This is a reply to Mr. Mal Barnard’s article, ‘Pharma – too big to fail?’.
Big pharmaceutical companies have a lot to worry about. Challenges and fierce competition are coming from every direction. Speaking from the European viewpoint, regulatory policies have been blamed for dousing the flames of innovation and healthcare reimbursement schemes shaved off profits leaving a landscape of operational stubble. The collapse of the pharma ecosystem has more to do with political red tape than internal bureaucracy which by the way exists to juggle national requirements in the first place. I have to agree with Mr. Mal Barnard’s statement that ‘the spiralling cost [price] of drugs is threatening the sustainability of pharma’. Whose fault is this? Big pharma have long been cautioned that being too profit-centric would reduce the affordability of medicines. So in a show of corporate responsibility, pharma have succumbed dutifully to public outcry and political behest to slash drug prices. One can say this has forced pharma to inject public service ethos into commercial objectives. However, it has also pushed them to teeter on an operational tight-rope with an overweighed fulcrum straining to maintain equilibrium under numerous economic pressures.
If the situation at home has resulted in relocation and thousands of jobs lost, international competition casts a looming threat to seize market share. India, for example, has been a constant irritation to western pharma by allowing generic versions of still patented drugs to be manufactured and sold at one-fiftieth of US prices. Fashioning itself as “the pharmacy to the Third World”, the price-cutting strategies of Indian pharma such as Cipla has increased accessibility to AIDS treatment and the firm wants to replicate this success for cancer.
Every Pharma Cloud has a Silver Lining
Despite what seems to be a commercial melee, I must remind that pharma is a business just like any other. Tough decisions have been made to ensure not only their own survival, but to guarantee uninterrupted supply of critical medicines to the world. While it is true that the economy in Europe is not conducive to sustain operations (at the moment), big pharma continue to have strong global presence and are standing quite sturdily albeit in other parts of the world. Let’s look on the bright side. Lower manufacturing costs in China could mean lower drug prices and pharma can still cut a comfortable profit. Europe will inevitably become an export market but it is still a major economy with one of the highest demands for medicines. Therefore, it is very unlikely that European requirements would be considered less seriously. With Indian firms, such as Ranbaxy recently involved in regulatory scandals and red-flagged by the US FDA for data falsification, western-grown pharma will remain the trusted source for medicines in regulated jurisdictions.
New Business Strategies
Secondly, let us not keep sulking about the amount of investments that have gone into R&D and clinical trials, just to have these innovations copied by third-world manufacturers under our noses. These should not be perceived as a weakness but an indisputable strength that places pharma constantly ahead of the game as the guardian of sacred product pipelines with a well-honed nose to sniff out new opportunities. Taking GlaxoSmithKline as a shining example of innovation, the company is happily churning out one blockbuster after another as Britain’s largest pharma despite the economy crashing about and around. Its philosophy is, make simple medicines hard to copy. One example of this is GSK’s Seretide drug to treat the humble asthma. Its patent has expired but the technology behind the medicinal powder and inhaler device is too complex to be copied by generic manufacturers, thus enabling to GSK to retain its £5bn-a-year sales.
The Generics Bubble will not Last
If Mr. Barnard compares the pharma industry to the downtrodden financial sector, I would make a comparison with the bustling electronics industry. When Apple produced the iPod, iPhone and iPad, there was no lacking of me-too MP3 players, smartphones and tablets each with their own rendition of slickness and style. What was once a market flooded with copycat mobile devices has now filtered down to a respectable few brands that is able to compete head-to-head based on technological innovation and with a price to match. Therefore, as generics manufacturing increases, so will competition in this sector. That is when we will start to see more intense price-cutting battles and probably leading to deterioration in product quality (depending on whether manufacturers start to cut-corners to maintain profits). Past lessons have taught us that the winners will be those with robust drug development strategies, regulatory policies and R&D infrastructure to produce therapies of the future. In order to cover developmental and clinical trial costs, innovative medicines will inevitably fetch higher prices, thus returning fair competition back to western-grown pharma. All is not lost …
About Nealda Yusof
Dr. Nealda Yusof is a business and technology writer who has expertise in developing business plans, evaluating technology, establishing business processes and performing market literature research. She owns a small business BeegBee Technology Alliances. For more information about BeegBee Technology Alliances and its solutions, visit www.BeegBee.com.
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