The year 2011 marks the end of an era for the pharmaceutical industry, which has long relied on blockbuster drugs to keep it financially healthy. But with best-sellers like Pfizer's cholesterol-lowering Lipitor -- the world's most prescribed medicine -- losing patent protection this year, drug makers are feverishly seeking new prescriptions for profit. No fewer than nine of the industry's 10 biggest blockbusters will go off-patent and face low-cost generic competition within five years, according to the consulting firm Bernstein Research.
There is little in the pipeline to replace these top sellers, and by some estimates expiring prescription drug patents will cost the pharmaceutical industry $30 billion in revenues over the next ten years.
The number of new drugs has been steadily falling despite rising public and private spending for research and development. Approval of new treatments by the U.S. Food and Drug Administration (FDA) has dropped from an average of more than 35 a year in the mid-1990s to just 20 in 2009, according to the Tufts Center for the Study of Drug Development.
Big Pharma is gradually turning away from proprietary, in-house drug development in an effort to meet these challenges. Companies are joining forces with universities and other companies to create new and more targeted medicines. "The era of the very large research lab is over," says Paul Schoemaker, research director of the Mack Center for Technological Innovation at Wharton, which helps companies compete in industries affected by new technologies. "The whole world is moving to more connected and open innovation," he adds. Schoemaker is co-author of a 2009 book about biomedical research called, Chips, Clones and Living Beyond 100.
Pressure to restrain drug-price increases contributes to this trend, as do sections of the 2010 health care reform law that encourage effective new treatments over me-too drugs. Such copycat drugs burn up marketing dollars that might otherwise be used to fund cutting-edge research. Prime examples are the erectile dysfunction treatments Cialis from Eli Lilly and Levitra from GlaxoSmithKline, both of which followed Pfizer's Viagra.
Big Pharma has long eyed specialty drug makers and biotech firms as a source of new medicines. In 1990, for example, Switzerland-based Roche acquired a majority stake in the California biotech Genentech, which subsequently won FDA approval for the cancer treatments Avastin, Rituxan and Herceptin whose combined sales totaled $15.4 billion in 2009. U.S. regulators revoked their approval of Avastin as a treatment for breast cancer last year and European authorities sharply curtailed its use as a treatment for that disease.
The pace of partnerships is now accelerating along with the rapid gains in scientific knowledge. Companies are making once closely guarded warehouses of proprietary compounds available to outside sources that can help develop cures. "When the company has done all it can, or all it is able to afford to do with these assets, it looks for a partner," says Terry Fadem, who heads the bioscience initiative at Wharton's Mack Center. "There are so many targets to shoot at that it would be very difficult for any company to hire enough people to get the new knowledge being created," adds Fadem, who is also managing director of corporate alliances at the University of Pennsylvania School of Medicine.
Drug makers are offering financial rewards to their partners. In November, Pfizer unveiled plans to team up with academic medical centers in a program called Global Centers for Therapeutic Innovation that will target new therapies. The first partner will be the University of California, San Francisco. Pfizer, the world's largest drug company, says it hopes to broaden its pipeline "with novel and highly differentiated candidate drugs to treat diseases of high unmet medical need" in exchange for granting its university partners royalties, milestone payments and ownership rights.
In spite of regulatory changes mandated by the Healthcare Reform bill and partnerships that Big Pharma has with third parties, they still do very good on the basis of revenues and profits. Let's look at the Top 12.
Source: Fortune 500 - May 3, 2010 issue
Such moves mark a return to reliance on academic medicine for breakthrough discoveries, according to Fadem. In the 19th and early 20th centuries, he notes, colleges and universities generated new biomedical products like insulin, which was discovered at the University of Toronto in the 1920s. But in the second half of the 20th century pharmaceutical companies became the main generators of treatments. "As specialization became more entrenched in medicine, leading to a huge growth in knowledge, companies picked up the new knowledge slack," Fadem says.
This led to a golden age for the drug industry, which grew and profited mightily from its laboratories following advances in new drug discovery technology like high-powered equipment to test the potency of new compounds. Drug makers had sole control of their patent-protected products and built vertical organizations that did it all -- from basic research and clinical testing to manufacturing and marketing. With minimal production costs for treatment of widespread conditions such as high cholesterol and depression, prescription drugs became profit machines for the companies that developed them. Lipitor racked up sales of $11.4 billion in 2009, for example, or more than 20% of Pfizer's total revenue for that year.
Cracks in the Golden Era
The golden era began to show cracks more than a decade ago as research productivity started to slump for reasons that analysts find difficult to pinpoint. Some speculate that blockbuster treatments for conditions like high cholesterol and depression represent "low-hanging fruit," leaving the task of developing drugs for more complicated conditions still to be done. Today, only one in six compounds developed by the 50 largest drug companies wins approval after entering clinical testing, according to the Tufts center. Meanwhile, the cost of bringing a successful drug to market has jumped from $150 million in 1980 to $2 billion in 2009, according to the European research group of Morgan Stanley as reported by the online publication Pharma Philos
Such costs and the long odds against success have cast a pall across the industry. An October survey of global pharmaceutical executives by Germany's Roland Berger Strategy Consultants found that 65% of those polled said the sector faced a "strategic crisis." Nearly half of those questioned agreed that current investments in research and development would yield a negative return.
What to do? While companies like Pfizer are outsourcing R&D programs, others are licensing promising compounds from universities or smaller firms and developing them themselves. Morgan Stanley's European researchers found that the chances for such "in-licensed" compounds to reach the market were two-to-three times greater than for internally originated compounds during the period 1981 to 2003.
Going forward, Big Pharma must compete with smaller rivals that are developing tailored medicines for more targeted populations, says Jehoshua Eliashberg, Wharton professor of marketing and operations and information management. Much new research focuses on such products because individual genetic differences keep many people from benefiting from the one-size-fits-all drugs they are taking, he notes.
The use of genetic information to produce personalized treatments remains in the early stages of development but is rapidly growing. In a year-long survey of nearly two dozen pharmaceutical companies, the Tufts center found that more than 90% were investing in such research. Personalized medicines accounted for up to 50% of some companies' clinical-development pipelines.
Translating Research into Medicine
An increasingly popular approach is so-called translational medicine, which aims to speed the translation of laboratory compounds into treatments by bringing together researchers, physicians and scientists from other disciplines. This past December, the U.S. National Institutes of Health unveiled plans for a new center devoted to translational medicine. The method "requires people who have knowledge in basic science as well as clinical science and in practical applications," says Eliashberg, and typically relies on early clinical testing of promising drug candidates.
An early example of translational medicine before the term came into widespread use was the rapid development in the 1980s of Retrovir -- also know as AZT -- to treat the HIV virus that causes AIDS. Thanks to collaboration between scientists and clinicians at the U.S. National Cancer Institute, Duke University and a forerunner of drug giant GlaxoSmithKline, AZT reached the market just two years after HIV was identified as the cause of AIDS in 1984. That remarkably fast timeline remains one of the most rapid in pharmaceutical history.
Federal support was vital to this effort. "The government should encourage these kinds of business models," Eliashberg says of translational research. "And the government, or the National Institutes of Health, should support academics who work closely with pharma companies on [translational] developments."
In a more recent example of such medicine, an international team led by researchers at the University of Pennsylvania School of Medicine and the Children's Hospital of Philadelphia used a gene-based therapy in 2009 to restore partial eyesight to three young adults who had been blind since birth. The treatment was developed without a pharmaceutical partner and is undergoing further clinical trials.
Big Pharma faces challenges from other sources as well:
- Pressure from medical device makers that provide alternatives to drug therapies. In November, Minnesota-based device maker Medtronic paid $800 million for Ardian, a California company that has developed a minimally invasive procedure that lowers blood pressure by using radio-frequency energy. "It's amazing what's going on," says Fadem. "The medical device industry is now moving in on applications that would have been the pharmaceutical industry's." Some pharmaceutical companies are fighting back by offering integrated medical treatments for diseases. For example, Denmark-based Novo Nordisk is "creating solutions to address diabetes across the continuum of prevention, diagnosis and treatment," says Reza Firouzbakht, co-author of a report from the consulting firm Accenture on emerging pharmaceutical business models. Novo Nordisk products include insulin and pen-like delivery devices that replace traditional syringes.
- Another challenge comes from a provision of the new health care reform law that creates a regulatory path for bringing generic biotech drugs, called biologics, to market. A similar path for approving traditional generic drugs has been in place for years, spawning a robust market for low-cost generic alternatives to patented medicines. Pharmaceutical companies that have been acquiring biotech firms will now face generic competition in the biotech field as well, notes Mark Pauly, Wharton professor of health care systems.
- Still another section of the new law creates a federal panel to assess the effectiveness of different drugs for treating the same conditions--a process known as comparative effectiveness research aimed at discouraging the creation of copycat treatments. Physicians, consumers and government and private insurers could use this information to shape treatment choices and reimbursement decisions. Pauly warns that comparative effectiveness may not reduce overall health care costs, however, since drug companies may wind up raising prices for treatments that are shown to be the most effective. "Information is a two-edged sword," he says.
The current state of biomedical research may have a lot in common with the dawn of the computer revolution that began in the 1970s and early 1980s, says the Mack Center's Schoemaker. The big winners then were nimble new companies like Microsoft, Apple and Intel that jumped on the new microprocessor technology. "I would not be surprised if 20 years from now, when you look at the landscape, there will be entirely new health care players," says Schoemaker. "I don't think this is going to be the exclusive domain of six or seven large pharmaceutical companies. Unless they reinvent themselves, others will reinvent the industry for them."
COMMENTARY: Big Pharma is making huge profits, so I can't say I feel very sorry for them. They have known that many of the patents for their top selling prescription drugs were expiring going as far back ten years, when I first starting writing about it.
If you have been following my posts, you know that Big Pharma ranks right up there with the health care insurance industry. These two have made the promise of affordable healthcare for everyone a thing of the past.
Big Pharma is driven by greed, and they don't play by the rules. Holding a patent on a new prescription drug is basically a license to make money, and Big Pharma has used that license to make as much money as possible. To drive this point, just look at how prescription drug costs have far outpaced hospital and physician costs by a country mile.
In a study conducted by the General Accountability Office (GAO), annual price increases for 44 brand-name prescription drugs and 43 generic drugs were compared for the years 2000 through 2006 and annual price increases for brand-name drugs far outpaced generics.
2007y
The drug price increases outpaced a common inflation measure during the period. The GAO cited nationwide data from the Bureau of Labor Statistics that found that from January 2004 to January 2007 prices of all common consumer goods for urban consumers—known as the Consumer Price Index (CPI)—increased by an average of 9.3 percent, or 3.0 percent annually.
The drug price increases were thought to be a large component of increases in overall health care costs, which rose by 6.9 percent in 2005, the most recent year for which the Centers for Medicare and Medicaid Services has data. These outrageous price increases clearly hurt the elderly and those on fixed incomes the most.
It's no secret that Americans pay more for prescription drugs than any other country. The Organization for Economic Co-operation and Development (OECD) has been tracking healthcare costs since it was founded in 1961, and their data clearly shows that the U.S. spends more per capital for prescriptiion drugs than any other country.
If you would like to see their data for all healthcare costs by country click HERE.
Big Pharma leads in campaign contributions to our Congressional representatives, both Republican and Democrat, through their huge network of Washington lobbyists who protect their economic interests, and insure there is less regulation. Let's look at some numbers:
No wonder it took so long for Congress to pass a "watered down" Healthcare Reform bill. Both parties caved in. The best politician money can buy. And guess what, the pharmaceutical industry made out like bandits, no price limits set for drugs to medicare recipients. Again, the elederly and those on fixed incomes get clobbered again. This assures that they will continue to reap huge profits from you and I forever it seems What a grand scheme, don't you think? No wonder everybody hates Congress.
In spite of the outrageous prescription drug price increases, I keep hearing, "We have the greatest healthcare of any country in the world, and I don't want you messing with it." Okay, you have a right to your opinion, and that right is protected by the U.S. Constitution. To that I say a resounding " bullshit". That is all propaganda sold to you by the Washington D.C. lobby industry (see above) that represents the healthcare industry, including Big Pharma I actually went to the trouble to find out how "great" our healthcare system is for myself, and you can can read about it in a blog post titled, "An Unabashed Look At The U.S. Health Care System, 'The Greatest Health Care System In The World', Damn Gummit."
If after all of the above, if you still feel sorry for Big Pharma, and like things just the way they are, please don't get really sick, okay?
Courtesy of an article dated February 8, 2011 appearing in Knowledge@Wharton
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