By: Arzoo Zaheer
Date: May-15-08
Blockbusters to the Rescue!
Can anything go right for Big Pharma? With a crop of mega-selling meds set to roll out, the industry may be on the mend.
By John Simons
Fortune Magazine
Judging by the headlines, it would be easy to think that Big Pharma is on the brink of collapse. In 2006 the industry is poised to lose more than $23 billion in sales to generic competitors, its worst-ever year for patent expiration. Merck, the sector’s erstwhile flagship, faces a long slog through the 6,000-odd lawsuits stemming from its Vioxx
disaster. And insurers and drug-benefit managers are aggressively countering Big Pharma’s marketing might at every turn. Most alarming of all, however, is the fear that despite the $40 billion that the industry spends on research and development annually, the once gushing pipelines of the giant drugmakers have run dry.
To read the full article, click here.
In my opinion, John Simons is wrong in assuming that blockbuster drugs would save the pharmaceutical industry. According to recent statistics, production of blockbuster drugs have placed too much pressure on the manufacturers. This is primarily because the manufacturer tend to follow the vertically integrated model where it has to deal with generic competitors, cost of R&D, cost of manufacturing and selling and not to build trust and reach out to the general public. Given such a high cost, the manufacturers would not have sufficient amount of return on the drugs, perhaps in the range of 5-10%.
If the pharmaceutical companies really wishes to make ample profit from its blockbuster drugs, it must achieve the following:
1-Instead of “going for the big one“ so that massive profits may be generated, every company should focus on what they have learned from the past. Based on their past experiences and knowledge of trial designs, they should be able to prepare better remedies for certain illnesses. Having such an approach would increase the probability of launch success and also lower the cost of developing and commercializing the drug.
2-Avoid vertically integrated approach to drug production. The companies should instead be able to form mutually beneficial partnerships with other companies to manage risk and return. Instead of bearing the cost of discovery, development, manufacturing, marketing and sales all by itself, the company should be able to allocate tasks to its partner companies instead. Furthermore, if pharma really wishes to profit from the blockbuster model, they should let go of the funcational organization model where R&D operates with a distinct focus on making the blockbuster drugs and then these are handed off for commercial operations for launch. It would be better to utilize a decentralized organization model which successful companies such as Dell and GE are using.
3- Pharmaceutical companies should focus on the customers instead of profits. If they really wish to earn enough profit from the blockbuster, they must design drugs that either cure the disease or at least meet the patient`s full needs in managing the disease.
For futher readings see the following
Has the Pharmaceutical Blockbuster Model Gone Bust?
Personalized Medicine: Challenging Pharmaceutical and Diagnostic Company Business Models
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