“If you want to launch big ships, you have to go where the water is deep”- anonymous
I wrote earlier about how the costs and risks associated with drug discovery and development in a Big Pharma PRI are measured against the remote prospect that any individual NCE might attain “Blockbuster” levels of sales and profitability. The issues involved with an assessment such as this are quite complex.
First, the drug has to cure a disease and do it more safely than has ever been required before. Second, if the disease all ready has alternative therapies, the new drug has to treat it more efficaciously than the old ones. Third, if it’s more expensive, a case must be made to the reimbursing agencies that there is enough clinical benefit to the patient, and perhaps to society, so that they are willing to pay for it. I suppose it’s beside the point for me to highlight that in circumstances where neither the major beneficiary of the new drug, the patient, nor the individual who makes the decision that the drug should be prescribed and therefore has a major intellectual and emotional commitment to the decision, the physician, are the ones who pay for it. That makes these circumstances quite different from how things work in the rest of the world. Troublingly, the one who does, the insurer, has the greatest stake in not doing so willingly. All of this is probably superfluous at this point, but these therapeutic and reimbursement decisions are typically maddeningly complex.
The market assessment is an all-together different proposition. Just to scratch the surface - how many cases a year; is the disease curable or will it be treated for life; what will be the remaining patent life of the molecule if and when the drug is ultimately approved; can that be extended through formulation changes, additional new claims and what about the rest of the world? All of these must be considered in light of the fact that each new drug candidate carries a financial burden of it’s own, but also that of it’s failed predecessors – as well as the massive on-going costs of scientists, physicians and managers whose salaries and overhead are attributable as much to their forbearers as to them, whether new drugs ever emerge from their efforts, or not.
The whole process consists of trying to know the unknowable. Piling suppositions on top of projections and speculations and then multiplying them by shaky assumptions. In short, using any and every conceivable means to try to take some of the risk out of what is inherently an unknowable set of future outcomes in an undeniably risky business.
But suppose you don’t get paid to manage risk. What if you get paid to identify and measure risk; to bring every imaginable tripwire and booby-trap into the open; to insure that there are no surprises down the road. How then to reach the decision, ever, that any individual new compound be christened to undertake such a perilous and expensive passage. The peril and expense encompassing, of course, personal career risk as well as the actual project.
The reality of this situation is there is no penalty for terminating a promising project. In fact, in today’s climate almost nothing is more appreciated by management than an “early kill” neatly executed before the costs and risks get appreciable. A skilled Marketing manager can find more good reasons for a new drug to fail than you can possibly imagine if there is no penalty for not going forward and, on balance, no reward for endorsing the enormous risks of even the most promising drug candidate.
Little wonder then that so few compounds get far enough along in early development to produce a field of late stage drug candidates broad and diverse enough to improve the overall prospects and yield. Without the willingness to enthusiastically embrace risk and reap the harvest of some unexpected results, there can be little expectation of any upside surprise through the discovery of something that is genuinely new.
Friday, February 29, 2008
Tuesday, February 26, 2008
Globalization: How might the coming US election affect the trend towards offshoring?
Lately, I’ve been blogging a lot about the U.S. Presidential election and its impact on Big Pharma. I’d like to continue this thread for a while and today blog about the election’s possible effects on one of Big Pharma’s most important strategies in trying to remain competitive – offshoring.
Interestingly, none of the big three candidates remaining, Obama, Clinton, and McCain, have taken a strong position here. I’m using their websites and what I’ve read and heard on other media and nothing has leapt out at me. Obama talks of new jobs in green industries. Clinton takes the traditional liberal Democratic tack of big government infrastructure projects. McCain, no surprises here, takes the Reagan approach of lower taxes and a hands off policy by government. Honestly, this is bigger than just the pharmaceutical industry.
The recent trends to offshore back office services, information technology, research and development, and clinical trials have been helping Big Pharma maintain profitability while its revenue growth is stagnating. With little likelihood of government interference, these trends should continue. Of course, this is only a short term fix. Sooner or later, there will no further costs to wring out of operations. Then there are the risks associated with offshoring. The recent incident in China where a factory contaminated healthcare products intended for the United States highlights the risks here. I suspect that somewhere in the U.S. drug industry someone is doing an analysis of the labor costs saved versus the increased quality assurance, public relations, legal and litigation costs arising from going overseas.
With all the problems that Big Pharma has been going through and all that are pending (please see our other blogs for more on this), government non-interference in offshoring is probably a good thing from their narrow perspective. I believe that this will only allow Big Pharma to continue to be distracted by moving operations offshore and become entangled in these activities. It’s only a band-aid, not a long term fix. Daniel Silverstein’s latest blog entry (see in archives below) talks about large PRI’s that are getting too big and are forgetting, or are unable, to remember what they were originally chartered to do.
So, it is business as usual for Big Pharma, at least as far as offshoring is concerned. We may be returning to this topic in the future if they can’t get their quality assurance under control.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Interestingly, none of the big three candidates remaining, Obama, Clinton, and McCain, have taken a strong position here. I’m using their websites and what I’ve read and heard on other media and nothing has leapt out at me. Obama talks of new jobs in green industries. Clinton takes the traditional liberal Democratic tack of big government infrastructure projects. McCain, no surprises here, takes the Reagan approach of lower taxes and a hands off policy by government. Honestly, this is bigger than just the pharmaceutical industry.
The recent trends to offshore back office services, information technology, research and development, and clinical trials have been helping Big Pharma maintain profitability while its revenue growth is stagnating. With little likelihood of government interference, these trends should continue. Of course, this is only a short term fix. Sooner or later, there will no further costs to wring out of operations. Then there are the risks associated with offshoring. The recent incident in China where a factory contaminated healthcare products intended for the United States highlights the risks here. I suspect that somewhere in the U.S. drug industry someone is doing an analysis of the labor costs saved versus the increased quality assurance, public relations, legal and litigation costs arising from going overseas.
With all the problems that Big Pharma has been going through and all that are pending (please see our other blogs for more on this), government non-interference in offshoring is probably a good thing from their narrow perspective. I believe that this will only allow Big Pharma to continue to be distracted by moving operations offshore and become entangled in these activities. It’s only a band-aid, not a long term fix. Daniel Silverstein’s latest blog entry (see in archives below) talks about large PRI’s that are getting too big and are forgetting, or are unable, to remember what they were originally chartered to do.
So, it is business as usual for Big Pharma, at least as far as offshoring is concerned. We may be returning to this topic in the future if they can’t get their quality assurance under control.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Thursday, February 21, 2008
WHY BIG PHARMA CAN’T DISCOVER DRUGS – PART 2
WHY BIG PHARMA CAN’T DISCOVER DRUGS – PART 2
by Daniel A. Silverstein
“You are what your numbers say you are” - Bill Parcels
Very large (5,000 to 10,000+ employee) PRIs are not reliable engines of discovery for new drugs. They are, in fact, extraordinarily productive at other things – particularly repeatable processes associated with aNDAs, sNDAs and the on-going maintenance of established drugs and their franchises. For activities like these, where there is a generally accepted way of doing things – one that is repeatable, and can be optimized – the management techniques and expertise of these kinds or organizations can get the job done quickly and reliably.
It is in the other arena – of breakthrough insights, creativity and originality, that the PRI fails to deliver reliable results; as if such can be “reliably” delivered by any entity known to man. In point of fact, scientific accomplishments such as these tend to be widely and randomly distributed throughout the scientific community. However, while no one knows exactly where the next really meaningful discovery may come from, chances are it will more likely emanate from an academic institution or a development stage Bio/Pharma company lab, than that of Big Pharma.
I commented generally in an earlier post that the absolute size, the extent of management controls and costs of doing business in these very large PRIs was in some measure responsible for this lack of creative output. More specifically however, I observe that never in the history of man have organizations of such size and monolithic character been put to the task of “discovering things.” Rather, discovery as a process, has taken place in more companionable, propitious surroundings populated mostly by newly minted Ph.D.s and Post Docs working in small groups.
Further, I ask you to recall that most great discoveries are made by scientists around the age of 30, who, interestingly enough, go on to careers based on never discovering anything else again. Moreover, there is support for the idea that the state of knowledge in all scientific fields changes so quickly that scientists 3 years past their Ph.D. are drifting out of touch with leading edge thinking, and those 10 years out from the academic training are suited only for work as doorstops, or in reality, as Managers of Discovery in Big Pharma.
This situation is exacerbated by the failure of Big Pharma to effectively establish equal pay, glory and stature for those who want to, or ought to, be kept on the scientific track. The result of this failure is evidenced by the endless desire of all those youngsters, profoundly trained in science, who can’t wait to rise to the position of Group Leader or Section Manager, stop discovering things and start managing people. They abandon their scientific heritage more quickly and more foolishly than a 40-year-old virgin in a house of ill repute.
So if Big Pharma Labs are best at process optimization and smaller labs excel at the kinds of thinking that leads to breakthrough discoveries, what to do?
One school of thought suggests that the PRI model ought to be changed and that the “R” needs to be conducted in a different setting from the “D”. Specifically, it should be both recognized and acknowledged that massive organizations are best for work characterized by processes that can be optimized; and that establishing numerous smaller, semi-autonomous labs, constantly refreshed by streams of new Post Docs on temporary assignment and nurtured by a revolving cast of academic thought leaders might be more likely places where something might actually get discovered, providing that the right incentives are put in place.
In support of the notion of getting the incentives right, I point out that except for the prospect of continuing employment, there are no appropriate rewards offered for the discovery of an important new drug. If you have a really great idea and work for a Big Pharma, you sign the patent over for a buck. If you do your work independently, get if financed on your own and make it a reality, the next 10 generations of your family will live with complete financial independence. No real basis of comparison, is there?
by Daniel A. Silverstein
“You are what your numbers say you are” - Bill Parcels
Very large (5,000 to 10,000+ employee) PRIs are not reliable engines of discovery for new drugs. They are, in fact, extraordinarily productive at other things – particularly repeatable processes associated with aNDAs, sNDAs and the on-going maintenance of established drugs and their franchises. For activities like these, where there is a generally accepted way of doing things – one that is repeatable, and can be optimized – the management techniques and expertise of these kinds or organizations can get the job done quickly and reliably.
It is in the other arena – of breakthrough insights, creativity and originality, that the PRI fails to deliver reliable results; as if such can be “reliably” delivered by any entity known to man. In point of fact, scientific accomplishments such as these tend to be widely and randomly distributed throughout the scientific community. However, while no one knows exactly where the next really meaningful discovery may come from, chances are it will more likely emanate from an academic institution or a development stage Bio/Pharma company lab, than that of Big Pharma.
I commented generally in an earlier post that the absolute size, the extent of management controls and costs of doing business in these very large PRIs was in some measure responsible for this lack of creative output. More specifically however, I observe that never in the history of man have organizations of such size and monolithic character been put to the task of “discovering things.” Rather, discovery as a process, has taken place in more companionable, propitious surroundings populated mostly by newly minted Ph.D.s and Post Docs working in small groups.
Further, I ask you to recall that most great discoveries are made by scientists around the age of 30, who, interestingly enough, go on to careers based on never discovering anything else again. Moreover, there is support for the idea that the state of knowledge in all scientific fields changes so quickly that scientists 3 years past their Ph.D. are drifting out of touch with leading edge thinking, and those 10 years out from the academic training are suited only for work as doorstops, or in reality, as Managers of Discovery in Big Pharma.
This situation is exacerbated by the failure of Big Pharma to effectively establish equal pay, glory and stature for those who want to, or ought to, be kept on the scientific track. The result of this failure is evidenced by the endless desire of all those youngsters, profoundly trained in science, who can’t wait to rise to the position of Group Leader or Section Manager, stop discovering things and start managing people. They abandon their scientific heritage more quickly and more foolishly than a 40-year-old virgin in a house of ill repute.
So if Big Pharma Labs are best at process optimization and smaller labs excel at the kinds of thinking that leads to breakthrough discoveries, what to do?
One school of thought suggests that the PRI model ought to be changed and that the “R” needs to be conducted in a different setting from the “D”. Specifically, it should be both recognized and acknowledged that massive organizations are best for work characterized by processes that can be optimized; and that establishing numerous smaller, semi-autonomous labs, constantly refreshed by streams of new Post Docs on temporary assignment and nurtured by a revolving cast of academic thought leaders might be more likely places where something might actually get discovered, providing that the right incentives are put in place.
In support of the notion of getting the incentives right, I point out that except for the prospect of continuing employment, there are no appropriate rewards offered for the discovery of an important new drug. If you have a really great idea and work for a Big Pharma, you sign the patent over for a buck. If you do your work independently, get if financed on your own and make it a reality, the next 10 generations of your family will live with complete financial independence. No real basis of comparison, is there?
Tuesday, February 19, 2008
Healthcare: Query from a Reader from India
This week, one of our readers, Kumar Shankar Roy of Chennai, India, replied to my blog about winners and losers in Big Pharma asking if Big Pharma’s difficulties would be an opportunity for generics. He also wanted to know if Clinton or Obama would do anything about extending help in innovation given the bad shape of the drug pipelines.
Larry and I talked about this and here’s what we think. First, let’s talk about the generics. Short term, Big Pharma’s problems will help the generics. Longer term, we’re not so sure. If Big Pharma’s pipeline really slows down there’s going to be nothing to copy, right? Larry’s view is that there will likely be an equilibrium point whereby R&D would likely be focused on fewer higher payout/profit drugs with less likelihood for as many "me too" products. There are still many diseases with large populations that can benefit from focused research:
· elder related illnesses,
· cancer in its many forms,
· mental illness and
· numerous life style issues.
Patients will benefit and the companies that successfully address them will do very well. So, the Big Pharma companies with the R&D capabilities to address these areas stand the best chance of surviving. Larry also believes that there are some other forces at play that will impact demand:
· Will payers prevail and only look at costs (as opposed to pharmaco-economics)?
· Can "we" afford medicines at current price points?
· Will regulatory issues gum up the whole thing, etc.?
· What about biogenerics?
Going back to Kumar’s first question, we see temporary advantage to the generics. Big Pharma if it avoids the pitfalls outlined above and can focus on the new opportunities would survive but be a very different industry.
Kumar’s second question about whether or not Clinton and Obama would do anything about extending help in innovation given the bad shape of the drug pipelines is in a different vein. I haven’t seen much, if anything, from either candidate indicating an interest in helping Big Pharma especially when it comes to helping protect their patents. Their strident advocacy of generics won’t be encouraging drug companies to make big bets on future drugs. I don’t expect Big Pharma to get any relief from Clinton or Obama. (Or, even McCain for that matter. Please see my earlier blog for more on that.)
Larry and I would like to thank Kumar for writing to us, telling us his thoughts on the blog, and asking questions. We hope that he finds our replies helpful and look forward to corresponding with him again in the future.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Larry and I talked about this and here’s what we think. First, let’s talk about the generics. Short term, Big Pharma’s problems will help the generics. Longer term, we’re not so sure. If Big Pharma’s pipeline really slows down there’s going to be nothing to copy, right? Larry’s view is that there will likely be an equilibrium point whereby R&D would likely be focused on fewer higher payout/profit drugs with less likelihood for as many "me too" products. There are still many diseases with large populations that can benefit from focused research:
· elder related illnesses,
· cancer in its many forms,
· mental illness and
· numerous life style issues.
Patients will benefit and the companies that successfully address them will do very well. So, the Big Pharma companies with the R&D capabilities to address these areas stand the best chance of surviving. Larry also believes that there are some other forces at play that will impact demand:
· Will payers prevail and only look at costs (as opposed to pharmaco-economics)?
· Can "we" afford medicines at current price points?
· Will regulatory issues gum up the whole thing, etc.?
· What about biogenerics?
Going back to Kumar’s first question, we see temporary advantage to the generics. Big Pharma if it avoids the pitfalls outlined above and can focus on the new opportunities would survive but be a very different industry.
Kumar’s second question about whether or not Clinton and Obama would do anything about extending help in innovation given the bad shape of the drug pipelines is in a different vein. I haven’t seen much, if anything, from either candidate indicating an interest in helping Big Pharma especially when it comes to helping protect their patents. Their strident advocacy of generics won’t be encouraging drug companies to make big bets on future drugs. I don’t expect Big Pharma to get any relief from Clinton or Obama. (Or, even McCain for that matter. Please see my earlier blog for more on that.)
Larry and I would like to thank Kumar for writing to us, telling us his thoughts on the blog, and asking questions. We hope that he finds our replies helpful and look forward to corresponding with him again in the future.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Saturday, February 16, 2008
WHY BIG PHARMA CAN’T DISCOVER DRUGS
They can only make Anti-bodies to NCE’s
Did you ever wonder why the large PRI’s do so poorly at discovering new drugs? How a group of 10,000+ highly trained and dedicated scientists, working with what the rest of the world would regard as unlimited budgets, the very latest in equipment and technology and access to the best thinking by leading academic researchers can do so poorly at discovering new therapeutic agents? Isn’t it funny that collectively, this enormous pool of Ph.D.s, M.D.s and even a few MD/PhDs, can’t discover the odd new drug? It seems statistically improbable that so many resources could be employed in such a rigorous and targeted fashion and produce so little to show for all that effort.
It’s become so well accepted that practically no one in Big Pharma ever discovers a drug that we don’t even think it strange to meet people in the course of our work who’ve spent their entire 20 or 30-year career toiling diligently in a PRI Lab and have never been involved with an Approved New Drug. Most in fact, consider themselves lucky and productive if they’ve played a part in getting a NCE into man, even if it failed in early testing. Stranger still, this plays out in an environment of supposed desperation on the part of Big Pharma to find replacements for drugs coming off patent protection.
An examination of the logic underlying this situation would be amusing if the results, for shareholders and patients alike, weren’t so tragic. The whole concept of trying to relate the disparate elements of unmet medical needs and the current state of the art of pharmaceutical research and development with extraordinarily speculative projections of final market size resembles a process in which so many filters are employed in refining the final product that almost nothing ever gets through.
If it’s not obvious by now to those making decisions about how to pick out the projects with Blockbuster potential that choosing the right one has about the same odds as catching lightning in a bottle, it should be. Doing it once is no guarantee that you can do it again – perhaps, in fact, the obverse is more likely.
I have a theory about all of this futility, which may shed some light on what is really going on. First, the absolute size and complexity of these organizations is so vast as to require highly sophisticated and elaborate management procedures to keep track of exactly what is going on. At the individual level, compliance with both the day-to-day reporting requirements, justification of projects and the periodic planning cycle consumes time, energy and resources that would be better spent on science. On the management level, the cost of infrastructure, control systems, real estate and staffing places an enormous cost burden that each drug candidate must bear, whether successful or not.
Second, the Blockbuster hurdle is too high a standard against which to measure the potential worth and value of every new product candidate. The conundrum though, is that the high cost structure of developing drugs in the typical Big Pharma setting requires that kind of financial outcome before full support is forthcoming. Since unreliable filters are set in place to assist in these judgments, not near enough candidates are launched on the perilous journey of development for an adequate number to survive the trip. I offer this comment by way of opining that predictions of final market potential cannot, by their very methodology, take cognizance of serendipitous medical insights that only occur when a drug is broadly used by physicians. Additional indications, more efficacious dosing levels, new regimens all represent value building opportunities that can be difficult to foresee.
Third, the portfolios of undeveloped compounds residing on the books of every Big Pharma represent valuable intellectual property that the owners are both reluctant, if not downright fearful, to see commercialized. The reasons for this are obvious – nobody is strongly incentivized to do deals; if, God forbid, one of these sleeping beauties turns into an actual blockbuster in the hands of another, the shame and humiliation would be matched only by the swiftness of termination of the offending deal maker; in Big Pharma not making decisions is often as well rewarded as making them (without the attendant risk).
At one time Big Pharma’s drug development machinery was considered the gold standard for the management of this costly and complex process. Today, the media’s skepticism about the objectivity of the development process, the growing demands that the results of every clinical trial be in the public domain and the cost structure of new drug development ($1 billion per NDA) suggest that we are well past the tipping point for changing out a model that doesn’t work any longer for something new, faster and cheaper.
Did you ever wonder why the large PRI’s do so poorly at discovering new drugs? How a group of 10,000+ highly trained and dedicated scientists, working with what the rest of the world would regard as unlimited budgets, the very latest in equipment and technology and access to the best thinking by leading academic researchers can do so poorly at discovering new therapeutic agents? Isn’t it funny that collectively, this enormous pool of Ph.D.s, M.D.s and even a few MD/PhDs, can’t discover the odd new drug? It seems statistically improbable that so many resources could be employed in such a rigorous and targeted fashion and produce so little to show for all that effort.
It’s become so well accepted that practically no one in Big Pharma ever discovers a drug that we don’t even think it strange to meet people in the course of our work who’ve spent their entire 20 or 30-year career toiling diligently in a PRI Lab and have never been involved with an Approved New Drug. Most in fact, consider themselves lucky and productive if they’ve played a part in getting a NCE into man, even if it failed in early testing. Stranger still, this plays out in an environment of supposed desperation on the part of Big Pharma to find replacements for drugs coming off patent protection.
An examination of the logic underlying this situation would be amusing if the results, for shareholders and patients alike, weren’t so tragic. The whole concept of trying to relate the disparate elements of unmet medical needs and the current state of the art of pharmaceutical research and development with extraordinarily speculative projections of final market size resembles a process in which so many filters are employed in refining the final product that almost nothing ever gets through.
If it’s not obvious by now to those making decisions about how to pick out the projects with Blockbuster potential that choosing the right one has about the same odds as catching lightning in a bottle, it should be. Doing it once is no guarantee that you can do it again – perhaps, in fact, the obverse is more likely.
I have a theory about all of this futility, which may shed some light on what is really going on. First, the absolute size and complexity of these organizations is so vast as to require highly sophisticated and elaborate management procedures to keep track of exactly what is going on. At the individual level, compliance with both the day-to-day reporting requirements, justification of projects and the periodic planning cycle consumes time, energy and resources that would be better spent on science. On the management level, the cost of infrastructure, control systems, real estate and staffing places an enormous cost burden that each drug candidate must bear, whether successful or not.
Second, the Blockbuster hurdle is too high a standard against which to measure the potential worth and value of every new product candidate. The conundrum though, is that the high cost structure of developing drugs in the typical Big Pharma setting requires that kind of financial outcome before full support is forthcoming. Since unreliable filters are set in place to assist in these judgments, not near enough candidates are launched on the perilous journey of development for an adequate number to survive the trip. I offer this comment by way of opining that predictions of final market potential cannot, by their very methodology, take cognizance of serendipitous medical insights that only occur when a drug is broadly used by physicians. Additional indications, more efficacious dosing levels, new regimens all represent value building opportunities that can be difficult to foresee.
Third, the portfolios of undeveloped compounds residing on the books of every Big Pharma represent valuable intellectual property that the owners are both reluctant, if not downright fearful, to see commercialized. The reasons for this are obvious – nobody is strongly incentivized to do deals; if, God forbid, one of these sleeping beauties turns into an actual blockbuster in the hands of another, the shame and humiliation would be matched only by the swiftness of termination of the offending deal maker; in Big Pharma not making decisions is often as well rewarded as making them (without the attendant risk).
At one time Big Pharma’s drug development machinery was considered the gold standard for the management of this costly and complex process. Today, the media’s skepticism about the objectivity of the development process, the growing demands that the results of every clinical trial be in the public domain and the cost structure of new drug development ($1 billion per NDA) suggest that we are well past the tipping point for changing out a model that doesn’t work any longer for something new, faster and cheaper.
Contributed by Daniel A. Silverstein
Wednesday, February 13, 2008
Healthcare: Who Would Be Worse for Big Pharma, Obama, Clinton, or McCain?
Guy has been blogging for a while now about the upcoming Presidential election’s impact on Big Pharma. He didn’t seem to have much good news. All this got me thinking. Who would be worse for Big Pharma, Obama, Clinton, or McCain? It’s an interesting question. Here’s my thinking.
What is very clear is that all three leading candidates have the pharmaceutical industry in their cross hairs. So, we may be faced with a "best of the worst" scenario.
Let’s begin with the Democrats. First, Barack Obama. He’s relatively new to the national political scene but he comes from the liberal, big government tradition of the Democratic party and as Guy pointed out, Obama has some very specific proposals for what he would do to Big Pharma. His plan to have the U.S. government negotiate with drug companies over pricing that would eliminate $30 billion in revenues alone (nominally a 5-10% revenue reduction should this plan be adopted). The reimportation of drugs is high on his agenda, another revenue reduction to the industry of 5-10%). He also has plans to extend healthcare coverage to all Americans, perhaps a nominal increase in demand to the industry, the majority of this demand likely going towards generics. His campaign's summary on pharmaceuticals is: "Obama will work to increase the use of generic drugs in Medicare, Medicaid, and FEHBP and prohibit big name drug companies from keeping generics out of markets." Definitely, not someone who is looking to be a friend of Big Pharma.
Next, let’s talk about Hillary Clinton. Long an advocate of universal healthcare and government oversight of the healthcare industry. There is nothing in her program that would alleviate any of Big Pharma’s concerns. Further, she is an accomplished politician and has mastered the intricacies of Washington’s convoluted politics. In her "Americas Health Choices Plan", she states: "Insurance and Drug Companies: insurance companies will end discrimination based on pre-existing conditions or expectations of illness and ensure high value for every premium dollar; while drug companies will offer fair prices and accurate information". Depending on what "fair prices" mean, the impact on the industry can be substantive to say the least.
Finally, John McCain. As Guy has pointed out, this Republican isn’t turning out to be a pro-business friend of Big Pharma. On cornerstone of his plan on healthcare states: "Foster the development of routes for safe, cheaper generic versions of drugs and biologic pharmaceuticals. Develop safety protocols that permit re-importation to keep competition vigorous." His program almost sounds like a Democratic broadside. Many elderly, retired people are his supporters. Not too many friends of Big Pharma there.
So, let me return to my original question, who would be worse for Big Pharma? While it seems a bit like a Hobson's choice, I think that it would be Barack Obama. But, first, let me explain why it’s neither Clinton nor McCain.
Clinton brings much experience and intelligence with her should she be elected. However, she also brings a history of acrimony and controversy. If the Democrats don’t achieve significant increases in both Houses of the Congress then she may not be able to achieve the consensus necessary to drive what will be a very contentious program. Clinton despite her very real political skills may not be able to break free of her past.
John McCain, if elected, would probably work towards some of his programs but without Republican party support probably wouldn’t enact legislation as comprehensive and far reaching as his competitors would. However, if the Democrats achieve substantial gains in the Congress they might be able to initiate legislation comparable to Obama’s and Clinton’s and with a “fellow traveler” in the White House make it happen. However, I think that’s a bit of a stretch.
Now, Obama. I believe that he would be the worst choice for Big Pharma for several reasons. First, he has no baggage and is perceived as an agent for positive change. Second, he expresses a willingness to reach across the aisle and compromise. Finally, his programs appear to be more realistic, reflecting the reality of the American economic system. The country wants change, fresh positive change, and he seems to be able to answer that need. If Obama wins the election then Guy may be right with his prediction of a decade long slump for Big Pharma.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Lawrence Rothman, PhD.
What is very clear is that all three leading candidates have the pharmaceutical industry in their cross hairs. So, we may be faced with a "best of the worst" scenario.
Let’s begin with the Democrats. First, Barack Obama. He’s relatively new to the national political scene but he comes from the liberal, big government tradition of the Democratic party and as Guy pointed out, Obama has some very specific proposals for what he would do to Big Pharma. His plan to have the U.S. government negotiate with drug companies over pricing that would eliminate $30 billion in revenues alone (nominally a 5-10% revenue reduction should this plan be adopted). The reimportation of drugs is high on his agenda, another revenue reduction to the industry of 5-10%). He also has plans to extend healthcare coverage to all Americans, perhaps a nominal increase in demand to the industry, the majority of this demand likely going towards generics. His campaign's summary on pharmaceuticals is: "Obama will work to increase the use of generic drugs in Medicare, Medicaid, and FEHBP and prohibit big name drug companies from keeping generics out of markets." Definitely, not someone who is looking to be a friend of Big Pharma.
Next, let’s talk about Hillary Clinton. Long an advocate of universal healthcare and government oversight of the healthcare industry. There is nothing in her program that would alleviate any of Big Pharma’s concerns. Further, she is an accomplished politician and has mastered the intricacies of Washington’s convoluted politics. In her "Americas Health Choices Plan", she states: "Insurance and Drug Companies: insurance companies will end discrimination based on pre-existing conditions or expectations of illness and ensure high value for every premium dollar; while drug companies will offer fair prices and accurate information". Depending on what "fair prices" mean, the impact on the industry can be substantive to say the least.
Finally, John McCain. As Guy has pointed out, this Republican isn’t turning out to be a pro-business friend of Big Pharma. On cornerstone of his plan on healthcare states: "Foster the development of routes for safe, cheaper generic versions of drugs and biologic pharmaceuticals. Develop safety protocols that permit re-importation to keep competition vigorous." His program almost sounds like a Democratic broadside. Many elderly, retired people are his supporters. Not too many friends of Big Pharma there.
So, let me return to my original question, who would be worse for Big Pharma? While it seems a bit like a Hobson's choice, I think that it would be Barack Obama. But, first, let me explain why it’s neither Clinton nor McCain.
Clinton brings much experience and intelligence with her should she be elected. However, she also brings a history of acrimony and controversy. If the Democrats don’t achieve significant increases in both Houses of the Congress then she may not be able to achieve the consensus necessary to drive what will be a very contentious program. Clinton despite her very real political skills may not be able to break free of her past.
John McCain, if elected, would probably work towards some of his programs but without Republican party support probably wouldn’t enact legislation as comprehensive and far reaching as his competitors would. However, if the Democrats achieve substantial gains in the Congress they might be able to initiate legislation comparable to Obama’s and Clinton’s and with a “fellow traveler” in the White House make it happen. However, I think that’s a bit of a stretch.
Now, Obama. I believe that he would be the worst choice for Big Pharma for several reasons. First, he has no baggage and is perceived as an agent for positive change. Second, he expresses a willingness to reach across the aisle and compromise. Finally, his programs appear to be more realistic, reflecting the reality of the American economic system. The country wants change, fresh positive change, and he seems to be able to answer that need. If Obama wins the election then Guy may be right with his prediction of a decade long slump for Big Pharma.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Lawrence Rothman, PhD.
Sunday, February 10, 2008
Healthcare: Would Big Pharma Be Any Better Off with McCain?
Originally, I had planned to blog here about whether Romney or McCain would be better for Big Pharma. Unfortunately, Mitt withdrew before I had a chance to prepare it. In fact, my last blog about Obama and Clinton still assumed that the Republicans still had no frontrunner. Even with the instantaneous nature of this blog it’s difficult stay abreast of everything that’s happening.
But, let me return to today’s topic, would Big Pharma be any better off with McCain? Unfortunately, for Big Pharma, the answer is no. Let me take two quotes from Senator McCain’s website (http://www.johnmccain.com/healthcare/ ). First, he said in a speech, “Pharmaceutical companies must worry less about squeezing additional profits from old medicines by copying the last successful drug and insisting on additional patent protections and focus more on new and innovative medicine.” Now that would put a real crimp in most large pharmaceuticals’ business models. The recent drug company raids in Europe conducted by the European Union probably were based on a similar theory. In the same speech, McCain continues, “Drugs are an important part of medicine, of course, and are often quite expensive. Here in Iowa the Attorney General is suing seventy-eight drug companies accusing them of inflating drug costs paid by Iowa taxpayers through the Medicaid system. Problems with costs are created when market forces are replaced by government regulated prices. If drug costs reflects value, fine. But if there are ways to bring greater competition to our drug markets by safe re-importation of drugs, by faster introduction of generic drugs, or by any other means we should do so. If I'm elected President, we will.” OK, now this is the guy who claims to be the conservative candidate for President. And, just in case, he hasn’t been clear enough about it, a recent Business Week article quoted McCain describing himself among the “great enemies of the pharmaceutical companies in Washington.” Additionally, McCain is a proponent of permitting Medicare to negotiate for discounted prices with drug companies. The Wall Street Journal has pointed out that retirees are major contributors to McCain’s coffers. Cheaper drug prices are clearly very important to them.
This is another reason why Big Pharma is in for some tough sledding for the next decade. The party normally associated with being pro-business is doing nothing for Big Pharma. The country’s concerns with healthcare seem to be driving towards a consensus that’s crossing party lines. That consensus will shake Big Pharma to its very core.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
But, let me return to today’s topic, would Big Pharma be any better off with McCain? Unfortunately, for Big Pharma, the answer is no. Let me take two quotes from Senator McCain’s website (http://www.johnmccain.com/healthcare/ ). First, he said in a speech, “Pharmaceutical companies must worry less about squeezing additional profits from old medicines by copying the last successful drug and insisting on additional patent protections and focus more on new and innovative medicine.” Now that would put a real crimp in most large pharmaceuticals’ business models. The recent drug company raids in Europe conducted by the European Union probably were based on a similar theory. In the same speech, McCain continues, “Drugs are an important part of medicine, of course, and are often quite expensive. Here in Iowa the Attorney General is suing seventy-eight drug companies accusing them of inflating drug costs paid by Iowa taxpayers through the Medicaid system. Problems with costs are created when market forces are replaced by government regulated prices. If drug costs reflects value, fine. But if there are ways to bring greater competition to our drug markets by safe re-importation of drugs, by faster introduction of generic drugs, or by any other means we should do so. If I'm elected President, we will.” OK, now this is the guy who claims to be the conservative candidate for President. And, just in case, he hasn’t been clear enough about it, a recent Business Week article quoted McCain describing himself among the “great enemies of the pharmaceutical companies in Washington.” Additionally, McCain is a proponent of permitting Medicare to negotiate for discounted prices with drug companies. The Wall Street Journal has pointed out that retirees are major contributors to McCain’s coffers. Cheaper drug prices are clearly very important to them.
This is another reason why Big Pharma is in for some tough sledding for the next decade. The party normally associated with being pro-business is doing nothing for Big Pharma. The country’s concerns with healthcare seem to be driving towards a consensus that’s crossing party lines. That consensus will shake Big Pharma to its very core.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Friday, February 8, 2008
Healthcare: Is Clinton or Obama Better for Big Pharma?
Super Tuesday is over for another four years. All we have to do now is to live with its results during that time. Unfortunately, unlike in prior years, we don’t have clear frontrunners in either party right now, especially with the Democrats. And, this has gotten me thinking. Is Hillary Clinton or Barack Obama better for Big Pharma? (Please don’t fret that I’m favoring one party over the other, I intend on reviewing the Republicans later.)
Senator Clinton has been known to the American public since the early Nineties when as part of her husband’s administration, she attempted to overhaul the U.S. healthcare system. I’d call her a child of the big spending, liberal governments of the Sixties that thought the government could fix anything. I remember her work from that time and being very confused by and skeptical of her proposal. I will also admit freely that I firmly believe that our country does need major healthcare changes and I give Senator Clinton much credit for getting out in front of this issue long before it became public awareness became white hot.
So, I went to the Clinton campaign’s website and found the page for her healthcare policy (http://www.hillaryclinton.com/feature/healthcareplan/ ). The site mentions drug company pricing and product information as elements of her program. One of her fact sheets talks about “excessive insurance, drug, and malpractice costs.” Doesn’t look like there are going to be too many Big Pharma friends there. What I see if Senator Clinton is elected and succeeds in implementing her healthcare policy is more pricing pressure on the industry. I’ve been blogging for a while about the next decade being a tough one for Big Pharma. Eight years of a President Hillary Clinton could just make that happen.
Then I went over to Senator Obama’s website and its healthcare policy page (http://www.barackobama.com/issues/healthcare/ ) to check his program. There is a lot more detail on what he intends to do. For instance, allowing Americans to import lower cost drugs from overseas. Or, permitting the U.S. government to negotiate with drug companies to lower prices, currently prohibited. The Obama site estimates savings of about $30 billion from this measure alone. He would also advocate the use of generic drugs. I have to admit that before I read the website I thought that Obama was moderate than Clinton. I learned otherwise on that webpage.
Looking ahead to November, whichever Democratic contender wins the election Big Pharma is going to be in trouble. I don’t believe that it will really matter which of them wins. And, if the Democrats pick up more seats in both Houses of Congress then these webpages could become this country’s new healthcare policy.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Senator Clinton has been known to the American public since the early Nineties when as part of her husband’s administration, she attempted to overhaul the U.S. healthcare system. I’d call her a child of the big spending, liberal governments of the Sixties that thought the government could fix anything. I remember her work from that time and being very confused by and skeptical of her proposal. I will also admit freely that I firmly believe that our country does need major healthcare changes and I give Senator Clinton much credit for getting out in front of this issue long before it became public awareness became white hot.
So, I went to the Clinton campaign’s website and found the page for her healthcare policy (http://www.hillaryclinton.com/feature/healthcareplan/ ). The site mentions drug company pricing and product information as elements of her program. One of her fact sheets talks about “excessive insurance, drug, and malpractice costs.” Doesn’t look like there are going to be too many Big Pharma friends there. What I see if Senator Clinton is elected and succeeds in implementing her healthcare policy is more pricing pressure on the industry. I’ve been blogging for a while about the next decade being a tough one for Big Pharma. Eight years of a President Hillary Clinton could just make that happen.
Then I went over to Senator Obama’s website and its healthcare policy page (http://www.barackobama.com/issues/healthcare/ ) to check his program. There is a lot more detail on what he intends to do. For instance, allowing Americans to import lower cost drugs from overseas. Or, permitting the U.S. government to negotiate with drug companies to lower prices, currently prohibited. The Obama site estimates savings of about $30 billion from this measure alone. He would also advocate the use of generic drugs. I have to admit that before I read the website I thought that Obama was moderate than Clinton. I learned otherwise on that webpage.
Looking ahead to November, whichever Democratic contender wins the election Big Pharma is going to be in trouble. I don’t believe that it will really matter which of them wins. And, if the Democrats pick up more seats in both Houses of Congress then these webpages could become this country’s new healthcare policy.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Sunday, February 3, 2008
Industry: Will there be winners and losers in the pharmaceutical sector? (Part I)
Last week, I blogged about what might happen next with Big Pharma. I wrote about the industry’s problems in general terms and I asked you to submit your thoughts about what companies might make the cut or not. Larry Rothman forwarded to me several articles about companies that might be interesting to blog about. I’ll start with this entry and continue for the next several weeks while I blog on several other subjects that are interesting me. (The Presidential election being just one of them.)
Larry’s first article concerned Wyeth and its recent announcement of up to a ten per cent reduction in its global workforce by 2011. The usual culprits were there. Failing pipeline, threat of generics, and its own unique problems with the FDA. As I read the article I was struck by its banality. No, I’m not criticizing the author. She was just writing about what she had heard and observed. What I’m talking about is here is another pharmaceutical company heading for trouble and other than cutting staff and reducing costs there doesn’t seem to be a lot going on. Recently, Wyeth’s stock has hit a fifty-two week low. Three years previously, their sales force had been reduced. I guess if you don’t think that you’re going to have any new products anytime soon you probably won’t need an expensive sales force.
Honestly, Big Pharma is starting to sound more and more like the U.S. auto industry. Although, at least the auto industry knows what it has to do to survive. Fuel efficient, eco-friendly, smaller vehicles, lower costs, and improving product quality should do it. OK, I know what you’re thinking, easier said than done. But, at least it’s a plan. I don’t hear anything comparable coming from Big Pharma. If anything, Big Pharma is hiding its head in the sand and missing the point.
I go back to my earlier blog entry in January where I wrote about excess capacity in the pharmaceutical industry. This is an example of what I’ve been talking about – a company that seems to have lost its way. The easy gravy train days are going away and managements don’t seem to know how to respond. The question is how does Wyeth respond? The defensive tactics of cost reductions will buy time. However, I’ve always found it curious that analysts and shareholders never ask why managements always wait until revenues start to collapse before they attack their cost structures. What comes next after the costs are taken out and the jobs eliminated? If the pipeline is thin and Big Pharma is losing its ability to raise prices then where will the future growth come from?
Again, in closing, Larry and I would like to hear your thoughts on this matter. Am I missing something here?
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Larry’s first article concerned Wyeth and its recent announcement of up to a ten per cent reduction in its global workforce by 2011. The usual culprits were there. Failing pipeline, threat of generics, and its own unique problems with the FDA. As I read the article I was struck by its banality. No, I’m not criticizing the author. She was just writing about what she had heard and observed. What I’m talking about is here is another pharmaceutical company heading for trouble and other than cutting staff and reducing costs there doesn’t seem to be a lot going on. Recently, Wyeth’s stock has hit a fifty-two week low. Three years previously, their sales force had been reduced. I guess if you don’t think that you’re going to have any new products anytime soon you probably won’t need an expensive sales force.
Honestly, Big Pharma is starting to sound more and more like the U.S. auto industry. Although, at least the auto industry knows what it has to do to survive. Fuel efficient, eco-friendly, smaller vehicles, lower costs, and improving product quality should do it. OK, I know what you’re thinking, easier said than done. But, at least it’s a plan. I don’t hear anything comparable coming from Big Pharma. If anything, Big Pharma is hiding its head in the sand and missing the point.
I go back to my earlier blog entry in January where I wrote about excess capacity in the pharmaceutical industry. This is an example of what I’ve been talking about – a company that seems to have lost its way. The easy gravy train days are going away and managements don’t seem to know how to respond. The question is how does Wyeth respond? The defensive tactics of cost reductions will buy time. However, I’ve always found it curious that analysts and shareholders never ask why managements always wait until revenues start to collapse before they attack their cost structures. What comes next after the costs are taken out and the jobs eliminated? If the pipeline is thin and Big Pharma is losing its ability to raise prices then where will the future growth come from?
Again, in closing, Larry and I would like to hear your thoughts on this matter. Am I missing something here?
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
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