Pharma companies and Corporate Social Responsibility
One
of the main challenges for pharma companies is how to balance the needs of the various stakeholders involved. Employees, shareholders and patients all have different needs. A particularly tricky problem is pricing: what we in the rich countries can afford is very often too expensive for poorer countries.
I was interested to read what Andrew Witty, the boss of GlaxoSmithKline, says in the Guardian - Glaxo offers free access to potential malaria cures. His company is is putting 13,500 compounds that might cure malaria into the public domain.
According to the article,
Andrew Witty, the British boss of Glaxo-SmithKline, will say in a major speech that multinational drug companies have to balance social responsibility alongside the need to make profits for their shareholders. There is, he will say, an “imperative to earn the trust of society, not just by meeting expectations but by exceeding them”.
This is a very welcome move. Now, it’s to be hoped that other pharma companies will follow suit. It’s also to be hoped that GSK and the other companies do even more to benefit people in poorer countries who are suffering from other illnesses.
Pharma industry change – Sanofi
As if to emphasise what my last post said, today came an announcement from Sanofi, the French pharma company, that they are buying Chattem for $1.9bn. Chattem provides over-the-counter drugs like Gold Bond or Selsun Blue. 
What’s the rationale for this? Probably Sanofi wants to become less reliant on the blockbuster patented drug business.
Change in the Pharma Industry
One of the most interesting industries that I have been involved with is the pharmaceutical industry. It is constantly evolving in the face of internal and external challenges which are described below. If you were the head of a pharma firm, how would you deal with these problems?
Three major issues that confront the industry: the rise of generic products, the difficulty in finding new treatments, and the large amount of spending on sales and marketing.
The first challenge is that in most countries, a drug company has a 17 to 20 year period when its product is protected by patent. However, this period does not start when the drug comes on the market, because patents are filed during the research phase. On average, a patented drug is on the market for around 12 years before the patent expires and generic competition arrives. Once the drugs have come off patent, their market share and price premium are significantly reduced, because the generic alternative is less expensive.
Second, there is a general feeling that all the ‘low hanging fruit’ of disease have been picked. The industry relies on blockbusters, which are drugs that bring in annual revenues of $1 billion or more. Evidence suggests that it is getting increasingly difficult – and more expensive – for companies to find new treatments. This has led to a significant change in the basic approach to research. Companies are moving from chemistry-based therapies to biology-based therapies, but since the major pharmaceutical companies tend to lack expertise in this area, they are either buying or forming partnerships with either smaller, more specialised outfits or are forming partnerships with larger drug companies.
The third challenge for all major pharmaceutical companies is that they spend a great deal on sales and marketing. Pharmaceutical companies position themselves as research-oriented organizations. In fact, the actual amount that they spend on research and development is less than the amount they spend on sales and marketing.
