Prescription Pharmaceuticals Will Lyle Feb 13, 2012 CBE 555.
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Transcript of Prescription Pharmaceuticals Will Lyle Feb 13, 2012 CBE 555.
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Prescription Pharmaceuticals
Will LyleFeb 13, 2012
CBE 555
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Overview
• Economic Impact• Drug Breakdown• Prescription Logistics• Lipitor Example• Public distrust• Misconceptions
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Per Capita Health Care SpendingUS OECD Median
1990 $2,799 $1,286
1997 $3,925 $1,728
2005 $6,401 $2,925
2010 $8,402 n/a
*OECD: Organization for Economic Co-Operation and Development
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Percent of GDP Spent on HealthUS OECD Median
1990 12.6 7.2
1997 13.5 7.5
2005 15.3 9.1
2010 17.9 n/a
*US percentage was 16.0 in 2007, but has increase quickly the past few years due to the recession
Figure from 2000
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Pharmaceutical Revelence
• 10-15% of health care costs in US • 17-19% avg in other OECD
countries
• 15.8% percent profit margins– Third highest industry behind
telecommunications & crude-oil production/mining
• US Pharma companies account for 36% of all R&D internationally
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Battelle Memorial Institute
• Study of healthcare costs of five major issue– AIDS, Heart disease, Cancer, Alzheimer’s, Arthritis
• Drugs to reduce spending $750 billion over next 25 years
• Schizophrenia example– $4,500/yr for medication– Alternative: $70,000 in hospitalization costs
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Drug Categories
• Chemical Pharmaceuticals– Originally found in nature– Reproduced in laboratories to obtain active
ingredients with high purities – Examples:• Aspirin – Willow Bark• Mevacor – Red Yeast Rice Powder• Vincristine – Madigascar Periwinkle• Ephedra – Ma Huang
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Drug Categories (cont.)
• Fungal Fermentation– Antibiotics & Steroids– Examples: Penicillin, Tetracycline, Erythromycin,
Cortisone• Biologic Drugs– Manipulated biologic cells used to create
pharmaceuticals• CHO (Chinese Hamsters Ovary) cells, yeast, ecoli
• Categories I & II: 100-1000 g/gmol• Category III: ~100,000 g/gmol
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Prescription Drugs
• Standard patent issued for 20 year period• Issued long before drug hits the market– 12 year avg to get to market
• Effective patent range: 7-15 years
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Clinical Trial Timeline
• Phase 1: 20-80 healthy volunteers to establish drug’s safety and profile (1 year)
• Phase 2: 100-300 patient volunteers to assess the drug’s effectiveness (2 years)
• Phase 3: 1000-3000 patients in clinics and hospitals (3 years)
• Company submits application to the FDA for approval (1-2.5 years)
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Lipitor
• Pfizer’s Lipitor– Statin for lowering cholesterol
• Revenues of $13 billion in 2006– More than MLB or the US box office– Currently $7.8/yr– Revenues dropped after 2006 when Merck’s
Zocor went generic• 3 million Americans currently on it• Patent ends in 2012
– Out-of-pocket users will have prices cut in half
– Insured users will have co-pay drop from $30-$35 to $5-$7
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Public Distrust of Industry
• Industry spends $855 million/yr on lobbyists– More than any industry
• Spending on Marketing vs R&D– 10-15% on R&D– 20-35% on Marketing
• Drug marketing in Canada: $2 billion/yr
• Drug marketing in US: $30 billion– Direct-to-consumer marketing in US
• Only US and New Zealand
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Public Distrust (cont.)
• 81,000 pharmaceutical reps in US– vs 830,000 pharma prescribers (mainly physicians)
• Tactics used in 80s and 90s– Dine & Dash, Gas & Go, etc.
• Price differentials between US and other OECD nations
• Markup of production costs• Creation of Step Therapy among physicians
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Marketing
• Canadian drug marketing 2/3 of the US per capita
• Canadian marketing only physicians• US drug marketing breakdown– 56% free samples– 25% detailing (1:1 education) of physicians– 12.5% direct to user advertisements– 4% hospital education– 2% journal advertisements
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Marketing (cont.)
• Marketing down 10% from 2009 to 2010• Laws eliminating “dirty” marketing tactics to
doctors in the past 10-15 years– Gifts– Restaurant meals vs hospital education
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Drug Development
• US pharma companies invest $12.6 billion a year in drug development
• Cost of developing and testing a new drug is estimated between $100 and $800 million
• 11% of drugs that begin clinical trials reach the market– 1 in 1000 compounds that enter testing make it to
human testing
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Conclusion
• Flaws need to be improved• Industry and FDA need to adjust accordingly to
politics around heath care• Complicated economics that can’t be simply
blamed by “corporate greed”• Industry robustness
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References• Dunn, Nina. New Developments in Pharma/FDA Faceoff. Spector & Associates. 1/25/2012• FDA Approval Process. Drug Information Online.http://www.drugs.com/fda-approval-
process.html• Fortune 500. CNNMoney. 5/23.2011• Harper, Matthew. Why There Will Never be Another Drug Like Lipitor. Forbes. 11/30/2011.• Kelley, Braden. Global Pharma Innovation at Abbott. Innovation Excellence. 11/25/2011.• Lankford, Kimberly. Brand-Name Lipitor at Generic Prices. Kiplinger. March 2012.• Marketsensus Research and Innovation. Overcoming Nasty Side-Effects Means the
Difference Between Life and Death for Competitive Drug Companies. 1/16/2012• Pharmaceutical Spending. OECD Observer.• Smith, Aaron. The War Against Cholesterol Gets Cheaper. CNN. 11/30/2011• Spirer, Janet. Pharma – New Challenge, New Sales Strategy, New Sales Trainer.
Businessweek. 1/27/2012• Spirer, Janet. It’s a New World for Pharma Sales Reps. Sales Training Connection. July, 20
2011.
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Questions?