The Indian government seems to have noticed, that barring a few instances of certain MNCs such as Merck launching their products differentially priced, or even counting these differentially priced drugs, health care remains by and large, much beyond the paying capabilities of even the fast growing middle classes. As per current proposals by the ministry, the Indian govt. could become the country’s sole purchaser of patented drugs. If carried out, this would be the first instance where the public as well as private health care providers of a country are solely supplied by the government.
This is discussed in detail in an article in Pharmatimes (available here). While the benefits of such a move, to both parties, are apparent – massive discounts, less expenses on advertisement, etc, the article goes on to mention that there has been some criticism regarding the monopolization of the purchasing power though. There could be difficulties in ensuring a continuous supply of a drug, as well as the chances of a less number of choices of medicines available to the eventual customer. There are also worries of the outcome on the market if there is only one buyer doing the negotiations and this could affect the market competition.
As it’s being discussed currently, the government would not take on the responsibility for distribution as well, but rather the products would be directly released to the public and private health care providers.
Until recently, the blockbuster model has worked for the ethical pharmaceutical companies, but with about $80 billion of ethical drug patents expiring in the next four years and with not much in the pipeline of major pharmaceuticals their business model needs a re-look. Major pharmaceuticals need to consider a strategy that would allow them to develop new drugs and also serve a large market that needs low cost drugs whether they are patented or otherwise. It could be the last opportunity for the majors to get in the generic business (similar to Novartis).
ReplyDeleteAcquisition of biotech companies is an extension of their current strategy. It might meet the same fate as blockbuster model.
If BIG PHARMACEUTICALS want to have a differential pricing strategy, they will have to improve their manufacturing technologies and move from "quality by analysis" to "quality by design." Manufacturing improvements is one area where they have been lacking.
It will allow them to retain high margins. It is a new world and pharmaceuticals will do whatever it takes to maximize their profit margins.