SHARES in global drug companies made the biggest instant gain from George Bush’s nail-biting re-election, jumping 4 per cent overnight. Fears of more onerous regulation in the world’s biggest market seemed to lift. That was only at the start of this month but it already seems a long time ago.

Two weeks later, a few remarks from David Graham, an official at the US Food and Drug Administration, knocked a combined £6.5 billion off the value of AstraZeneca and GlaxoSmithKline (GSK), not to mention US pharmaceuticals groups. After a long battle, Dr Graham had just succeeded in having Merck’s big-selling painkiller, Vioxx, withdrawn from the market and named five other drugs the safety of which he doubted. They included Crestor, a fighter of cholesterol that AstraZeneca was relying on for a fifth of its 2007 profits as valuable patents expired. Its shares lost 9 per cent.

Those of us on this side of the Atlantic who own shares in these blue chips know this is not the only problem for the UK’s big two. They have been among the FTSE 350’s worst performers over the past 12 months, with GSK returning - 15 per cent and AstraZeneca losing 20 per cent.

The dollar’s slide against sterling has been more instantly painful. Compared with 18 per cent between September last year and February this year, the recent 5 per cent fall is modest. But GSK makes more than half its sales and even more of its profit from America, so every little hurts.

More fundamentally, the industry seems to be entering one of those phases when it is Public Enemy No 1. In the developing world, Big Pharma is under attack for charging prices that the poor cannot afford for drugs that they need most. Companies accept some of the arguments, but this weakens incentives to focus research on the big remaining killer infections, which mainly affect poor countries. Higher returns can be earned by addressing conditions that most afflict the affluent West, such as obesity, allergy and behavioural disorders. But in these areas risks of bad side-effects are less acceptable and more finely balanced against benefits. Apart from Crestor, for instance, the medicines named by Dr Graham included treatments for asthma, obesity, arthritic pain and acne.

Industry insiders think that regulators will become more risk-averse. Accelerated approval for breakthrough drugs may go. Sir Tom McKillop, of AstraZeneca, envisages conditional approvals, where use of a new drug would be limited to give time for bad side-effects to show. Regulators may also be more reluctant to allow patent extensions.

All this would be bad for profits. The World Health Organisation (WHO) reports that the average cost of bringing a drug from discovery to market has risen 40 per cent since the 1990s to $1 billion (£550 million). This has to be recouped over a relatively short patent life, so companies need to win global approval and boost sales as fast as possible. High costs and limited patents also put a premium on blockbuster drugs, however much companies wish to convince us that they have a continuous pipeline of new drugs.

This language underlines links between pharmaceuticals and oil. Both are mature industries in existing markets and try to keep investors happy by big mergers to save costs and share buybacks to mask pedestrian earnings growth. Both have a few huge integrated groups and lots of small high-risk explorers. Both depend on making new finds at a fast enough rate to compensate for exhaustion of old earners. And both are subject to odd cycles.

Discoveries seem to come in spurts, none of which is apparent just now. Just as oil is subject to price cycles, so pharmaceuticals are also prone to political/regulatory cycles. The last really bad patch came 12 years ago, when Bill Clinton’s attempt to reform US healthcare and force price cuts hit the sector for three years.

In 2004, any American with political ambitions is liable to campaign against the industry. It is also facing big, legally imposed price cuts in Germany that the WHO thinks are short-sighted.

AstraZeneca is defending Crestor stoutly. It needs to; its shares trade at more than 16 times next year’s expected earnings. GSK says that it has a record 148 compounds in human trials and will pour out a wave of new approvals next year “like storming the beach at Normandy on D-Day”. In today’s climate, that claim left its shares unmoved.

As in the mid-1990s, the tide will turn only when ratings of the big groups fall to those of other mature sectors such as banks. GSK is on the way, trading at about 15 times lower forecast earnings for this year before some recovery next year, dollar permitting. Some continental drug shares look lower-rated, as does the accident-prone Shire. The industry’s cash-generating value will eventually come through but you may need a course of betablockers to keep patient.

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