A newly published article in the British Medical Journal disputes the widely held belief that profits at large pharmaceutical companies will plummet as the companies face a "patent cliff" when their exclusive rights expire on several blockbuster drugs. Co-authors Donald Light, PhD, of the University of Medicine and Dentistry of New Jersey-School of Osteopathic Medicine, and Dr. Joel Lexchin of the University of York (Toronto) argue that a "hidden business model" provides major pharmaceutical companies with a solid cushion of steady profits from patent-protected minor variations to their existing drugs.
"Most research and development at large pharmaceutical companies is directed at developing clinically minor drugs rather than finding better drugs for unmet needs," said Light, who is also a Fellow at the Safra Center for Ethics at Harvard University. "Independent assessments indicate that 80 percent of increased costs paid by employers and insurers for pharmaceuticals is wasted on these 'new' drugs that can command higher prices under government patent protections even though they provide little or no benefit over existing medications."
The authors say claims of an "innovation crisis" in the pharmaceutical industry are a myth arising from media reports of a roughly decade-long decline in the discovery of new molecular entities (NMEs). They cite industry studies to support that conclusion. The Food and Drug Administration defines an NME as "an active ingredient that has never before been marketed in the United States in any form." According to the article by Light and Lexchin, the "crisis" simply represents a return from an unusual spike during the mid-1990s to the long term average of 15 to 25 NMEs per year.
"Companies are, of course, delighted when research breakthroughs occur, but don't depend on them," Light explained. "Instead they focus on promoting minor variations, spending 19 times as much on their marketing efforts as they do on basic research to discover new molecules."
The resultant sales of these "minor" drugs -- some of which become market blockbusters -- offset the ups and downs of drugs coming off patents, the authors note. They point to the example of Pfizer, which lost market exclusivity for Lipitor and other major sellers in 2011, but still maintained steady revenues and saw net income increase by 21 percent over the previous year.
The above story is based on materials provided by University of Medicine and Dentistry of New Jersey (UMDNJ). Note: Materials may be edited for content and length.
- D. W. Light, J. R. Lexchin. Pharmaceutical research and development: what do we get for all that money? BMJ, 2012; 345 (aug07 1): e4348 DOI: 10.1136/bmj.e4348
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