Monday, March 09, 2009

As Innovation Shifts to Small Companies, How Will Big Pharma Defend High Drug Costs?

I read today Sanofi-Aventis CEO Chris Viehbacher said he may cut his company’s budget for early-stage research in half (see "Sanofi-Aventis CEO Looks to Cut Research Spending"). Instead, he plans to use the money to partner on drugs being developed by small companies, which "often yields more promising candidates than internal research programs at a big pharma shops like Sanofi, where bureaucratic fiefdoms may keep unworthy ideas alive."

This follows the lead of other Big Pharma companies that have ditched research efforts in whole disease categories and cut back on R&D staff. See "Is Pfizer Outsourcing Innovation?", "Why Grow Your Own Drugs When You Can Buy Them Off the Street?", and "Drug Firm Leaves R&D to Others" for more.

Pharmaceutical Research and Manufacturers of America (PhRMA) says its member companies, which are primarily Big Pharma companies (as opposed to small pharma/biotech companies), are "devoted to inventing medicines that allow patients to live longer, healthier, and more productive lives. PhRMA companies are leading the way in the search for new cures."

It seems, however, that Big Pharma's new strategy takes the "re" out of "research" and focuses instead on "searching" small companies for new cures. This is probably much less expensive than doing innovative research.

Impact on Drug Industry Reputation
PhRMA has often opposed limits on drug prices in the US by playing the "innovation card"; ie, lower drug prices will stifle innovation by Big Pharma and lead to fewer innovative drugs reaching the market. That card may not be as powerful as it once was to defend high drug costs and promote the benefits of expensive drugs.

The drug industry already has a bad reputation among the general public. So far, the vast majority (82%) of respondents to my ongoing "How to Earn Back the Public's Trust Survey" agree that the industry's bad reputation is primarily due to the "high costs" of prescription drugs.

As the public sees the new strategy described above unfold, they will be less likely to buy the industry's "innovation" argument. Therefore, it's time for the industry to drop that argument and take a new approach to dealing with "high drug cost" criticisms.

One approach may be to join the "
comparative clinical effectiveness" bandwagon (see "Comparative Clinical Effectiveness Research Provision An Important Step Forward for Patient Care").

What's Your Opinion on How to Improve the Drug Industry's Reputation?
Please take a few minutes to tell me your opinion of the drug industry's public image and how it can be improved. This survey asks what you believe are the reasons for the drug industry's bad reputation and what it should do -- including doing more to promote comparative studies to prove the efficacy of prescription drugs -- to improve its reputation.


Results of this survey may be summarized in Pharma Marketing News. After you complete the survey, you will be able to see the summary yourself. No comments or other identifying information is included in the summary.

Your comments are confidential (anonymous) unless you specifically provide your contact information at the end of the survey and allow us to attribute comments to you personally.


  1. Anonymous12:26 PM

    The cost to develop remains the same, close to a billion for a drug that makes it to market. Just because they are buying smaller companies doesn't mean the cost will magically disappear. It just means that they will be buying innovation elsewhere.

  2. And you got that data regarding costs to develop in-house vs. buy from outside from where?

  3. Hi John, I'm Jeff Trewhitt, a communications officer with PhRMA, and I'm just taking a quick second to say thanks for conducting the survey. We will read the results with interest. This is one time when it is better for me to sit back and read and learn rather than respond, though on other occasions, I may weigh in if you don't mind. If you should ever need to contact me, my e-mail address is Best regards. . . .

  4. Jeff,

    Thanks for your comment. I will be summarizing the results of the survey in the March issue of Pharma Marketing News.

    P.S. I hope that you do not mind that I am posting PhRMA's press release RSS feeds to the "Industry News" Forum at



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