(Required reading for Organization Management Ethics students.)
In the past decade drug companies have seen a significant decline in revenue due to the expiration of patents.
In 2001 Eli Lilly's patent on the antidepressant Prozac expired. That same year AstraZeneca's patent on Prilosec expired. Before this AstraZeneca was bringing in between $5 and $6 million a year for the 'purple pill' for heartburn.
Schering-Plough's allergy drug Claritin brought in a third of that company's revenue before the patent expired in 2002.
Bristol-Myers Squibb lost revenue when that company's patent on the diabetes drug Glucophage expired in 2000. Glucophage brought in sales of $1.7 billion.
In 2005, patents expired on about 200 drugs accounting for more than $30 billion in sales in 2000 alone.
How will drug companies compensate for the loss of revenue? The industry's answer is this: through new drugs that are being developed. The answer is progress and innovation, if we are to believe all the public relations.
Exactly how many truly new drugs are in the development pipeline? Consider this:
"Of the seventy-eight drugs approved by the FDA in 2002, only seventeen contained new active ingredients, and only seven of these were classified by the FDA as improvements over older drugs... Furthermore, of those seven, not one came from a major US drug company." (Business Ethics, McGraw Hill 2007 edition, John E. Richardson, editor, page 113).
Not very encouraging. However, there are a few glimmers of hope on the horizon, mostly involving new applications for existing drugs. For example, some prostate cancer patients have had remarkable results following influsions of the drug ipilimumab, a monoclonal antibody that stimulates the immune system. Likewise Gardasil has been shown to be effective in preventing genital warts caused by HPV strains 6, 11, 16, and 18 in males aged 16-26 years.
Meanwhile, drug companies are not keeping up with the demand for drugs in general use such as:
Technetium Tc99m Generators
Calcium Disodium Versenate Injection 200 mg/mL 5 mL ampules
Azactam 1 gram and 2 gram (aztreonam for injection)
Infed (Iron Dextran) injection
Mitomycin for injection
Metoprolol Succinate extended release tablets
Why aren't the drug companies keeping up with demand? Perhaps the margin of profit isn't great enough?
Then there are the lurking suspicions that some drug companies may be manipulating the public. Consider the recent revelation that Merck paid the Australian branch of Elsevier, a company that publishes scholarly journals, to put together a bogus journal in which 9 of the 29 articles were about Merck's controversial Vioxx and the remaining 12 were about Merck's Fosamax; both drugs presented in the most positive way possible.
After all is said and done, the US drug companies don't seem to be making much progress in the development of new drugs or in keeping up with the demand for existing drugs. So what are they spending the profits on? Likely some on research and development and a goodly sum on promoting the myth of American innovation.
Read more here and here.