'Pharmaceuticals' Archive
It seems that few R&D programs are safe from cost cutting these days, and it troubles me that the present economic conditions may impact the future of medicine. Financing troubles have pharmaceutical and biotechnology companies cutting back on research programs left and right, and many have ceased operations altogether.
Most of the smaller development firms rely on investment firms and partnerships with larger drug companies to fund their research programs, but when no one is willing to step up and fund a project and the start-up can’t afford to keep going it alone, these companies are left with few options.
If the failed drug development firm had products in trials, a purchaser might snap up the downtrodden assets and continue with research programs found to be potentially profitable. But what happens to the technologies that seemed promising enough for some scientists to form a start-up around, but that no one finds worthwhile enough to catch when the cookies crumble?
Many projects likely return to the universities or corporations that originally discovered them, but still probably end up stockpiled in some lab library with millions of other drug formulas (potential blockbusters and duds alike) and may never again see the light of day. Granted, many probably aren’t worth the effort of seeing them through to fruition, but there are also likely some life-saving cures left lying to waste.
While I have often come down on big pharma companies for their not-so-perfect practices, they are largely responsible (along with educational and government agencies) for funding development of the life-saving or life-improving drugs on the market today. So when I see that even the top drug companies (including Merck, Pfizer, and GlaxoSmithKline) are pruning their research programs more rapidly than usual, it’s a little worrisome. It seems to me that if these companies are as desperate for new blockbusters as they say they are, they should be increasing R&D spending, not cutting it.
While there’s never enough money to go around for all of the seedling research projects (which cost LOTS of money to fund) to be groomed for growth, I truly hope that the current economic conditions don’t result in the loss of worthwhile therapies due to excessive caution from their potential saviors.
The US pharmacy benefits management playing field narrowed Monday when the #3 provider, Express Scripts, agreed to acquire the #4 firm, NextRx, for nearly $4.7 billion. Pharmacy benefits management (PBM) companies administer prescription drug programs for employers and other groups.
While the purchase won’t boost Express Scripts into the #1 spot, it will raise its customer volume to the level of its biggest rivals, giving it more bargaining clout and increased opportunities for growth. NextRx will raise Express Scripts’ annual prescription processing load into the 750- to 800-million bracket, where top players Medco and Caremark held court in 2008.
As NextRx is a subsidiary of health insurance firm WellPoint, the acquisition will also have an impact on the debate over whether independent PBMs can provide better prescription services than insurer-owned PBMs. Some insurance companies (such as PBM-operators Aetna, CIGNA, and UnitedHealth) argue that they can provide better benefits comprehensively, while other market players believe that independent PBMs can get better drug prices due to higher prescription volumes.
Either way, top US health insurer WellPoint is probably wise to simplify its operations and stockpile some cash in the face of impending government reform measures. And if Express Scripts plays its cards right, the company could make a move for top-dog PBM status.
Pharmaceutical companies, many of which were avidly fretting over balance sheets long before “recession” was even whispered, have been taking massive steps toward consolidation in 2009.
January brought Pfizer’s $68 billion agreement to acquire Wyeth — the industry’s largest deal since the creation of GlaxoSmithKline in 2000 — which will keep Pfizer perched on top of the drugmaking mountain for a while at least.
Last week two deals were announced: Roche finally succeeded in its struggle to take complete control of coveted affiliate Genentech by reaching a $56 billion agreement, and Merck & Co. struck a deal to acquire rival Schering-Plough for $41 billion, an agreement that will push Merck into the #2 global pharmaceutical ranking behind Pfizer.
Speculation is running rampant about which companies will close ranks next: GlaxoSmithKline, currently the second largest drugmaker by market share, has stated that it’s not interested in another big merger, but that’s not keeping rumors away from its door. (Pfizer claimed to be sticking to a small-deal strategy not so long ago itself.)
Other top industry players that could make major merger headlines include Novartis, Johnson & Johnson, Abbott Labs, Eli Lilly, Bristol-Myers Squibb, Sanofi-Aventis, and AstraZeneca. These large pharma companies, many of which are already under pressure from looming generic threats on patent expirations (the “Lipitor problem”), will now face increased competition from their larger, consolidating rivals as well.
Despite the sometimes-unhappy endings that can result from pharmaceutical megamergers, bond investors are practically clamoring to get behind the drugmakers, who despite their woes have a commodity that withstands many consumer-spending threats. The combination of these factors, along with bargain stock prices, may continue to be too much for top pharma companies to resist.
A long-awaited Supreme Court ruling that denies Wyeth’s appeal in a product liability case probably has the entire pharmaceuticals industry sighing, and NOT with relief.
The decision dashes the hopes of drugmakers that were hoping to pin responsibility for inaccurate or misleading drug labels entirely on the FDA. The court ruling implies that FDA approval is not a roadblock that can keep patients from filing state lawsuits against pharmaceutical manufacturers over such labels.
The drug industry already experiences a high level of government, patient, and cross-company litigation over issues ranging from manufacturing and marketing practices to patent loss and generic competition. This ruling will keep the line of patient lawsuits claiming “failure to warn” coming, and it may increase their frequency now that the Supreme Court has backed their legitimacy.
The decision, which seems contrary to last year’s ruling protecting medical device makers against certain patient lawsuits but agrees with a recent cigarette manufacturing judgment, could also impact consumer cases against other types of manufacturers.
The decision will certainly keep pharma label-writers on their toes, and it also showcases the fact that while the FDA should be able to fully regulate drugmakers and their labeling practices, the agency does not presently have the resources to do so.
The back-and-forth sparring going on between US biotech heavyweight Genentech and its majority shareholder Roche is gaining steam, with both companies taking bold actions to further their purposes.
During an investors’ meeting Monday, Genentech stood firm in its rejection of Roche’s recent $42 billion offer to take full ownership. CEO Art Levinson outlined a number of ways in which the company believes its long-term value is much higher, including the worth of current products and promising drugs in development, even going so far as to set Roche’s sales growth aflame in an animated presentation while removing Genentech’s contribution.
Genentech’s management also touts the value of its innovative scientists and has argued that an increase in Roche control without proper compensation could threaten the innovative culture behind the success of Genentech. The company’s board believes that Roche should be offering $112 per share instead of its current hostile bid of $86.50 per share.
Roche, on the other hand, has gone forward with its share offering, hoping to convince Genentech’s other stockholders that it means business without having to gain the Genentech board’s approval. Roche has raised about $30 billion for the acquisition through investment bonds issued in the US and Europe, proving that it can raise the necessary funds without relying on banks in the volatile credit market.
Some analysts speculate that Roche is gearing up to make a higher offer, but there is also the possibility that it will simply drop its efforts if the tender offer is unsuccessful or if the overall condition of the stock market continues to deteriorate. And while Genentech has indicated that it would accept and endorse a higher offer from Roche, the company’s willingness may be hindered by Roche’s hostile attitude.