Why the pharmaceutical industry continues to step on mines
May/05/2007 08:29 Filed in: Pharma
Business
If there is anyone naive enough to believe that, when drugs are being developed, drugs are marketed because they provide better health solutions then there is a bridge I want to sell you really cheap. Drug development is a business decision, that means that the key driving decision as to whether the drug will continue in development is the potential for sales dollars not "how many patients will it help". I know of at least two drugs in development at major pharmaceutical companies and what is being discussed internally is the potential for "off label sales". The sales people know that regardless of what the label says that a number of physicians will use these drugs off label and could add hundred of millions of sales dollars to the bottom line.
On the other side of the coin I also know of a drug that could be used to prolong the lives of patients with a certain type of cancer but that these drugs are getting reduced funding because the sales potential is very low. So what does all this mean? Well it brings us back to the age old paradox: is profit the underlying driver in pharmaceutical business decisions? But first let's take a step back here...Chrysler is for sale because of sagging sales and because the models they have introduced have little consumer appeal. When an automobile company decided to take a concept car to production they have to determine their break even sales point and project how many units need to be sold in order to maximize investment. This is traditional, standard MBA analysis. The difference is that these are cars, or SUV's that take people places they are not products that could save or enhance lives. Ahhhh, there's the rub...profit or patients health...shareholders or customers?
I'll be the first to admit that it's not easy being a CEO today. You have to please board members who look at a companies financial sheet for quantitative measurements of performance. Wall Street analysts can swing hundreds of millions of investor dollars to or from your company depending on what they want to hear and the regulatory environment is getting a hell of a lot tougher. Still, if I was earning millions of dollars a year and was guaranteed a golden parachute I would embrace this challenge. The problem seems to be, as I have written many times before on this forum, is that there is a real lack of business leaders in American industry today. Bill Gates is semi-retired and Microsoft has become a huge, slow bloated company, Steve Jobs is still a driving force with Apple but then again his compensation is valued well over $600 million and the auto industry compensates a new CEO from Boeing $24 million to report record losses and lay off thousands of people.
So what does all this mean for the pharmaceutical industry? Well first the company slogans don't mean a thing. "Answers that matter" should be "answers that matter for a price", "where patients come first" should be "where patients come first behind Wall Street, "working for a healthier world" should be "working for a healthier stock price". Pharmaceutical companies are public companies and as such have a responsibility to earn a return for investors.
George Merck in 1952 said "Medicine is for people, not for profits.” I think that too many people in the industry have forgotten that and as long as they do the pharmaceutical industry will continue to go blindly into the mine fields that await them.
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