Pfizer issued a warning on the depth of the pharmaceutical industry's problems yesterday, when it cut its profit expectations for this year and withdrew optimistic forecasts for the next two.

The world's biggest drugmaker warned that its operating earnings this year would fall more than expected to $1.92 (€1.60) to $1.94 per share, excluding one-time items. Previous expectations had been for $1.98.

Pfizer blamed slowing sales trends in some of its biggest branded medicines, including Lipitor, the world's best-selling drug, and increased competition, both branded and generic.

But more worrying to investors, Pfizer withdrew forecasts of at least 10 per cent earnings growth in the next two years.

Its shares fell by 8 per cent to $22.16 - nearing eight-year lows - in New York lunchtime trading.

Barbara Ryan, analyst at Deutsche Bank, said the cancellation of Pfizer's earnings outlook left "maximum uncertainty regarding the company's future outlook".

Pfizer's warning summarised 'Big Pharma's' challenges - US pricing pressures, drug safety, patent expires along with generic competition and me-too drugs - while also raising the possibility that they might be getting tougher.

The biggest challenge is the US, the cornerstone of the sector's profitability. Pfizer's outlook highlighted the intensifying debate over drug pricing and the relative value of higher-priced branded drugs, compared with the efficacy of generic medicines.

Lipitor is a focal point of that debate. Recently, a US prescription drug plan manager removed the cholesterol treatment from its list of preferred drugs.

The outlook also showed the effects of drug safety concerns on the industry.

Sales of Celebrex, a drug of the same class as Merck's withdrawn Vioxx, fell 44 per cent in the third quarter.