Pharmaceutical firms' business model failing - Oxfam
01/17/2008 | 12:28 AM
The "blockbuster" business model of pharmaceutical companies is failing, says a study done by international aid agency Oxfam.
The way forward is to recognize the emerging markets in developing economies such as the Philippines, says the study titled "Investing for Life."
The report looked into the pharmaceutical industry's growth patterns and the business practices of the world's top 12 pharmaceutical companies - Abbott, AstraZeneca, Bristol-Myers Squibb, GlaxoSmithKline, Eli Lilly, Johnson & Johnson, Merck, Novartis, Pfizer, Roche, Sanofi-Aventis and Wyeth.
Oxfam said the industry is witnessing an increasing number of "blockbuster" drugs or drugs generating at least one billion dollar sales going off-patent while very little innovation has been done in the research pipeline to replace them.
Helena Viñes Fiestas, Oxfam's policy advisor in private sector and one of the authors of the report, said the fall in growth rates has driven the industry to dig in rather than reorient its operations to the needs of huge and growing populations in developing countries.
Fiestas said the "blockbuster" model is aimed at developed country markets. She said this model does not take into account realities in developing countries, which include huge income disparities, heavy disease burden and severe constraints on public health budgets.
"These realities require new approaches and practices such as market segmentation and tiered pricing," she said.
The Oxfam report says drug companies continue to put its efforts and resources at protecting intellectual property patents instead of innovation through developing new medicines needed in poor countries.
Oxfam says the top 12 pharmaceutical companies continue to set prices at levels affordable in rich countries but are not affordable to millions of poor people in developing countries.
"Unless the pharmaceutical industry takes serious notice of realities of poor countries when devising its business strategies, it will see a continuing downward spiral in its growth and worse, it will mean unmet needs and heavier health care burdens for poor people," said Fiestas.
Oxfam's study found that the top 20 pharmaceutical companies in the Philippines produce roughly 36 percent of the total number of brands, but own 82.65% of the total market share.
Majority of the top 20 are multinational companies. Only two are local companies, United Laboratories occupying the top post and Pascual Laboratories.
Together, the two local companies own 20% of the total market share and 9% of the total number of brands in the market.
Oxfam said United Laboratories and Pascual Laboratories produced generic versions of branded medicines and achieved large annual sales because they provided cheaper generic versions of pharmaceutical products that have great demand in the market.
The report recommends that companies review its approaches on pricing structures, R&D investment and patent policies to serve emerging markets.
"The industry is burying its head in the sand. The industry must recognize that charging high prices, quashing generic competition, developing medicines only for those rich enough to pay and fighting for harsher patent laws is an ineffective business strategy for new markets, as much as it is a moral outrage," said Fiestas. - GMANews.TV
The way forward is to recognize the emerging markets in developing economies such as the Philippines, says the study titled "Investing for Life."
The report looked into the pharmaceutical industry's growth patterns and the business practices of the world's top 12 pharmaceutical companies - Abbott, AstraZeneca, Bristol-Myers Squibb, GlaxoSmithKline, Eli Lilly, Johnson & Johnson, Merck, Novartis, Pfizer, Roche, Sanofi-Aventis and Wyeth.
Oxfam said the industry is witnessing an increasing number of "blockbuster" drugs or drugs generating at least one billion dollar sales going off-patent while very little innovation has been done in the research pipeline to replace them.
Helena Viñes Fiestas, Oxfam's policy advisor in private sector and one of the authors of the report, said the fall in growth rates has driven the industry to dig in rather than reorient its operations to the needs of huge and growing populations in developing countries.
Fiestas said the "blockbuster" model is aimed at developed country markets. She said this model does not take into account realities in developing countries, which include huge income disparities, heavy disease burden and severe constraints on public health budgets.
"These realities require new approaches and practices such as market segmentation and tiered pricing," she said.
The Oxfam report says drug companies continue to put its efforts and resources at protecting intellectual property patents instead of innovation through developing new medicines needed in poor countries.
Oxfam says the top 12 pharmaceutical companies continue to set prices at levels affordable in rich countries but are not affordable to millions of poor people in developing countries.
"Unless the pharmaceutical industry takes serious notice of realities of poor countries when devising its business strategies, it will see a continuing downward spiral in its growth and worse, it will mean unmet needs and heavier health care burdens for poor people," said Fiestas.
Oxfam's study found that the top 20 pharmaceutical companies in the Philippines produce roughly 36 percent of the total number of brands, but own 82.65% of the total market share.
Majority of the top 20 are multinational companies. Only two are local companies, United Laboratories occupying the top post and Pascual Laboratories.
Together, the two local companies own 20% of the total market share and 9% of the total number of brands in the market.
Oxfam said United Laboratories and Pascual Laboratories produced generic versions of branded medicines and achieved large annual sales because they provided cheaper generic versions of pharmaceutical products that have great demand in the market.
The report recommends that companies review its approaches on pricing structures, R&D investment and patent policies to serve emerging markets.
"The industry is burying its head in the sand. The industry must recognize that charging high prices, quashing generic competition, developing medicines only for those rich enough to pay and fighting for harsher patent laws is an ineffective business strategy for new markets, as much as it is a moral outrage," said Fiestas. - GMANews.TV
