Monday, May 31, 2010

Big Pharma – Back to the Future

One of my favorite quotations has always been from George Santayana, “Those who do not remember the past are condemned to repeat it.” You may ask why am I suddenly so philosophical?

Well, while preparing to write this blog (yes, contrary to popular belief, I do research for my blogs, it’s not all just flow of consciousness) I googled “pharmaceutical companies issues” and received back the usual gazillion replies.

As I started to go through the list one by one from the top (I really hope that my readers, assuming I have any, appreciate what I do for them) I noticed two things.

First, we’re not alone. The topics that we’ve been blogging about for several years now, declining profits, stagnating product pipelines, and an industry in crisis are being written about by many people. And they’re writing a lot.

Next, and this surprised me, people have been writing about this for a long time. I mean years.

Larry and I have been talking about these issues for a while now. But, it was only about when we started this blog that our thinking began to coalesce around these issues. But, there were people out there before us. Long before us.

One writer in particular, Bianca Piachaud, wrote a particularly good article (;col1 ) all the way back in March 2002 for Contemporary Review on the issues facing the pharmaceutical industry which is still relevant today. Think about that. That’s over eight years ago!

Dr. Piachaud made one particularly prescient observation that the past eight years has borne out. She noted that the unsustainability (I may have made up a word here) of pharmaceutical profits because of increasing competition from generics, government policies, and the increasing costs of finding new drugs. There is even a reference to the cost cutting programs being put into place (and which may have gotten some pharmaceutical companies into recent trouble) to try to fend off the inevitable.

I also found in this article, the first rational explanation of why the product pipelines are stagnating. Dr. Piachaud highlights the increasing diminishing returns from research as technology with its costs becomes a larger part of the work undertaken. She also notes the contributions of administrative inefficiencies and increasing bureaucracy (think of Sarbanes-Oxley and healthcare compliance costs) in lowering profits.

The unsettling aspect of Dr. Piachuad’s article is that there doesn’t appear to be any good news soon for the pharmaceutical industry. We may be moving through the middle game preparing for the end game.

Dr. Piachuad has a doctorate from the Aberdeen Business School, the Robert Gordon University, Aberdeen. She is also has written Outsourcing of R&D in the Pharmaceutical Industry published by Macmillan ( ).

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

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