From Stuart Lyman via Xconomy today we have a piece challenging whether there really is such a thing as a Big Pharma "patent cliff" or whether it is all a red herring. Mr. Lyman concludes that a couple companies may have a cliff but by and large the problem in the industry is lack of R&D productivity and too much marketing expenditure on mediocre drugs.
There is no cliff if you plot out "industry performance" over last 10 years versus an individual company or two. The problem is a dearth of new drug approvals. This actually does show a decline in the past decade. Drug sales went up 2.5x from 1997-2007 yet approvals of new drugs dropped 50%. The increase in sales appears to parallel the 300% increase in DTC-ad spending during the same period. Wow! No new drugs but lots of new ads.
Mr Lyman further notes that there are 6 basic approaches Big Pharma could use to bridge the revenue gaps (see his post above) but only 1 of the 6 actually was geared toward adding a new (as opposed to a modified) drug. The primary responses were to "curtail research expenditures, cut headcount, and ramble down the other paths."
The myth of the cliff will remain until pharma changes its R&D model and gets back to understanding basic drug mechanisms - and adopts a more collaborative approach - perhaps with academic sites as their funding decreases from other sources. When that happens, the cliff myth will begin to recede.
Until then, next time you hear about a patent cliff - think red herring - salted, pickled, with mustard, sherry or dill and little aquavit!
Posted by Bruce Lehr November 29th 2010.
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