Big Pharma Can’t Go On As It Does: Report
5 CommentsBy Ed Silverman // June 13th, 2007 // 10:03 am
But first the good news - the global pharma market will more than double in value to $1.3 trillion by 2020. The increase will be driven by soaring worldwide demand for meds as the population grows, ages and becomes more obese and as chronic conditions and infectious diseases tied to global warming increase.
Now, the bad news - the current business model is unsustainable and the industry must fundamentally change the way it operates in order to capitalize on opportunities, according to a PricewaterhouseCoopers report. Drugmakers face a dry pipeline, poor share value performance, rising sales and marketing spending, increased legal and regulatory constraints, and tarnished reputations. And so, the industry is at a “pivotal point.”
“The core challenge is a lack of innovation. The industry is investing twice as much in R&D as it was a decade ago to produce two-fifths of the new medicines it then produced,” says PwC’s Steve Arlington. “The industry must shift its investment focus more toward research and less on sales and marketing. Pharma’s traditional strategy of placing big bets on a few small molecules, marketing them heavily into primary care with the aspiration of achieving blockbuster sales, will no longer suffice.”
Major changes forecast include….
- The blockbuster sales model will disappear;
- Emphasis on outcomes to increase;
- Compliance monitoring becomes win-win for patients, payers and providers;
- Focus will shift from treatment to prevention;
- New technologies will drive R&D;
- The current linear R&D process will give way to in-life testing and live licensing;
- Greater international regulatory cooperation;
- The supply chain functions will become revenue generating;
- More sophisticated DTC distribution channels will diminish the role of wholesalers;
Read a summary of the report here.
Eric Rosenson
In the past, wasn’t the industry criticized for spending too much money on so-called “me - too” drugs and not enough on “break through” compounds? Is there really a balance that can be struck?
Your thoughts?
Ed Silverman
Hi Eric,
Should I assume you’re asking me - the Pharmalot guy - or any other reader?
Well, for now, I’ll simply say that yes, there was plenty of criticism and I suppose a balance is possible, but it appears harder than ever to achieve. I’m not privy to what the PwC consultants scrutinized for their report, unfortunately, but the FDA is, in its own way, trying to encourage more innovation with the Critical Path program, yes? That tells us something.
Improved meds are always desirable but there’s still seems to be less appetite for the me-too, especially with patents expiring on a bunch of brand-name drugs, which means cheaper generics. But the me-too option won’t go away as long as companies see them as a source of cash, and insurers are willing to pay.
Hope this helps.
ed
Lew
Ed,
Regarding your comment on “me-too” products. I think it’s worth mentioning that there are a number of forms of me-too products; for instance, those that are simply a minor chemical twist (isomers and the like) on an existing products (eg, Nexium vs. Prilosec; Clarinex vs. Claritin); those that are extensions of existing products (eg, Detrol vs. Detrol LA; Claritin D vs. Claritin) for convenience or other reasons. In addition, according to Marcia Angell, all follow-on products in a category are also me-toos. In that case, Lipitor and Zocor are both me-toos, as is every other stain except for lovastatin. I have little sympathy for the first type and some for the second. The third type, in my mind, is both unavoidable and necessary. Given the long and most often disappointing R&D cycle, it is critical that multiple companies work on multiple products in each emerging drug category. But, once the first product reaches the market, it is unrealistic and bad for society for the other companies to stop development of their products. Clinically, we shouldn’t want this to happen. With more products in a category, there is greater chance that individual patients will find the product that works best for them. One of the fallacies of comparing efficacy rates is that if two products are both 60% efficacious, it doesn’t mean that they work on the same 60% of patients. Also, if significant unexpected side effects emerge in one product, its important to have alternative (imagine if Baycol was the first and only statin). From a pricing perspective, follow-on products have a dampening effect on costs. While not seen as much at the retail level, contracts with payers definitely are impacted as more competition enters a category.
I’ll get off my soapbax now.
Lew
Professional Guest
Isomers, line extensions, and emerging class duplicates don’t represent real innovation, and PwC has it right: the industry is spending too much and bringing real innovations to market infrequently.
If manufacturers insist that “me too drugs” are essential, it absolutely must manage the advertising & promotion spend around them. This strategy could go a long way to improving the public’s perception of corporate integrity.
jason
Hey, this is a market driven economy. If no one paid for me-too’s, there wouldn’t be any. Right? I hate to say it — the consumer is swayed in pharma just like everything else. If people can pay $150 for a pair of jeans, why wouldn’t they pay that for a drug that may be a little better than the generic alternative?
It does look like everyone is going away from follow-on’s, so they might not have a bright future in a few years. Of course, that means the pharma industry will be down and innovation will be down. And if anyone makes real innovation, there is significant cost. Anyone priced a new biotech lately? Take a look at Alexion pharma and their new$389k/yr drug.
The current model will likely not sustain the industry forever, there will be change. But that is the one constant with everything, this industry will evolve and become more efficient. It will still make money - to the despair of some - because this is a profit driven country. If it doesn’t make money, look forward to most of your pharmaceuticals being made by Mylan or Teva in the future. - and taking the same meds in 20 years as you are today.