Looking at the Global 500 this year, you would not think that the pharmaceuticals industry is languishing in a mood of depression. While last year the sector ranked as fourth largest by market value, this year it jumped to second place, overtaking telecommunications and IT hardware.

While other sectors have fallen spectacularly over the past year, pharmaceuticals has retained its defensive reputation – healthcare spending is not immune to economic conditions, but it holds up better than most.

The results emphasise just how important the pharmaceuticals industry can be to many countries. Two of the top four French companies are from the sector as are two of the top five in the UK. In the US three of the top 10 are pharmaceuticals giants. Conversely, the tables also show the industry’s declining importance to other countries, such as Germany, where Bayer, the drugs and chemicals conglomerate, is the first pharma entry at 10th place.

Behind the headline figures, however, a more troubled story is apparent. A number of the industry’s biggest names are facing hard times this year. As a result, Merck, which fell from 13th to 15th place, is predicting no earnings growth, while Bristol-Myers Squibb, down from 27th to 42nd place, faces a sharp fall in profits. Expiring patents on top-selling drugs and political pressure to reduce prices are taking their toll.

Most worrying of all, the industry’s research laboratories are producing fewer new drugs and a growing number of those there are come not from the companies themselves but are licensed by biotechnology companies, which are retaining a greater share of the profits.

Perhaps the most significant move is the continuing rise up the ranks of Amgen, the US biotechnology company, which has risen from 73rd to 54th place – putting it ahead of a number of the better-known pharmaceuticals companies.

Analysts predict that revenues in the healthcare sector as a whole will grow at an annual rate of 10 per cent over the next few years – hardly a recipe for pessimism. Maybe in a decade’s time, the top rankings will show biotechnology companies rubbing shoulders with the pharmaceuticals giants.

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