Saturday, August 14, 2010

Big Pharma – More Doubts

If you’ve been following my blogs lately then you know that I’ve announced the end of Big Pharma as we know it and since I’ve been trying to prove it. When I started this series, I thought that this might prove controversial but as I’ve been researching and blogging, I’ve come to realize that I’m probably not alone here.

Another point that I’m realizing is that some of these warning signs have been around for awhile. Maybe not with billboards and newspaper advertisements but the signs are there if you look closely enough. (Larry does say that I have too much time on my hands.)

For example, while researching, a fancy way of saying surfing the Net, I came across a report on the Federal Trade Commission’s (FTC’s) website ( ) entitled The Pharmaceutical Industry: A Discussion of Competitive and AntitrustIssues in an Environment of Change. The report is dated June 25, 2007 and is meant to address possible antitrust practices but I believe is a clue to how Big Pharma’s practices will work against it in the long term. Also, note that this is over two years before healthcare reform legislation was passed and even before most people even thought that Barack Obama had a chance of becoming President of the United States.

The report notes four changes in the pharmaceutical industry and discusses them from an antitrust perspective. I don’t wish to blog about that but what these changes mean to an industry that’s going through a period of elimination and consolidation.

First, the report notes that information technology is becoming a driver of competitive advantage for drug companies. My take is that early innovators who can make the big investments here will pull ahead of their competitors.

Second, the authors make the point that pharmaceutical companies could then segment their pricing strategies to different categories of users because of this technology. Here’s where I feel that since these buyers will be either the government or medical insurance providers that this will work against the drug companies. As I’ve blogged before many times, the drug companies can’t squeeze their suppliers and employees for cost reductions without the same ultimately happening to them. What goes around comes around.

The final two points discuss the antitrust implications of vertical and horizontal consolidations. These points are indications of an industry going through shake-out and consolidation. There’s no rocket science here. Go back to the nineteenth century when the first trusts were being established in the railroad and oil industries to see some of the first examples.

These points are interesting and I’m not the report’s authors thought about it the way that I am. But, I feel my points are valid. Please check the report out for yourself and let me know your thoughts.

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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