The Blockbuster Model of Drugs is Dead

Many people are reading all the wrong messages out of Merck’s Vioxx’s troubles. It is not merely that Merck ignored the risks in the product; that is a simplistic and overly risk-skewed view.

It is deeper than that, and it has to do with the rising cost of new drugs, which means that companies must sell more product to more people to recoup their cost of finding, developing, and selling the drug. That is why so many companies have stopped coming up with new molecular entities. Aaccording to FDA statistics, only 10 percent of the 314 drugs approved between 2000 and 2003 were based on new molecules that offered a significant improvement over drugs already on the market. It is just too darn expensive to mess around with anything that is overly different from what is already selling.

The upshot, however, is that pharma companies must sell their products to so many more people than the drug is really intended for. After all, Vioxx was arguably no better for many of its customers than would have been ibuprofen.

Anyway, all of this can’t continue. It is too risky, and it is about to become even more expensive with the FDA wangling for expanded Phase III trials to avoid Vioxx-like episodes (even though we should all know by now that perfect safety is for people who don’t want to live in the real world). An article in today’s Washington Post makes the point well:

“The whole blockbuster model is not going to survive the next decade” because scientists will eventually be able to use genetics to figure out in advance for whom the drug will work. Such research may reduce serious side effects, but it will also cut substantially into the potential market for each drug, he said.

Wall Street analysts say they expect successful drug companies will have to develop an array of more narrowly targeted drugs, each with a smaller market. Such a strategy would make firms less vulnerable to problems with individual products but also means companies can’t count on a single successful product to cover all of their research and development costs.

Related posts:

  1. Roger Ailes: CNBC is Dead
  2. Mo’ Money for Social Software
  3. NatPost Column: Vonage Doesn’t Matter