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After decades of strong growth and high margins, the pharma industry is confronting the limits of its traditional business model. Since 2000, the industry collectively has destroyed shareholder value. Pharma net earnings multiples have collapsed, languishing at almost half of what they were at the beginning of the decade. The decline of pharma's traditional model isn't imminent; in fact it already happened. While medical device companies gained 98 points in total shareholder return (TSR) from 2000 to 2007 (from 1 00 as a base), pharma companies lost three points, underperforming the S&P 500 and other mature industries such as financial services and consumer goods.
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