A reduced call for services from drug makers resulted in two contract research organizations (CROs) cutting back and restructuring their operations recently. In late May, Kendle International (Cincinnati, Ohio) said that because of a decrease in the number of clinical trials for new drugs, it was reducing its work force by about 125 full-time positions, approximately 8% of its total staff. Chairman and CEO Candace Kendle, PhD, explained the slowdown in trial activity as a result of preoccupation by the pharmaceutical companies "with merger activity and pipeline reprioritizations." She estimated that the cutbacks would result in annual savings for Kendle of from $4 million to $6 million, adding that "long-term industry fundamentals remain solid."
About 10 days later, Covance (Princeton, New Jersey) said it would cut back its Phase III clinical trials unit "to align its cost base with current revenue projections." Covance will close two satellite offices, consolidate some facilities and eliminate about 200 positions internationally. As a result, the company will take a restructuring charge of approximately $15 million, pre-tax, in 2Q00. It predicts the restructuring will give it pre-tax savings of about $16 million, with another $8 million in savings anticipated in the second half of 2000.
Chairman Chris Kuebler referred to the company's 1999 restructuring efforts, but said that savings made with that move "have not been sufficient to offset continuing weakness in the market for our Phase III clinical trials services." But, he added, "We continue to gain market share and recognize solid financial results in our central labs and early development businesses, and we anticipate reaching normal biomanufacturing production levels in the second half of this year."
The impact of consolidations on pharmaceutical development was highlighted by CenterWatch (Boston, Massachusetts), a sister publication of BBI that focuses on the clinical trials industry, in its June issue. The publication analyzed 22 pharmaceutical companies that merged between 1988 and 1999, concluding that the following three years of post-merger activity resulted in an average decline of 34% in development projects, compared to the pre-merger periods.
"A number of professionals believe that, in the long run, mergers create better companies," said Annick de Bruin, research manager for CenterWatch. "but in the short term, these mega-mergers cause disruptions in internal operations and project cancellations." Among the most recent or pending mega-mergers in the drug sector have been those of Astra and Zeneca, Pharmacia Upjohn and Searle, Pfizer and Warner-Lambert, and GlaxoWellcome and SmithKline Beecham.
Experts see shifting market in e-health
Medem, an e-health network founded by a group of medical specialty societies and the American Medical Association (AMA; Chicago, Illinois), last month reported a sharp increase in physicians' use of e-mail to communicate with their patients. Its 5th "Physicians' Use of the Internet" study reports a 200% growth in e-mail use for this type of communication, concluding that 10% of doctors currently are using e-mail on a daily or weekly basis to communicate with their patients. This statistic refutes "the widely held perception that physicians are not Internet-savvy," according to Medem. The study also said the number of physicians building web sites for their practices "has doubled to more than 50% in the last nine months, and [that] currently half of all physicians who responded are using the Internet in their offices on a daily basis." A year ago, an AMA study reported only 37% of physicians using the Internet.
Medem's estimate contrasts sharply with those of Michael Hawley, a Massachusetts Institute of Technology (Cambridge, Massachusetts) professor heading a project called "Things that Think," at last month's Association for the Advancement of Medical Instrumentation (AAMI; Arlington, Virginia) conference in San Jose, California. Hawley said at the AAMI gathering that only 10% of physicians currently are using the internet, and that only 4% use e-mail to communicate with patients. By contrast, he noted that at least 70% of patients are tapping into Internet sites to learn more about medical conditions. But this disparity must and will change, he said.
Among the biggest changes – and one likely to happen over the next three years – will be the use of hand-held devices linked to the Internet for prescription and prescribing applications, according to James Ackerman, health care IT analyst with Friedman, Billings, Ramsey & Co. (FBR; Arlington, Virginia). Last month, Ackerman released a 34-page report titled "e-Care: Internet Solutions Changing the Paradigms of Health," which attempts to answer what Ackerman says is a basic question: "Where is the real meat in the health care Internet space?" The increasing spotlight on deaths related to prescription errors will result in greater use of electronic prescribing systems, Ackerman said, and he predicts such systems eventually will be mandated by the government. Those systems with the greatest market impact, he says, will be small, portable devices, "something like a PalmPilot or Microsoft CE operating system. Wirelessly, fitting in the palm of your hand, you can select name, diagnosis, choose what drug to prescribe and even identify problems of side effects."