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July 30, 2008
Rediscovering Lost Revenue
It's been widely reported that the next five years are going to be tough ones for the pharmaceutical industry. Several multi-billion dollar blockbusters are going off patent between 2008 and 2012, and few replacements are nearing the end of the development cycle. On the political front, scrutiny and criticism of the pharmaceutical industry increases each year, with each presidential candidate having now made pointedly negative comments about the industry. Add in an economy that can't seem to recover from housing woes and large fuel and food price increases, and any high-cost prescription medicine not treating an acute, deadly illness may become expendable, and expended.
But there are still a couple of ways that drug manufacturers can protect themselves from this economy.
One path is to look towards generics. With so many of the small-molecule drugs going off patent, generic companies are positioned for highly profitable years ahead. And while profits at these companies have been disappointing recently if your name isn't Teva, Robert Steyer at The Street points out that much of this is due to recent acquisitions that have diluted results. As these companies begin to integrate their new generics factories and streamline operations, competition for the mighty Teva may look more daunting. Novartis CEO Dan Vasella, speaking about the company's generics subsidiary Sandoz, recently stated that, "Teva is better than we are, and that's hard to take." Despite seeing strong growth in the last year, Vasella plans to look towards Teva to improve the Sandoz structure, and spoke highly of Teva's 'vertical integration.' That sounds like acquisition-speak to me.
But while a generics arm might provide a steady revenue stream in the coming years, it won't replace multi-billion dollar blockbusters. A biologic compound might, however. Biologics, for now, have the added benefit of lacking a generic application process; with rare exceptions like Omnitrope, biologics effectively have unlimited market exclusivity. And, even if they didn't, the incredibly high costs to grow and sell most biologic compounds means that generic companies lack the muscle to do it. Amgen's Epogen was approved in 1989; analysts project it to be a $2 billion dollar drug in 2012, 23 years later. Look for a continuation of the years-old trend of big pharma acquiring the rights to biologic compounds, or just buying the company outright. If a large pharmaceutical company doesn't have the compounds to replace ones lost in the next five years, it can buy them.
Of course, the traditional tactics will likely be employed to protect compounds as well: next-generation products, new formulations, patent litigation and aggressive pricing will all see plenty of use in the next five years. But if the science isn't there, Big Pharma needs a plan B.
Posted by Jeremy Spivey at 08:39 AM | Comments (0)
July 11, 2008
Payments Between Companies and Doctors is an Age-Old Practice
There's always a perceived controversy when someone finds out that pharmaceutical companies pay doctors to deliver speeches or author a medical publication that promotes their drugs. For example, TheStreet.com recently published a story on how Elan and Wyeth failed to disclose the financial relationship they had with the co-authors of an Alzheimer's disease publication that appeared in a prestigious medical journal last year.
But paying relationships between doctors and pharmaceutical companies are nothing new; and neither is the profit motive for medical professionals. A colleague of mine forwarded me an article originally published in 1888 that discusses VIP patient payments to physicians as high as $30,000 even then. So it shouldn't be a surprise that pharmaceutical companies leverage physicians' influence to promote their business.
In most cases, financial relationships between doctors and pharmaceutical companies aren't controversial at all. A company may pay a top physician to lead a high-profile clinical trial. Think of it as an outsourcing arrangement. And so what if that research then leads to a medical publication. It's now required that all clinical study results are published, or at least made available, once complete. But do people expect physicians to conduct work on behalf of a billion-dollar pharmaceutical company for free? Would you? I didn't think so.
Before we get too far ahead of ourselves, let's think about what's really going on behind these financial relationships between the industry and the medical community. Is it really a bad thing if doctors are paid to advise pharmaceutical companies?
In reality, the doctors involved in these relationships are often at the top of their field and respectable scientists. They're not out to make a buck and prescribe whatever their pharma buddies tell them to. Instead, they're interested in furthering scientific treatments in their field. Believe it or not, the pharmaceutical companies are looking to do the same thing, they just get a bad reputation because they want to make money doing it.
Posted by Elio Evangelista at 12:18 PM | Comments (0)