This Week, Industry Snapshot Looks at
Large-Cap Pharmaceuticals

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Bristol-Myers Squibb Company

Eli Lilly and Company

Merck & Co., Inc.

Pfizer Inc.

Schering-Plough
Corporation

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This Week's Industry Snapshot

In 1996, pharmaceutical companies achieved average "top line" improvements of 11%, bringing revenues for the industry to over $100 billion in sales. In conjunction with cost cutting and share repurchases, this sales growth drove earnings per share (EPS) up 15% over the same period. The strong gains came from: (1) favorable demographics given that, as the population ages, more and more prescription drugs are consumed; (2) The Food & Drug Administration's (FDA) decision to decrease the amount of time it takes to get a drug approved; and (3) the decision of managed care providers to increase the use of pharmaceuticals as part of their preventative medicine programs.

As William Steere Jr., the Chairman of Pfizer, asserts, "Our companies are the future of health care cost containment." For instance, just one Merck drug, Vasotec, when used in conjunction with another drug utilized to treat chronic heart failure, can reduce the risk of death by 18% and the need for hospitalization by 30% according to a five-year study conducted by the National Heart, Lung & Blood Institute. The study concluded that the drug could prevent 20,000 deaths and 100,000 hospitalizations every year. The cost savings for the healthcare industry would be just over $1 billion. It is these kind of cost savings that is driving managed care organizations to become proponents of aggressive prescription drug use.

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