During the past five years, the global pharmaceutical industry has experienced a golden age of wealth creation, defined as total returns to shareholders—that is, the value of stocks and dividends (Exhibit 1). Swiss companies, which outperformed both the global stock market benchmark and their European competitors, participated strongly in this trend. Nevertheless, it was US companies that increasingly set the benchmarks, not only in stock value, but also in underlying performance, such as the innovativeness of new therapies, the number of licensing deals,¹ and sales of products launched.

McKinsey examined the prospects of the Swiss pharmaceutical industry and what it must do to remain competitive in an increasingly global economy. Exhibit 2 presents a measure of size (the worldwide market share of leading global pharmaceutical companies) on the horizontal axis and a measure of performance (market capitalization per market share point) on the vertical axis. Although Swiss pharmaceutical companies performed reasonably well along each axis, the exhibit clearly shows that their leading US competitors have meanwhile pushed further up and off to the right and thus gained a higher degree of market control.

A major factor likely to increase the value gap between the top league and the...