BIG PHARMA – THE DRIED UP PRUNE
It’s true, Big Pharma is a dried up prune compared to the fulsome plum it used to be.
In the pre-blockbuster era, discovering and developing drugs was the exclusive domain of large, predominantly vertically integrated pharmaceutical companies. They were the ones that generated and owned all the clinical and non-clinical data, compiled the license applications, manufactured the test materials, liaised with regulatory bodies and generally exercised stewardship of the many and complex activities required to develop and market a drug. They sponsored the clinical trials and if and when a marketing authorisation (MA) was approved, they maintained in-house company structures to ensure safety, efficacy and quality of their products, under their statutory obligations as marketing authorisation holder (MAH).
In those days, people all worked for the same company, sharing the pain and sweet smell of success.
Having retrenched into opposite ends of the prescription drug life-cycle in search of blockbusters, Big Pharma has left most of the work of testing, developing, making, storing, moving, distributing and reporting issues with prescription medicines to third party service providers.
Having abandoned vertical integration and the corresponding control over drug development and supply, what is Pharma doing to stay afloat?
WHAT IS BIG PHARMA DOING ABOUT IT?
…employing a number of tactics to maintain revenues from the declining pipeline of blockbusters. Health Economics and Outcomes Research (HEOR) has become a new tool in the box. The reluctance of payers to stump up the eye watering prices has given rise to market access groups, tasked with justifying why prices are so high, based on HEOR arguments.
Also in favour is the targeting of perceived less challenging regulatory environments and patient populations—rare diseases, orphan indications and all things cancer. The unfortunate side-effect of this is that prices have to be astronomic because of the very small volumes.
Pharma, it seems, is playing the same tune on a different instrument. Only this time, the instrument is very different; all Pharma has left to play on are massive discovery research teams and sales & marketing muscle. The crucial body of the product development instrument has completely lost its puff.
With such little capability in drug development, important debilitating diseases, such as Alzheimer’s, sepsis and bacterial infections (AMR) have fallen out of favour. These are no longer the cherries that Pharma wants to pick, and the world is suffering because of it.
SERVICE PROVIDERS AND GENERICS HAVE SOARED
Meanwhile, on the other side of the fence, the fledgling service providers that were, flew the nest years ago and grew into fully formed adults, soaring like eagles.
CROs have been and still are consolidating, becoming big, powerful providers of clinical and non-clinical services.
Massive consolidation has also taken place in the CDMO world, and evidence suggests they are moving into additional areas of the value chain.
The specialist 3PL’s have also been part of the consolidation, as the two main players have been acquired by giant corporations, one from inside Pharma and one from outside (Marken/UPS; World Courier/AmerisourceBergen).
The finished product distributors of Pharma products are now mega corporations, on the back of, yes, you guessed it, consolidation. Just three share nearly 90% of the market on each side of the pond. There has been forward integration (pharmacies) and reverse integration (logistics specialists) going on for some time and also moves into broader service offerings to the industry.
The generics industry has grown enormously on the back of payer demands for cheaper drugs. Up to 90% of drugs now sold in the US and UK are generic. Ironically, in later times, the intense competition for out-of-patent drugs has subsided, which has led to spiraling rises in generic drug prices. This again has been attributed to M&A activity leading to far less, bigger players on the field being able to pick and chose what they supply; with the ever present shortages adding to the hikes.
WHAT NEXT FOR PHARMA?
It should now be clear from what we have just heard that the large R&D based companies developing and selling drugs (Big Pharma) have lost contact with an industry it once dominated. As drug development business models have become increasingly virtual, isolated and lacking in physical presence, the issues have risen to boiling point, and the bubbles have reached the top.
We must therefore conclude that things have gone horribly wrong for large swathes of stakeholders in the world of prescription medicines…
…re-integration is the only way forward. Big Pharma MUST start buying back the assets necessary for the development and commercialisation of prescription medicine, otherwise the prune will shrink to a raisin and eventually disappear from view…