For many Australian pharmaceutical companies, 2012 was an "abysmal" year, and their expectation is that 2013 will be even worse, according to a new report.

The sector is caught in a negative cycle, with companies suffering reduced profits, continuing redundancies and rising costs, says the study, which is published by Pharma in Focus and measures industry confidence in the areas of business conditions, employment, sales and clinical trials. It finds that, while the industry has an expectation for a slightly improved operating environment in 2013 compared to 2012, a flattening of sales growth combined with falling employment and lower clinical trial activity means that overall confidence for 2013 is lower than for 2012.

Other major points to come out of the report include that:
- 90% of pharmaceutical companies in Australia reported that business conditions declined last year, and the same proportion believe that conditions will remain unchanged or get worse in 2013;
- all large drugmakers reported conditions in 2012 to be worse than expected;
- less than half the companies reported an increase in pre-tax profit last year;
- 90% of firms experienced higher regulatory costs and 80% incurred increased market access costs last year;
- 93% say that Pharmaceutical Benefit Scheme (PBS) price cuts is their most important issue;
- 69% expect their drug pipeline to be a positive for this year;
- smaller pharmaceutical companies are faring much better that the large firms;
- generics manufacturers are faring much better that patented prescription drugmakers;
- most large companies reduced their staff numbers in 2012, and half are planning further cuts in 2013;
- 80% of companies are planning to increase their imports this year, while a third expect to cut exports by more than 10%: and

- the biggest players in Australian industry-sponsored clinical trial research reduced this research activity significantly last year.

These findings show that the Australian pharmaceutical industry is not as robust as often believed, commented Pharma in Focus’ managing director, Nick Lush.

"Large multinational companies relying on patented prescription products are suffering more than most and having to look at their business models for solutions. In comparison, smaller pharma companies and generics were found to be coping much better in the current environment, but these sectors also have challenges ahead," he warned.

Moreover, clinical trialling, the heart of drug innovation, is under serious threat, with the vast majority of survey participants predicting a fall in 2013 on top of an already-serious decline last year, said Mr Lush.

"In all, companies are struggling to come to terms with the commercial results of a PBS system that has been undergoing successive and ever-tougher price reforms for more than five years. The pharma industry is under pressure to yield even greater savings, making the business environment increasingly uncertain and challenging,” he added.