What is your opinion of the global Pharmaceutical Industry shrinking?

What is your opinion on the idea of the number of Pharmaceutical companies being reduced to a few enormous companies by way of acquisitions and mergers? Is this really happening? Is it possible for new smaller companies to start up or does regulation make it near impossible?

1 Answer

  • Az R
    Lv 6
    1 decade ago
    Favorite Answer

    Depends on how you look at it. The organization of the industry has shifted dramatically towards a new business model due to the proliferation of powerful biotech related methods. Previously we had several dozen moderately sized companies which employed their own R&D and marketing to develop new pharmaceuticals. This has gradually contracted into about perhaps a little less than a dozen major corporations which do their own inhouse R&D, production etc. This does not really convey the full state of the industry however.

    As patents expire, the number of medications available for generic production increases substantially, and there are a number of companies out there that specialize only in the production of off-patent, or generic drugs. Israeli TEVA is perhaps the most significant example of such, which makes profits on a par with the larger companies by exclusively manufacturing generic medications.

    On the biotech side of things, we're seeing an increase in the creation of smaller companies, generally started by a handful of individuals. These companies apply biotech and rational drug design approaches to come up with novel compounds, recombinant human proteins. These companies will typically develop a compound using a method like high throughput screening, and using investment capital fund the development of a compound into a complete set of preclinical data - basically everything you need to get approval to do the most costly part of the development: human trials. They'll then sell the compound to one of the larger companies, which has the available funding to do those human trials.

    These companies have become quite prolific - Genentech is one of them that has branched out into doing more of its own sales, Biovex which is working on the current most promising HSV vaccine, Palatin which is more famous for their possible sex drug PT-141. Allergan, the company that created Botox is something of an oddity as well, having been purchased, then spun off again and is now doing independent development.

    In terms of the general news, we tend to only see the big manufacturers mentioned - Sanofi-Aventis, Pfizer, GSK, Lilly and the few other major ones. These do not represent the entire pharmaceutical industry, far from it. They're simply the largest ones, and the ones that have the most ethical conduct issues.

    Part of the impetus has been the increase in cost in manufacturing some of these compounds. The costs involved in producing a virus-like-protein for a vaccine are pretty atrocious, as are other protein products - about a decade ago a month's worth of interferon for HepB treatment could cost as much as $10,000 (recalling from memory, the price was ridiculous). These prices come down when they're done in bulk for some time.

    The other impetus has been increased cost of doing human clinical trials. These can cost in excess of a billion dollars to run, require hundreds or more individuals in staffing and have to go on for around a year in most cases. Putting these trials together, and constructing them so they give valid results in relation to the intended use of a drug has become costlier, more time consuming and just flat out hard as these trials get a great deal more scrutiny from the general scientific community - for the most part academics who do research in the employ of universities.

    The resources to address these things only become practical when done on a large scale, pooling resources. This has unfortunately left this sort of thing only within the scale of a national government, or an extremely large corporation. The government is generally uninterested in production, but most fund research in one way or another. There are notable cases where the costs have outstripped what governments are willing to provide. A good example of this is the development of Taxol in the late 80s/early 90s. While Taxol is to put it bluntly a revolutionary cancer drug that has changed outcomes for dozens of cancers, the researchers at the NIH did not have the resources to even manufacture enough of the drug to test with it.

    The result was that the US government basically traded the drug to BMS, a pharma company in return for BMS doing the trials on it with no guarantee of approval. While there's some criticism of how this has been done, it did result in a cheaper, better way to produce the drug that pushed survival rates from cancers that were universally lethal to upwards of 30%, and made it very widely available.

    Er. In summary, the public face of the industry is shrinking and condensing into a small handful of companies. These are what we see for the most part in the papers and TV news. However, the industry itself is growing quite diverse, in both the number of people employed and the number of companies. Most of these are relatively small, and do not garner a lot of attention unless they produce a truly spectacular product.

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