Much has been written about the travails of the pharmaceutical industry. Generic competition is reducing profitability as leading blockbuster drugs like Pfizer’s Lipitor lose patent protection. Biotech generic competition is on the horizon.
The industry’s sleazier marketing techniques are in decline. Physicians are turning their backs on fancy dinners and sham consulting contracts, and not just because the companies were forced to fork over billions of dollars to settle government anti-kickback suits. Starting in 2013, patients of every physician who takes money from a drug or medical device company will be able to find that fact and the amount in a publicly available internet database, courtesy of the Affordable Care Act, a.k.a. Obamacare.
Meanwhile, the udders on the cash cows that for decades made the industry the most profitable in America are running dry. The insurers who manage Medicare and Medicaid’s drug plans are watching every penny. They are forcing generic substitution wherever possible and will soon have a growing body of comparative effectiveness research to fend off charges they are rationing drugs when they turn down payment for expensive new products that are no better than the ones that are already on the market.
Over in the firms’ R&D departments, the pipeline for blockbuster products – defined as drugs that generate over a billion dollars a year – is running dry. To justify their huge research infrastructures, companies are now charging $100,000 a year and more for new drugs, which often deliver only a marginal improvement in health, especially in cancer treatments. Industry officials publicly fret about where they are going to find revenue to develop the next generation of cures.
Last week’s news from the frontiers of medical science highlighted the problems facing an industry tripping over its existing business model, which funds R&D by getting more and more people to use its older yet still on-patent drugs. Read more »
