BIG PHARMA—FULSOME PLUM OR DRIED-UP PRUNE?

It’s a dried-up prune!

The fulsome plum days

Truly, 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 nonclinical 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 (product license) (MA) was approved, they maintained inhouse company structures to ensure safety, efficacy and quality of their products, under their statutory obligations as the marketing authorisation (product license) holder (MAH/PLH).

In those days, people all worked for the same company, sharing the pain and sweet smell of success.

Today’s pharma life as a dried-up prune

Having retrenched into opposite ends of the prescription drug life-cycle in search of blockbusters, Big Pharma has left the work of testing, developing, making, storing, moving, distributing and reporting issues with prescription medicines to third-party service providers, working on a fee-for-service basis.

Having abandoned vertical integration and the corresponding control over drug development and supply, the flow of new drugs to market got slower and slower. It was dubbed by the investor community as the ‘valley of death’, which resulted in the ‘patent cliff’ (existing drug patents expiring with no new ones to replace them).

So, what did Big Pharma do to stay afloat?

What did Big Pharma do about it?

It employed a number of tactics to maintain revenues from the declining pipeline of blockbusters. Health Economics and Outcomes Research (HEOR) became a new tool in the box. The reluctance of payers to stump up the eye watering prices gave rise to market access groups, tasked with justifying why prices were high, based on HEOR arguments.

Also in favour became 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 was that prices had to be astronomic because of the very small volumes.

Big Pharma, it seemed, was playing the same tune on a different instrument. Only this time, the instrument was broken; all Pharma had left to play on were massive discovery research teams and sales & marketing muscle. The crucial body of the product development instrument had completely lost its puff.

With such little capability in drug development, important debilitating diseases, such as Alzheimer’s, sepsis and bacterial infections (AMR) fell out of favour—no longer the cherries that Pharma wanted to pick, and the world suffered because of it.

Service providers and generics had soared

Meanwhile, on the other side of the fence, the fledgling service providers created by the initial asset and people sell-off, had flown the nest, growing into fully formed adults, soaring like eagles.

Clinical research organisations (CROs) had been, and still are consolidating, becoming big, powerful providers of clinical and nonclinical services.

Massive consolidation had also taken place in the contract development and manufacturing organisation (CDMO) world—they too became major corporations.

The specialist third-party logistics companies also were part of the consolidation, as the two main players were acquired by AmerisourceBergen (World Courier) and UPS Healthcare (Marken).

The finished product distributors of Pharma products have become mega corporations, on the back of, yes, you guessed it, consolidation. Just three now share nearly 90% of the market, in US it’s—Mckesson, Cardinal Health and AmerisouceBergen (above).

The generics industry grew 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 choose what they supply.

…and then there was the last, desperate step—outright fraud

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...and the last desperate step to keep blockbuster profits flowing has been to commit wholesale fraud, by ignoring the existing licensing and good practice regulations in place to keep patients safe—example below (see more in INSIDE PHARMA archive):

BROOK JACKSON SPILLS THE BEANS ON LACK OF PFIZER OVERSIGHT

Now you know!

Hopefully, the above has been helpful in understanding how it came to where we are today. The route to salvation is to reverse this horrible race to the bottom. A return to well balanced horizontal integration has to be the way forward—it will benefit all involved!

Best,

Hedley :O)