Friday, September 28, 2007

The Pharmaceutical Industry Under Attack

The Pharmaceutical Industry is one of the last industries where high value innovation occurs (the other being the IT industry). While Pharma is more regulated than IT, it has relative freedom within the U.S. to capture value for its product and in turn to fund development. This is evidenced by the strong Venture Capital market for young pharma companies, where it is still a viable financial bet to invest in companies whose products won't come to market for a decade or more. The only way this sort of investment is viable is if the possible payoff is huge and in Pharma, a successful blockbuster makes billions for its parent.

But witness a string of healthcare legislation, proposals from political candidates, and ongoing debates, all of which, if they make it to fruition will serve to continue to decimate pharma's long term prospects. Here's a round-up:

Drug Re-importation: under the guise of the government acting as an "efficient purchaser" of drug proposed legislation is nothing more than riding piggy back on European socialism. I had a whole post on this, and ARI's great op-ed beat me to it. Europe doesn't get better drug prices because they have access to volume discounts or to some magic to make pharma producers more efficient. They have them because they dictate the prices in their countries. Re-importing drugs through those countries is nothing more than adopting the same dictates, only in a seemingly "squeaky clean" Mafioso money-laundering style.

Post Vioxx increase in FDA's regulatory powers. From a recent Forbes.com article, "The Biggest FDA reform in a Decade", new legislation, quietly moving through congress, and attached to appropriations legislation would increase FDA's powers to meddle in pharmacuetical companies development programs. This includes dictating drug label claims to pharma companies, directing pharma companies to do post launch clinical trials, and forcing drug companies to make public all clinical trial results. All of these measures will serve to bottleneck and already too lengthy clinical trial process, increasing development costs even further.

Hillary Care 2.0. Another veiled attempt at socialized medicine. How many times must we see this kind of crap. ARI's again takes these to task, in both a letter to the editor (which I'll post when available) and a great op-ed by Noodlfood's Paul Hsieh.

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