Scribd Logo
Upload

Welcome to Scribd!

  • Tutorial Case Study - Global Phamaceutical

    Uploaded by

    abhilashasingh8791
    46 views12 pages

    Original Title

    Tutorial Case Study - Global Phamaceutical (2)

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    Download as pdf
    46 views12 pages

    Tutorial Case Study - Global Phamaceutical

    Uploaded by

    abhilashasingh8791

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    Download as pdf
    of 12
    The global pharmaceutical industry: back to the future? Sarah Holland A CEO's dilemma In April 2015, Olivier Brandicourt started work as CEO of French pharmaceutical and vaccine giant Sanofi, after a profit warning and the abrupt departure of his prede- cessor Chris Viehbacher had sent the share price tumbling the previous October. Viehbacher had revital ised Sanofi's R&D, notably through the acquisition of Genzyme in 2011, but fallen foul of the largely French board by reportedly acting without consultation, and by ‘moving fis domicile back to the USA, A French native with @ strong track record at Bayer and Pfizer, Brandicourt’s appointment was viewed positively. Sanofi was. top five global pharmaceutical company wit {$40bn in annual revenues, but the company faced the imminent loss of patent protection on Lantus, one of the world’s biggest selling drugs, which contributed over $8bn! to sales. Sanofi had also disclosed that sales in the core diabetes franchise would be held flat by strong pricing pressure in the USA. An analyst commented th ‘the organisation is just moving too slowly and is not innovative enough’ It was clear that Brandicourt needed to act swiftly, but how? Industry evolution 4s described in Box 1, the pharmaceutical industry is characterised by a highly risky and lengthy research and development (R&D) process, intense competition for intellectual property, stringent government regulation and, Powerful purchaser pressures. How has this unusual picture come about? The origins of the modern pharmaceutical industry date from the late nineteenth century, when dyestutts Were found to have antiseptic properties. Penicilin was a major discovery, and R&D became firmly established Within the sector. The market developed some unusual characteristics. Decision-making was in the hands of medical practitioners whereas patients (the final consumers) and payers (governments or insurance compa: nies) had litle knowledge or influence. Consequently, ‘medical practitioners were insensitive to price but suscep: tible tothe efforts of sales representatives. ‘Two important developments occurred in the 1970s, First, the thalidomide tragedy (an anti-emetic for morning sickness that caused birth defects) led to much tighter regulatory controls on clinical trials Second, legislation was enacted to set a fixed periad on patent protection ~ typically 20 years. On patent expiry, rivals could launch generic medicines with exactly the same active ingredients as the original brand, but at a lower price. The dramatic impact of generic competitors is illustrated by Merck's top-selling asthma and allergy drug Singulair, which lost 90 per cent of US sales just four weeks after patent expiry in 2012. Generics had a major impact on the industry, driving innovation and a race to market, since the time during which R&D costs could be recouped was drast: cally curtailed. ‘The pharmaceutical industry is unusual since in many counties itis subject to a ‘monapsony’ ~ there is effec: tively only one powerful purchaser, the government. From the 1980s on, governments focused on pharmaceuticals a8 a politically easy target in efforts to control rising healthcare expenditure. Many introduced price or reim bursement controls. The industry lacked the public or political support to resist these changes. Business environment Ageing populations create pressure on healthcare systems, since ‘over-65s' consume four times as much healthcare per head as younger people. Combined with an epidemic of chronic disease linked to obesity, this created an unsustainable situation, further exacerbated by the global financial crisis. In response to these pressures, government and private payers (such as insurance companies) use a This case study was prepared by Sarah Holland, It is intended as a basis for class discussion, not as an illustration of good or bad Practice. Not to be reproduced or quoted without permission. Tecms printed in es are explained in the Appendix GLOBAL PHARMACEUTICAL INDUSTRY: BACK TO THE Fi BOX 1 The drug development process The pharmaceutical industry has long new produt lead mes, with the period from discovery to marketing authorisation typically taking almost 12 years (Figure 1 ‘New product development can be divided into distinc research and development phases. The research phase produces a new chemical entity (NCE) with the desired Characteristics to be an effective drug, Development mpasses. all of the # toxicology. and clinical trial work nec stringent regula tory requirements for marketing approval During all o ases ‘attrition’ occurs, as promising. age ticular hurdles, so most R&D projects never result in a marketed drug, Late stage failures are particularly costly and luncommon ~ in 2014, Roche announced the failure of bitopertin for schizophrenia and onartuzumab for cancer, in both cases after heavy investment in broad Phase I1l programmes. OF those drugs that that do not reach fruition are considered, it becomes Clear that pharmaceutical R&D is a very high-stakes game indeed. Given the enormous risks and considerable invest ‘ment involved, itis not surprising that pharmaceutics) Compenies compete fiercely to establish and retain intellectual property rights. Only by securing a patent that can be defended against imitators can the value of all this R&D be recouped, The industry is subjected to rigorous regulatory scrutiny. Government agencies such as the Food and Drug. Administration (FOA) in the USA thoroughly examine all ofthe data to support the purity, stability, safety, efficacy and tolerability of a new agent. The time taken Is govemed by legislation and typically averages 12 months. Obtaining marketing approval is no longer the end of the road in many countries, as further hurdles must be overcome in demonstrating Teach the market, 80 per cent fail to recoup their the value ofthe new drug to jst pice ander cone R&D investment. When the costs ofall the projects bursement to cost conscious payee iia as Discovery, pretinica testing Prose! Phase Phase Fon Phase Years 65 | 15. 2 35 1s | Test) | Laboratory ana St heared oma a00| I eo eee Ba sional aa = S| Review oo Access safety, | & | Determine aluate corre & | process: | | ™erketir CBeegen | 2) Sy | cite | onsavenes, | | porval| | ,tetine Mie | sctityara | 8 | “ond | ewig | montorodvene | S| % pai formula desage | sideetteis | Tecton trom | = arp | ong use } / Success | 9,000 compounds 5 1 } ‘ate evaluate enter tials eves | Fitu ing new pharmaceuticals: it takes 10-15 years on average for an experimental érug to from the lab to patients ames ‘kes vest ical stent alue story Ighly ity, ally iting THE GLOBAL PHARMACEUTICAL INDUSTRY; BACK TO THE FUTURE? Table 1 Methods used to control pharmaceutical spending Controls on supplies Mixed effect Negotisted prices with manstactur vera ac Reference pricing Postve and negative lists Constants on wholesalers and pharmacists Imposea price cuts ere the patent Some ofthe rug cost variety of methods to control pharmaceutical spending (see Table 1). Some put the emphasis on the manufac- turer and distributor, others on the prescriber and patien Controls are designed to reward genuine advances ~ price andior reimbursement levels are based on perceived inno tion and superior effectiveness, In countries with supply-side controls, negotiating price or reimbursement can take up to a year. In those with demand-side controls, market penetration is delayed while negotiating with bodies such as the National Institute for Clinical Excellence (NICE) in the UK. NICE typifies a general trend towards evidence-based medi cine, where payers expect objective evidence of effec- tiveness to justify funding new therapies. The impact of NICE decisions reverberates beyond the UK, as coun- tries collaborate internationally on value assessments. Where new drugs are approved for funding, this is increasingly in the context of formal patient selection and teatment guidelines, so their use is carefully controlled and individual prescribers have limited decision-making power. Switching to generics is one way to cut drug exnendi ture. Countries are experimenting with ‘e-prescribing’ wnere physicians are presented with recommended options. Payers are increasingly effective in establishing generic drugs as first-line treatment for chronic diseases such as osteoporosis, asthma and depression, with patented drugs only used if generics fail to work, In volume terms, generic drugs are growing and patented drugs are in decline ~ falling from 50 per cent of US Prescriptions in 2005 to barely over 12 per cent by 2014 ~ s0 sales growth for patented drugs relies on securing ever higher prices for innovation. The industry has adopted a number of strategic responses to these challenges. Pharmacot eval uations are conducted to demonstrate the added value offered by a new drug due to improved efficacy, safety, tolerability or ease of use. For example, a study of the Contos to intluence demand 1 negotiated Patent co-payments Treatment guideline indicative fined bucests Incentives to presctbe or dispense seneries or paral! imports ransfer trom prescrpton-oniy to overthe-

    You might also like