Drugs are Expensive

These days it seems as if drugs are the answer to all of our problems. From minor to major health issues, drugs play a very important role in our lives. According to a recent editorial from the magazine Nature, Pfizer, which leads the pharmaceutical industry in both revenue and R & D spending, is going to cut spending on drug research. According to the author of the article, “A changing drug supply”, Pfizer has not been able to generate enough revenue, recently, to cover its research and development expenditures. The pharmaceutical corporation will therefore cut its costs in an attempt to earn greater profits.

The author also states that Pfizer’s problem is one which the entire pharmaceutical industry faces. The article states that research and development expenditures “rose by 147 percent from 1993 to 2004.” Despite the dramatic increase in research expenditures, drug approval applications have only risen by 38 percent. In order to increase revenues, the former CEO of Pfizer chose to pursue a policy of buying smaller pharmaceutical companies to obtain the rights to their drugs. In 2000, Pfizer purchased the company which created Lipitor, a drug that helps lower cholesterol. This drug alone generated nearly 13 billion in sales last year. In 2003, Pfizer made another acquisition, giving them the rights to the arthritis drug Celebrex, which generated almost 2 billion dollars last year. Since this strategy did not offer the company a long term solution to their research and development issues, the board fired the CEO last year. The new CEO is currently pursuing a policy of focusing on fewer projects at one time citing that the company “can no longer afford to play every slot machine in the room.”

According to GSK, a major pharmaceutical company, a single new medication costs over $800 million to develop. Furthermore, only one out of a million medications actually becomes available to the public. Even if a medication does become available, only thirty percent of those medications bring in enough revenue to cover their costs. From this we can conclude that either the FDA is too strict or the pharmaceutical companies are not spending their money wisely. The author of this article would most likely agree with that latter. He or she believes that Pfizer, along with other companies, are researching too many drugs at the same time in the hopes that one will be successful. Although this is an extremely costly approach, there does not seem to be a better way. If one drug out of a million can save countless lives, is it not worth it? Cutting back the scope of the research would definitely save the company money in the short run; however, the company may miss out on the next miracle drug.

Many believe that Pfizer’s new policy will result in the outsourcing of early drug discovery to India, China, or Eastern Europe. Furthermore, the new policy will also rely on partnerships between large and small companies in order to generate new drugs because Pfizer cannot compete with the “productivity of smaller, more flexible firms.” Thus, Pfizer would essentially be reduced to a marketing firm because they would be handling mostly late stage development and marketing. The author of the article concludes that there will not be any more “blockbuster” drugs. Therefore, pharmaceutical corporations must focus their attention on developing drugs which are geared to smaller, targeted populations. By doing this, the author believes that the drug companies will incur lower expenses and face less competition.

The author of this article makes two major assumptions. First, he or she assumes that there will be much fewer “blockbuster” drugs in this era. Second, he or she assumes that Pfizer’s costs are too high because of its research and development spending. In this era, technological breakthroughs occur at a rapid pace. Today we enjoy access to many technologies that we could not have dreamed of ten years ago. Given that fact that there are countless advances in science and technology, it would be presumptuous for the author to assume that there will not be any more of these so called “blockbuster” drugs. There are so many incurable diseases we face these days and most have only limited treatments or none at all. Currently, there is no cure for AIDS, Parkinson’s disease, ALS, and many other diseases. While these diseases might not affect a large portion of the population, drugs which can treat these diseases would be a large source of revenue for the pharmaceutical corporations. Many pharmaceutical companies are researching drugs that fight the HIV infection. Pfizer is one of those companies. HIV is a virus that infects various cells in the human immune system, specifically T-cells. Once the t-cells fall below the critical level, the immune system loses its ability to fight off other infections (HIV). As of the end of 2004, there were nearly 40 million people living with AIDS or infected with HIV according to the UC-San Francisco school of medicine. Pfizer is currently working on a drug that prevents the virus from entering the t-cells. The drug, which is currently in development, does so by preventing the virus from binding to a specific receptor on the t-cell. Therefore, this medication is more likely to be successful than previous medications because it does not specifically target the virus. In the past, medications that have targeted the HIV virus have not been successful because the virus succeeded in becoming resistant to them (Nagle). If Pfizer succeeds in developing an effective medication to fight of this virus, they would generate huge revenues. This would be a major pharmaceutical breakthrough and would therefore have to be considered a “blockbuster” drug.

In the second assumption, the author assumes that Pfizer’s financial problems are entirely related to their research and development expenditures. While it is very likely that Pfizer was attempting to stretch itself too thin, this is probably not the only reason. If Pfizer wants to remain competitive, it needs to realize that a large portion of its expenditures are going into the pockets of it executives. Between 2003 and 2004, the former CEO of Pfizer received a 72 percent pay increase from $9.7 million to $16.6 million (Noon). Pfizer should be cutting executive salaries instead of R&D expenditures. Unfortunately, Pfizer would rather waste countless sums of money on R&D that does not pay off and make up the loss by purchasing smaller companies with successful drugs. Pfizer’s new strategy will certainly decrease R&D expenditures since the company will focus on a smaller research projects; however, it means that Pfizer will probably not be responsible for the next “blockbuster” drug. Pfizer should continue to focus on a wide range of potential drugs in the hopes of finding another revenue generating drug. Finally, the board should stop voting to give themselves raises because it comes at the expense of scientific research.