Tell someone you work for Big Pharma and one of two reactions ensues: “Wow, can you get me a job at [insert Big PharmaCo name here]?” But more likely in liberal, progressive circles, eyes narrow and faces stiffen. Sure, Big Pharma occasionally charges upwards of $130,000 for breakthrough medicines and is sometimes besotted with bribery scandals. But are these really reasons to link life-saving products with other evil-doers like Big Tobacco and defense contractors?
The pharmaceutical business is complex, global, and powerful. As an industry, Pharma generated over $960B of revenue in 2012 and is consistently one of the biggest spenders of R&D. Incentives are well-intentioned: 20 years of intellectual property (IP) protection for novel products that offer improved health. In reality, though, most drugs have only 5-7 years left of patent protection to recover their investment due to regulatory, development, or other delays.
The patent cliff – the falling off of revenues due to patent expirations or legal challenges with no new products to make up for the decline – has hit the industry hard. An estimated $170B of revenue will be lost from 2012-15 due to falling prices after patent expiry. In recent years, Big Pharma has turned to emerging markets to make up for declining sales in developed markets. The “Pharmerging” markets of Brazil, China, and India are a wild west, with seemingly unlimited opportunities to sell innovative wares. However, in these markets, thriving local generic industries (that may or may not respect patents) combined with lower ability to pay has started to throw clouds on Big Pharma’s parade.
It is a well-known fact that pharma companies charge different prices for the same drug in different markets, and Americans pay more for drugs than everywhere else. Pricing is typically set in a negotiation between the manufacturer and the insurer, usually the government. In the US, as there is no single insurer, prices are negotiated insurer by insurer, with the best rates going to Medicaid and higher prices paid by commercial insurers.
Increasingly, doctors and insurers are rejecting such high prices. Memorial Sloan-Kettering’s unabashed refusal to pay for Sanofi-Aventis’s colon cancer drug Zaltrap led to an unheard of 50% price reduction in the US. ExpressScripts, the largest pharmacetical benefit company in the US, has dropped over 40 drugs from its formulary on grounds of limited benefit versus existing alternatives. Such tactics have been practiced for years in the UK by NICE, the National Institute for Health and Care Excellence, as a means of controlling spiraling health care costs.
But what of access? In both rich and poor countries, most pharma companies have programs to help needy patients secure free medicines. But what of the poorest people who live on less than $2 a day? Some public-private partnerships in Sub-Saharan Africa enhance local production but still largely target patients with some ability to pay. As pharma companies recognize the limitations to price in even their richest markets, the wake-up call to action elsewhere must be heard. Whether through partnerships, trade negotiations, or IP, now is the time to show the world that pharma can do more good than harm.