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Big problem for big pharma case study
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For the pharma industry as a whole, there are several issues that impact the availability and affordability of safe and effective medications. While research and development technology moves quickly, moving a product from concept to market is very lengthy and expensive for pharmaceutical companies, and once a drug makes it to the market there’s only a window of a few years in which to earn a return on investment before that drug patent expires and it can be manufactured and sold as a generic. Once brand exclusivity is lost, generic alternatives typically arrive on the market at about 70% of the cost of the brand name drug during the first six months, and by the end of twelve months drops to 15-20% of the cost of the brand name drug (Zimmerman, 2013). U.S. pharmaceutical companies are also at a disadvantage, in particular, since as leaders in the industry they bear the weight of R&D costs. The U.S. population also pays more for drugs, too, since there are no pricing controls for medications in this country like there are in many others (Williams & Torrens, 2008). Unless a new drug is completely unique or otherwise differentiated from like drugs in utility/purpose, health plans and/or the Pharmacy Benefit Managers that develop formularies will generally opt to exclude the more expensive new drug in favor of cheaper drugs or generics used for the same purpose. Young (2013) notes that pharmaceutical companies’ “revenue challenges will be tied directly to the difficulties in getting drugs approved, reimbursement challenges, patent expirations, weak product pipelines, and failing business models” (p. 20). Vogenberg (2012) notes that, in order for pharmaceutical companies to be successful in gaining PBM formulary status, they mus... ... middle of paper ... ...can Journal of Public Health, 103(5), e10-e14. doi:10.2105/AJPH.2013.301239 Teevan Burke, B., Miller, B. F., Proser, M., Petterson, S. M., Bazemore, A. W., Goplerud, E., & Phillips, R. L. (2013). A needs-based method for estimating the behavioral health staff needs of community health centers. BMC Health Services Research, 13(1), 1-12. doi:10.1186/1472-6963-13-245 Vogenberg, R. (2012). P&T community ponders economic goals of healthcare reform and pharmacy. Formulary, 47(12), 433-434. Williams, S. & Torrens, P., (2008) Introduction to Health Services, 7th edition, Thomson-Delmar Learning, 2008. Young, P. (2013). 2013 Pharma and biotech financial report: industry's spinning compass -- north, south, everywhere. Pharmaceutical Executive, 33(12), 16-20. Zimmerman, A. (2013). Finding more value in pharmacy benefits: five trends that matter. Benefits Magazine, 50(6), 28-33.
According to Harry A. Sultz and Kristina M. Young, the authors of our textbook Health Care USA, medical care in the United States is a $2.5 Trillion industry (xvii). This industry is so large that “the U.S. health care system is the world’s eighth
In the recent years the drug industry underwent a significant transformation. Many of the big companies generate high revenues, which allow them to expand. Some of them expand on their own others through mergers and the buying of smaller companies.
Williams, S. & Torrens, P., (2008) Introduction to Health Services, 7th edition, Thomson-Delmar Learning, 2008.
Miller, H. D. (2009). From volume to value: better ways to pay for health care. Health Affairs
Ghosh, C. (2013). Affordable Care Act: Strategies to Tame the Future. Physician Executive, 39(6), 68-70.
Yu, Winnie and Joel Hay. 1999. “Drug Patents and Prices: Can we Achieve Better Outcomes?” Measuring the Prices of Medical Treatments. Pages 27-28.
"Health And Human Services, United States Department Of." Columbia Electronic Encyclopedia, 6Th Edition (2013): 1. Literary Reference Center. Web. 18 Apr. 2014.
In the business of drug production over the years, there have been astronomical gains in the technology of pharmaceutical drugs. More and more drugs are being made for diseases and viruses each day, and there are many more drugs still undergoing research and testing. These "miracle" drugs are expensive, however, and many Americans cannot afford these prices.
... middle of paper ... ... Six years later, in 2001, the majority of their income came from services to pharmaceutical companies (Martinez). This shows a definitive shift in the conduct of PBM’s.
There are three issues when it comes to the health care cost rising. The first is the rising cost in prescription drugs. The second area of rising cost is the increased technologies when it comes to the medical industry. The third problem is the aging population. Prescription drugs are the area of the fastest growing health care expense, and it is projected to grow at 20 to 30 percent each year over the next several years. There are many newer, more expensive drugs on the market, and the use of these prescriptions is exploding. In addition, with so much television advertising, many consumers ask their doctors for expensive, brand name drugs when there may actually be a generic drug that works just as well.
When a drug does make it to market and is successful, companies need to make up for the money spent in development as well as the cost of drugs which did not make it to market. After all investments are taken care of, there is still the need for profit. Some are concerned that if the United States government implements control over prescription drug costs, then private firms will be less motivated to invest in pharmaceutical development, fearing they will not make their investment back. This would supply pharmaceutical companies with less finances for the research and development process. According to the information collected by Abbott and Vernon, a drop in the price of pharmaceuticals would result in significant loss in investment in research and development (Abbott and Vernon).
developed through the years. It starts out by explaining how our health care delivery system is
10. Collis, David, and Troy Smith. "Strategy in the Twenty-First Century Pharmaceutical Industry:Merck&Co. and Pfizer Inc." Harvard Business School, 2007: 8-12.
This week’s case study concerning Genzyme’s strategic direction was very interesting in that they essentially pursued a strategy that seemingly was purposely avoided by other players in the pharmaceutical industry (Schilling, N.D.). Their strategy centered on developing prescriptions for rare diseases. Typically “developing a drug takes 10 to 14 years and costs an average of $800 million to perform the research, run the clinical trials, get FDA approval, and bring a drug to market,” and in turn it is normally intuitive, from an economic standpoint, to attempt to develop drugs that will have a substantial market so to be able to assure enough revenue is generated to produce a significant profit. In turn, drugs marketed towards treating
The cost of US health care has been steadily increasing for many years causing many Americans to face difficult choices between health care and other priorities in their lives. Health economists are bringing to light the tradeoffs which must be considered in every healthcare decision (Getzen, 2013, p. 427). Therefore, efforts must be made to incite change which constrains the cost of health care without creating adverse health consequences. As the medical field becomes more business oriented, there will be more of a shift in focus toward the costs and benefits, which will make medicine more like the rest of the economy (Getzen, 2013, p. 439).