David Prosser: The drugs don't work

Outlook If the rumours are to be believed, GlaxoSmithKline will tomorrow announce hefty job losses, less than a week after its rival AstraZeneca unveiled plans for a similar cull. And while there will be some understandable gnashing of teeth from the unions, more and more of these cuts are inevitable, given the healthcare of Western governments.

Put simply, the pharmaceutical industry's traditional business model no longer works. For years, companies such as GSK poured resources into research and development in order to find the next blockbuster drug. Now the patents on those drugs are expiring and the pressure that governments are applying on pricing is trashing the economics of developing their replacements. Cue a switch into less capital intensive businesses: over-the-counter medicines, personal care, and food and drink.

That means fewer jobs in R&D and fewer jobs in sales (you no longer need an army of agents to convince the world's doctors of the benefits of your wonder drugs).

While this is an unhappy outlook for the pharmaceutical industry workers it also – and this is one for policymakers to ponder – raises serious questions about from where the next generation of health breakthroughs will come.