Last week was an acutely difficult one for the pharmaceutical industry. On 20 May, Pfizer, the world's biggest drug company, announced the departure of both its research director, John LaMattina, and its chief financial officer. The following day, a study in the New England Journal of Medicine cast doubt on the safety of GlaxoSmithKline's blockbuster diabetes drug Avandia (see page 512). And that same day, Amgen received an unwelcome subpoena from the New York State attorney general, apparently related to questions about its marketing activities that have so far this year knocked one-fifth off the immense market capitalization of one of the world's top two biotechnology companies.

If these were just three isolated incidents, they might be of no great concern to the thousands of researchers who work for major drug manufacturers around the world. But the nature of the events themselves, and the way they've been received in the industry's largest and most lucrative market — the United States — carry important warning signs for the industry as a whole.

The barrage of bad news comes as the industry is trying to grapple with a new and more problematic environment for its business in the United States. Trouble over regulation, in particular, has been brewing for a few years now. But it is the change in control in Congress after last November's election that challenges the industry most directly.

Action is already pending in Congress to strengthen the regulator, the Food and Drug Administration, to make provision for the approval of biogenerics and, perhaps most ominously of all, to shift the entire patent regime in a direction that will please the information-technology industry (which likes patent sharing) at the expense of the drug industry (which does not). On top of that, there is the prospect of a new push towards general healthcare reform after the next presidential election, and the associated prospect of price controls, akin to those in force in most nations outside the United States.

In heading off these challenges, the industry has several ingrained advantages. It is widely and rightly seen as an important engine for innovation, and therefore for US economic strength, and it can muster a formidable coalition of allies, ranging from doctors and patient groups to medical schools and the cities that host them.

But it also has some disadvantages — most notably its track record of aligning itself more closely than any other major industry, save oil, with the Republican Party. According to the Wall Street Journal, 69% of the industry's political contributions in last year's midterm election went to Republican candidates. It was seen as a necessary bet, given the industry's fear of tighter regulation, but it turns out not to have been a prudent one.

There is a sense that the heady growth that the pharmaceutical sector enjoyed in the 1990s is not going to be revisited.

That, coupled with continuing public discontent about healthcare costs in the United States, has put the industry firmly on the back foot this spring. It is underperforming in the stock market, where there is a sense that the heady growth that the pharmaceutical sector enjoyed in the 1990s is not going to be revisited.

The industry's response to all of this has yet to take shape. It is trying to align its public image more closely with that of its biotechnology component (innovative, science-based, responsive to patient needs) and it has tried to introduce some self-regulation, in areas such as direct-to-consumer advertising. At the same time, the changes at Pfizer and similar developments elsewhere point to at least the possibility of a major consolidation of research and development activity to fit straightened circumstances (see Nature 445, 13; 2007).

In terms of science and innovation, the pharmaceutical industry's best days ought to be ahead of it. The sequencing of the human genome and parallel developments in cell biology and immunology should greatly increase the potential for developing effective therapeutics, including ones matched to individuals' genetic make-ups. But the industry has some tricky terrain to navigate before these days arrive — and it is by no means clear that today's big-name companies will be around to enjoy them.