Laboratories invested $6,000,000 and sifted 100,000 molds before turning up Aureomycin in a spadeful of Missouri soil. E. R. Squibb & Sons and Hoffmann-La Roche independently tested 8,000 compounds to track down isoniazid, the anti-tuberculosis drug. This year alone, such efforts cost the industry $127 million in research, produced more than 500 new drug compounds. Said a Parke, Davis executive: "In the old days you used to predict a new drug every 25 years. Now we get a new one practically every 25 minutes."

Medication While Dreaming. The swiftness and frequency of new discoveries force firms to hustle to put a new compound into full production before it reaches the market, hoping to recoup research costs before the drug can be duplicated or brought out in improved form. The sulfonamides, for example, lost most of their market after World War II to penicillin, which in turn has lost part of its market to the broad-spectrum antibiotics.

Despite such perils, the drug house that produces a needed new drug can expect to see its sales soar. Schering's "Meti" cortical steroids, primarily for arthritics, sparked a 142% rise in its 1955 sales, is still going strong. Chloromycetin, a broad-spectrum antibiotic prescribed for a dozen ailments, accounts for about two-fifths of Parke, Davis' total volume. Smith, Kline & French's Spansule dosage system, in which a single capsule contains hundreds of tiny pellets that dissolve at different times, opened up huge new markets to the company, since it allows people to go on receiving medication while sleeping. G. D. Searle & Co.'s sales will probably rocket if its new tablet for menstrual disorders, Enovid, lives up to expectations as an oral contraceptive (TIME, Oct. 21).

The new competition born out of research has also caused the drug houses to move more and more toward specialization and consolidation; e.g., Parke, Davis, which once marketed 1,250 products, now sells 500. Though some companies are working hard on combination vaccines, such as Parke, Davis' projected vaccine to give immunization against polio, tetanus, whooping cough and diphtheria, the trend in research is to develop specific products for specific ailments.

Twilight Zone. The very prosperity of the industry has made it vulnerable to criticism about its high prices. Disturbed about the steep cost of antibiotics ($6 for a normal prescription of twelve Achromycin or Terramycin capsules, prescribed for pneumonia and other infections), the Federal Trade Commission is preparing a report for Congress on the antibiotics side of the industry. The drug industry's ratio of net earnings to total sales is among the highest in industry; Searle's nine month profits of $5,236,000, for example, are nearly 24% of its sales. But drug houses, operating in a twilight zone between private profit and public service, argue that they are entitled to higher-than-usual profits because of rapid obsolescence and the vast amounts spent on research and testing (more employees are used in testing drugs than in making them). They point out that hundreds of drugs are researched and discarded for every one that reaches the market, and that many small-profit items, such as penicillin and smallpox vaccine, are kept in production as a public service.

Mixed Crusade. This mixed incentive--keeping the public healthy while making wealth--has set the U.S. drug industry off on a determined crusade to battle and conquer almost every disease. Having helped to raise the public's life expectancy (now 69.5 years at birth), it is faced with a vast new market in the growing number of older people, is working eagerly on geriatric drugs designed to make aging easier. From its laboratories pour forth new wonder drugs with amazing rapidity.

One major firm expects to announce a vaccine for the common cold early next year--and hopes it will work. Merck Sharp & Dohme is researching a drug that will relieve complications from heart disease. Last fortnight Smith, Kline & French put out Sul-Spantab, a new sustained-release compound for the relief of urinary and respiratory infections. Wyeth Laboratories announced a new drug, Zactirin, that relieves pain as effectively as codeine but has none of its frequent side effects (nausea and dizziness). And the industry is confidently taking on mental disease and Western man's two biggest killers, cancer and heart disease. Says Allied Laboratories Treasurer and Director J. T. Cahill with a businessman's determination to overleap scientific research: "Once we have the answer to heart disease and canter--well, you haven't seen anything yet."

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