Backing Big Pharma
Someone's Gotta
By Pejman Yousefzadeh Posted in Economy | Featured Stories — Comments (5) / Email this page » / Leave a comment »
Should it be necessary, I shall once again enter into a blog post about large corporations with the stipulation that oftentimes, large corporations do bad things and deserve to be punished for those bad things. Additionally, large corporations are all too willing to take corporate subsidies from government, which more than slightly gets on my nerves. Let me repeat: These Are Bad Things For Which Corporations Deserve More Than A Little Opprobrium.
Now, can we please stop beating up on certain industries for entirely unjustified reasons whatsoever? Like Big Pharma, for instance? (Read on.)
THE PHARMACEUTICAL industry is getting bad press. Recent books by Marcia Angell, the former editor of the New England Journal of Medicine, and Jerome Kassirer, another former editor of the journal, have harshly condemned the industry for recklessness, insensitivity and all-consuming greed. They gain sales by spicing up their titles with inflammatory phrases about "deception," "complicity" and how drug companies "endanger your health."
I take a different approach. I don't defend every business decision made by the great pharmaceutical research houses. To the contrary, much recent commentary suggests that many such companies have committed themselves to a blockbuster-drug model -- in which a company's success or failure depends on a few vital, high-selling drugs -- that may prove unsustainable over the long haul. If so, I believe that those firms should suffer the financial consequences of their mistaken business choices. Government bailouts are no more appropriate for Merck and Pfizer than they are for Chrysler or Ford.
Nonetheless, critics like Angell and Kassirer are absolutely wrong to portray the nation's big drug companies as heartless, avaricious behemoths that act in whatever manner they choose and always get their way. The truth is, the pharmaceutical industry is too heavily regulated. Its big problem today is not that it's free to run roughshod over the needs of consumers, but that it operates in a hostile and excessive regulatory environment that frustrates sound business decision-making and keeps down pharmaceutical company share prices in the stock market.
Consider the following: Ever-tougher conflict-of-interest rules in the National Institutes of Health and such academic medical centers as the University of Pennsylvania, Stanford and Yale have reduced opportunities for fruitful collaboration between industry, government and universities. More stringent requirements for clinical drug trials -- including rules that demand larger test populations and more extensive documentation -- have reduced the flow of new drugs to market. (Between 1996 and 2000, the FDA averaged about 153 new drug approvals. Between 2001 and 2005, the number was down to 55, with only 15 in 2005 and 29 in 2004.)
In addition, the industry faces major liability risks. Consumer fraud legislation adopted in many states has generated massive, often eye-popping claims for refunds of the original purchase price -- in some cases even for drugs that have worked as promised or on the part of people who have not taken the drugs at all.
Read it all. Of course, I don't expect such scattershot attempts to undermine the free market to stop anytime soon. It's a pity that they will not; when it comes to pondering policy towards Big Pharma, lives really do hang in the balance and our decisions will either save a lot of lives or be directly responsible for taking them.
(Thanks to InstaPundit for the link.)
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Backing Big Pharma 5 Comments (0 topical, 5 editorial, 0 hidden) Post a comment »
You make an excellent point about the smaller companies, startups and academic research organizations. They're going to do the new research and discovery, and pass the promising compounds on to the "big pharma" organizations. It's a simple matter of unwinding an uneconomic vertical integration. By splitting pharma up into what amounts to two different industries (R&D on the one hand and regulatory compliance on the other), Wall St can apply different valuation metrics to each side, and thus can assign the correct value to each player. Genentech still follows this model (and gets the higher valuations) even though in only the length of your career they have gone from feisty upstart to one of the biggest of the big.
Has anyone else noticed that the "big pharma" companies are not really "American" in any strict sense of the word (other than corporate domicile, in some cases)? Most of these companies, the traditional bigs as well as the new R&D upstarts, earn a huge proportion of their revenue outside of the US. And keep an eye on India, where VCs and entrepreneurs have identified pharma (and biotech in general) as a area they want to dominate.
Disclaiming nativist motives, I'll add that a walk down the halls of ANY American pharma (big or small) lab, university science building or biotech startup will note mostly Asian, Slavic and Israeli nameplates...with gracenotes of Brits and Americans.
But this is part of the much broader and longer trend of eroding American presence in science and engineering at large and not disproportionately in pharma science.
India recently changed their rules to permit -- for a fee of about $300 -- expatriate scientists who've become naturalized citizens of other countries to acquire dual citizenship in India. The response is reportedly brisk.
Big pharma (including my alma mater) is busy setting up research laboratories, and increasingly conducting clinical trials, in India and China.
A higher percentage of US-trained international science graduates are choosing to repatriate -- some right after graduating, and some after extended work experience in North America or Europe. These folks could be the seed corn to rapidly grow the important biotech and pharma initiatives to which you allude.
I don't observe ANY of these trends in order to advocate protectionist or nativist policies. If we Americans lose in a global competition of wits, we will have done it to ourselves.
Bellinghamster
congrats on your promotion here to front page contributor. If I could of voted, you would have made it sooner. BTW, I have secured a conservative voice columnist position with the Dead Tree MSM:
see DeVine
http://www.charlotte.com/mld/observer/2006/12/20/news/16279108.htm
http://race42008.com/2006/12/20/race-4-2008-writer-wins-charlotte-observ...
www.race42008.com
http://theminorityreportblog.blogspot.com/
"One man with courage makes a majority." - Andrew Jackson http://gamecock.townhall.com
In the spirit of full disclosure, I'm a big pharma retiree with 27 years experience.
Based on what I saw, I drew these global conclusions:
1. The FDA is a very political animal, risk-averse by nature and periodically swinging to profound risk aversion in response to current events that generate political heat. We're in one of those interludes now, mostly precipitated by the Vioxx withdrawal.
2. The costs of new drug development are very heavily weighted to "Phase II and III" human clinical trials. Typically three-quarters of total cost of a given project. And one of the most important ways that increasing FDA risk aversion is manifest is the increasing size, complexity and length of clinical trials they require for NDA approval.
3. A tepid recent FDA reform was to require them to make decisions within a reasonable time (18-24 months or so) after an NDA submission. Not requiring approval of course, just making some decision. What's actually happened is that the agency issues an "Approvable Letter" by the deadline...and requests more clinical trial data.
4. Time is money, as always, and adding another year or two to the regulatory approval time adds a lot to the total project cost. Estimates vary, but the typical average cost to bring an NCE ("New Chemical Entity") to market is in the $1-2 billion range. Add some 8-12% carrying cost on numbers that big, and you'll see time really is money.
5. Full-scale drug development is already too expensive, and too risky, to be undertaken by universities or government laboratories. Early stage drug discovery, on the other hand, is relatively more affordable, hence biotech startups and university labs are widely active in basic research and discovery projects. Almost always, promising drug candidates from these "boutique" sources are optioned to big pharma for the heavy-lifting development spending.
6. By the standards of other high-tech industries, big pharma isn't very concentrated. The largest players have perhaps a 10% market share. Contrast that with computers, software, telecommunications, Internet searching, transportation, etc. Big pharma is only really "big" collectively, not as individual companies.
7. Over my entire lifetime, the track record of innovation of big pharma has been extraordinary. Treatment of infectious diseases, cardio-vascular diseases, many cancers, disabling diseases like arthritis and osteoporosis, devastating psychiatric conditions and many, many more afflictions has been revolutionized via modern pharma science.
Rhetorical question: why imperil such a flow of blessings?
My answer: if the Dems are willing to subordinate the safety and security of our whole country to the advancement of their political fortunes -- as with the GWOT -- it's hardly surprising that they'd sacrifice the pharma industry to score short-term political gains.
If historical cynicism is any guide, by the time the self-defeating folly of the Dem's anti-pharma policies is evident, few will remember what we lost.
Bellinghamster