Transcript The Global Pharmaceutical Industry

The Global Pharmaceutical
Industry
Timothy F Christian, MD, MPA
Characteristics of Big Pharma
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One of OECD largest industries
In US: sales = $380 Billion
R&D costs=$40 Billion
Single drug to market=$1-4 Billion
– The fixed cost in R&D and IP is high
– The marginal cost is very low-opportunity to
recapture investment
• Marketing costs generally outstrip R&D by 2:1
or 24.4% of budget vs 13.4%
Pharma is BIG
Where are drugs consumed?
asia/India
World Pops
US
Africa
Europe
Japan
Latin
America
FDA Review Process
Patent Clock Starts
Phrma and Congress
• >$800 million spent on lobbying in US
• >3000 Pharma lobbyist on the Hill
• 75 former members of congress lobby for the
drug industry
• Attempted influence in >1600 bills, 1998-2004
• >$90 million in political contributions, 69% of
these are to Republican candidates, though
Romney and Obama had equal amounts 2012
Medicare Part D
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Enacted in 2006 by George Bush
Subsidizes Medicare recipients for drug costs
Costs about $50 Billion/year (maybe more)
By law, it prohibits Medicare from negotiating
with Pharma on the costs of the drugs covered
• The congressman who wrote the bill left
congress upon passage and became president
of Phrma, many others joined the industry
Pricing a new drug
• Prescription drugs = 17% US healthcare dollars
• Reference pricing=the benchmark price a
company charges for initial roll-out
• Since US Gov does not negotiate price, most
Pharma pricing is established in the US
• Other governments negotiate a % of US price
• Differential pricing maxes profit as it allows
countries to choose willingness to pay value
Reference Pricing of Drugs
The US subsidizes world innovation
US R&D
Subsidy
Drug Paths to Market
Pharma R&D
Venture Capital
Buyout
Pull Programs
R&D discovery
Academic discovery
Gov/Foundation identifies
need
Animal studies
SBIR from NIH
Award announcement
Clinical phases 1-3
Small co. spin-off
(Bayh-Dole Act)
Private/public
partnerships
FDA approval
Attract venture capital
R&D
Manufacture pills
Scale up
Discovery
Market
IPO (amgen) or Pharma
buy-out
Scale to world need
The “me too” problem
• Drug companies tend to stick with what works
• Often develop me-too drugs for patent that are
similar to an innovative drug
• Possible because FDA only requires a drug be
better than placebo, not existing drugs
• Eg: multiple drugs that treat high-cholesterol
• This creates an Innovation problem as companies
divert resources away from harder to treat
problems that have a less certain pay-off
Orphan Drug Act
For diseases affecting<200,000 pts
• Passed in 1983:
– Exclusive marketing to producer for 7 years
– Tax credit=50% of drug development cost
– US Research grants to company
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$50 Billion industry
Has stimulated over 1000 new drugs
No price controls so can be very profitable
Eg: Gattex for SBS: $300,000/yr for individual
Generic Drugs
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Must bring suit against patent Co.
Can use clinical data from original FDA approval
Only has to submit new bioequivalency data
Hatch-Waxman Act
– Suit=trigger of 30 mos protection before any action
– Extends marketing exclusivity additional 3-5 years for
original developer
• During these hold periods, Pharma often buys off
the generic manufacturer not to copy the drug
Drug pricing in LDCs
• GATT agreement protected patents in LDCs
• HIV crisis threatened Pharma with compulsory
licensing by country for retrovirals
• WTO Doha round LDCs won patent
infringement for public health emergencies
• Pharma eventually responded with differential
pricing for LDCs
• Still not clear if LDC generics can be exported
Competition reduces prices:
Evidence from HIV/AIDS
Local production of drugs in LDCs
Pro
Con
• Security thru
independence
• Draw to bring in
expertise
• Creates Jobs
• Potential for export
• No comparative
advantage
• Duplicative
• Requires infra-structure
• Regulation for
corruption/counterfeits