6/19/07

Humans are funny creatures. The more they learn about themselves, the more weaknesses they think they have. And the more weaknesses they think they have, the more they scramble for ways to address them, usually with chemicals. And the more they do that, the more conflict emerges between groups advocating their approach as better than everyone else's.

The bunny is too savvy to put his paws into the American healthcare debate (AKA The Morass), but he is curious about the direction of Big Pharma, particularly in the US.

The Democratic-majority Congress, not surprisingly, has declared war on it. The courts have made headlines uncovering all sorts of hanky-panky in cases involving doctors or drugmakers (like the 2005 silicosis case, http://findarticles.com/p/articles/mi_hb268/is_200509/ai_n18878338), doctors have painted drugmakers out to be drug-pushers (check out Elliot Valenstein's Blaming the Brain, http://search.barnesandnoble.com/booksearch/isbnInquiry.asp?z=y&EAN=9780743237871&itm=2)
and then there's the age-old problem of passing costs on to consumers--you lives by de big R&D budget, you dies by de big R&D budget, since the comapny that supplies you with the drugs you may need to stay alive have to keep pace with rising prices too.

Putting aside the prickly points which will doubtless be done to death during the '08 campaign, the bunny sees the big problem as being one of patent rights. All big pharma companies worry about when their product protection expires. Some go to great lengths to hedge against it, others go to ludicrous ones. Take Bristol-Myers Squibb, for which 2007 has been The Year of Digging Out From Bad Decisions Going Back A Decade. Finally emerging from a two-year Federal probation for prior no-no's, and winning a lawsuit to protect the patent on its blockbuster drug Plavix (which the generic competitor, Apotex, is sure to appeal), the company now has to decide if it can get back on its own two feet, or if it would be better off merging with its European partner Sanofi-Aventis (for more on this, check out today's Reuters piece by Ben Hirschler and Ransdell Pierson, "Rumors Fly But hurdles Remain to Sanofi, Bristol Deal"). Litigation is a constant risk for big pharma companies (the bunny figures this is why Warren Buffett never moved to snap up Bristol's battered stock), not to mention the possibility that (besides Federal interference) their product may not work so well (Vioxx, anyone?),

Or the drug dreadnoughts could simply diversify. Johnson and Johnson, for instance, sees about 40% of its revenues coming from drugs, with the balance coming from its highly successful consumer staples. Who says drug companies need make only drugs? The bunny wonders if Big Pharma might borrow a page from the book of Big Manufacturing. 3M makes a variety of drug delivery systems (http://solutions.3m.com/wps/portal/3M/en_WW/DDS/DrugDeliverySystems/), General Electric has moved aggressively into medical imaging and early-detection systems(http://www.gehealthcare.com/usen/products.html).

The bunny figures Big Pharma will feel more Federal scrutiny, not less, though it will not disappear. However, in an election year, with healthcare the perennial issue, the industry will have to come up with new business models to accomodate an increasingly hostile political climate, unending media scrutiny, an army of ambulance-chasing litigators slavering for a payout, and a population that's just sick of it all.