Big pharma going down, down, down

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Yesterday s The New York Times reported on worrisome trends in the pharmaceutical industry: the dearth of big drug breakthroughs, research and development downsizing and more stringent FDA regulations. Of course it also doesn t help that the drug industry stands to lose nearly $50 billion in annual sales this year after relinquishing control of more than ten medicines to cheaper generics due to expiring patents. Currently, 75 percent of all U.S. prescriptions are for generic drugs. Moreover, many big pharmaceutical companies are relocating their research and development departments to emerging nations like China and Indonesia.

After working as a medicinal research chemist for over two decades in a major pharmaceutical company, ACSH s Dr. Josh Bloom comments that, As usual, The Times only gets half the story right. They describe the decline in new drug development as though our intellectual and research capacity suddenly dried up in the past five to ten years, yet they barely mention patent limitations, the length of time it takes for companies to bring drugs to the market, nor the oppressive precautionary approach of the FDA with its resultant uncertainty as more viable explanations for the worsening operating environment for pharma.

The various economic and regulatory pressures lead to a chilling effect on funding for innovation, adds ACSH s Dr. Gilbert Ross. Pharma is often misunderstood. All people see is that a blockbuster drug like Lipitor grosses $11 billion in sales, and they don t understand what Pfizer could be complaining about. However, what they often don t realize is that before Lipitor made it to the market, there were about 8,000 drugs that never made it past Phase II trials while hundreds more were quashed by the FDA, until finally only one or two drugs were approved.

The drug industry may also face more challenges from a new law within President Obama s health care overhaul that would control drug pricing, at least for Medicare patients, through centralized price-setting beginning in 2015. Starting then, an independent board appointed by the President would have the authority to lower drug prices across the board in Medicare unless Congress overrules the law each year. This is like killing the golden goose, says Dr. Ross. At first, everyone will be happy that cheap drugs are available, but in ten years, we ll still have the same pharmacopeia we have now, and our grandchildren will be treated with medications from 2010, not 2030. The bean counters will be happy, though.