Pharmaceutical companies

Pharmaceutical companies have played a central role in improving the quality of life. With deadly diseases such as AIDS and lifestyle diseases such as obesity spreading rapidly, the importance of pharmaceutical companies has increased further. Pharmaceutical companies have already paid their dues to the society by increasing life expectancy through several breakthrough drugs, but are now called upon to do more. Not only does the society expect the pharmaceutical companies to come up with new drugs for deadly diseases, but also expects them to sell drugs at low prices.

Most pharmaceutical companies would not mind selling new drugs at low prices if they were confident of coming up with breakthroughs at regular intervals. Unfortunately, pharmaceutical companies for all their skills do not have absolute control over the discovery and development process. In recent years, the new product pipelines of major pharmaceutical companies have become thinner and worse, the drug development times are getting longer. With the cost of developing new drugs shooting through the roof, pharmaceutical companies have little option, but to maximise returns on blockbuster drugs within the patent period. For example, a drug faces severe competition from generics after losing patent protection. Therefore, pharmaceutical companies have limited time to recover their investment and generate cash for developing new drugs.

Pharmaceutical companies and the government

In the final analysis, pharmaceutical companies have to make money for their shareholders. The governments and the consumers do not see it that way. Both believe that pharmaceutical companies should sacrifice profits for the sake of greater good. This argument makes sense in the case of life threatening diseases such as cancer, but should not be carried to an extent where pharmaceutical companies do not have any incentive to pursue innovation. The pharmaceutical business has become incredibly complex and risky business with uncertain rewards. In a few cases, pharmaceutical companies have successfully cleared all the regulatory hurdles only to stumble in the marketplace owing to the surfacing of unforeseen side effects.

The governments have their own reasons for urging pharmaceutical companies to lower drug prices. Most developed countries have a comprehensive social welfare system a place; their spending on health care for instance has ballooned to high levels in recent times. This does not pinch as long as economy is doing well, but when economic growth stalls then government’s attention is drawn to the bloated health care budget. The governments in some developed countries have begun to substitute costlier patented drugs with generic versions.

Ideally, competition should drive down prices, but patents system protects companies from competition and rightly so. Now thanks to WTO agreement, developing countries have also begun to grant protection to intellectual property rights. Pharmaceutical companies have also grown more selective in their pursuit of opportunities. The number of pharmaceutical companies producing vaccines, for instance, has come down over the years because of economic reasons. Generally, the discovery and development costs for vaccines are high and the market is small. Pharmaceutical companies no doubt have the right to earn profits, but given the importance of drugs to the society, an exception needs to be made for drugs that treat deadly diseases. Without such a mechanism, deadly diseases such as AIDS will create havoc in developing countries.

The pressure on pharmaceutical companies will increase further with major drugs going off patent in the next few years. But several developments could help pharmaceutical companies cope with rising pressures and contribute to the eradication of deadly diseases.

Biotechnology holds out a lot of hope. Biotech drugs have already appeared on the market and more are in the offing. Now biotech drugs comprise a healthy share of the research pipeline. An increase in new drugs will certainly take some pressure off the pharmaceutical companies. With shareholders content, pharmaceutical companies may be more willing to lower prices of drugs, particularly ones that treat deadly diseases.