U.S. governments generic drugs policy - Essay Example

This proposal seeks to study the impact of price control on generics medicines on the pharmaceutical companies of the U.S. and how they should face the challenges to survive the impact. Though there is much justification in the name of public policy concerns, this study is concerned with prevention of erosion of the viability of Pharmaceutical Companies and ways in which these companies will re-invent themselves to stand out against the crisis in addition to what economic forces will influence their ultimate survival. Table of Contents Page Title page .. 1 Abstract ....2 Introduction ... 4 Aim and Objectives ..4 Literature Review 4 Methodology .7 Conclusion 9 References 10 Introduction This proposal sets the outline for studying the impact of the U.S. Government's generic drugs policy, how it affects the pharmaceutical industry and how the companies should address the situation in order to stay competitive and continue to meet the dynamic and ever growing health care needs. The situation is alarming as many drugs will go off-patent with the result, the pioneering pharmaceutical companies will be pitted against the rest of the world in surviving the competition from generic drugs market unless they continue to innovate and invent newer drugs for existing and new diseases. This study will identify the interplay of economic theories that underpin the survival of pharmaceutical industry in the wake of increased competition in generics market. Aim and Objectives This proposal looks into the economic forces likely to lead to a logical conclusion in the wake of crisis perpetrated by generic drugs pricing policy pursued by the Government. Literature Review World pharmaceutical sales are estimated to grow by 5 -6 % in 2008 as opposed to 6 -7 % growth in 2007.This is attributed to reduction of the cost of drug treatment in selected therapies and dilution of intellectual property rights. U.S. will experience only 4 %-5 % growth, the lowest recorded in the history of U.S. pharmaceutical market due to U.S. Medicare Part D which keeps the price under control, the expiry of patents for many branded drugs which has resulted in the increase of use of low cost generics, accelerated payer pressure, limited access to some therapies and increased safety measures that lead to the slowing down and stopping of introduction of new drugs. On the other hand, the emerging markets called "pharmerging" markets of China, India, Brazil, Mexico, South Korea, Turkey and Russia are expected to register an increase of 12-13% in consumption of drugs due to greater access to generic drugs, improvement in primary care and increased interest to take private health insurance. In the U.S, there will be soon the end of Medicare Part D rhetoric as a result of pressures on price increase, patent expiries and increased safety measures taken by the FDA. The forecast says that the shift will be in terms of absolute growth in cancer drugs, anti-diabetic drugs, angiotensin II antagonists, respiratory drugs and psychiatric drugs. In Diabetics treatment alone 9%-10% growth is expected (IMS Health Incorporated 2008) Pharmaceutical companies are watched out to check on profit generation. The UK government, for instance, under its PPRS allows the companies to set their prices but keep their earned profit margins within the agreed upon limit. Any extra profit should be submitted to the NHS. OFT has recommended that the Pharmaceutical Price Regulation Scheme (PPRS) should be reformed, so that they can use money from NHS to manufacture drugs with the greatest benefits for patients. (Office of Fair Trade: Pharmaceutical Price Regulation Scheme). Though the WTO's newly adopted measures seek to give greater guarantee to the R & D efforts of pharmaceutical companies to the developed countries, it will not give any corresponding benefits to original inventor pharmaceutical companies in the U.S. and other developed countries due to dilution I.P. rights for newer inventions to last for short terms. Existing literature only advocate for manufactures to adapt to the new situations of lesser IP rights and ignores the economic implication of the pricing and the patent control. In a perfect competition market setting, there will be no governmental intervention. Alternatively, with the Governmental intervention, profits will come down or will not be there completely hence it will carter for some of the costly raw materials like sugar, thus keep the pharmaceuticals stay while producing cheaper drugs as dictated by the public policy concerns. The Government sources say that use of generic drugs will save consumers an estimated $8 to $10 billion a year at retail points, and more at hospital level. (FDA). However, due to lessened patent protection, pharmaceutical companies will be shy of investing on newer primary care drugs and tend to focus their attention on specialty care drugs such as for oncology and biotech in which there are no cost pressures and in which case, growth is expected to be 14%-15 % for the U.S in the year 2009. Currently, 29 new medicines are expected to be introduced, most of which will comprise of specialties including oncology for the treatment of melanoma and acute myeloid leukemia. Methodology This section attempts to find answers for the key questions of this proposed study, which are: How the pharmaceutical companies will face the challenge posed by the price control on generics which causes most of the branded drugs going off patent shortly, and the short term protection that will henceforth be available for newer discoveries in future, what economic forces will influence the companies' continued presence in the market and how far the artificial price control will be viable for the country's economic growth. Is the Government justified in forcing the burden on the companies under the pretext of controlling profiteering What if the profiteering part is removed and still there is outcry of exorbitant prices of drugs. These questions will be answered in the main study by qualitative research methodology. The secondary data collected will be subject to the above qualitative assumptions. Secondary information and data will be the support base for this study. This will include; -a review of the history and current situation of the drug pricing policies, -identification of current studies on the concepts of price control. -justification of the study on different aspects of price control. -a few case studies Conclusion The findings in the literature review throw much light on the impact of price control on generics though what has been seen is just a tip of an ice berg. Though it has been perceived from the study so far that generic pricing is not a bad proposition to address public policy concerns, the main study would go into detail about the economic theories underpinning the ability of pharmaceutical companies to re-emerge out of the generics crisis. Any economic activity would ultimately fail if it does not fall within the context of economic forces and theories. More efforts will be directed towards this end for justification or other wise of generics price control and alternatives available to the players. The main study will look into the aspects of competitive advantages, backward integration and application of Porter's five force theories which are not found in the References: UK drug pricing system scrapped: www.rsc.org/chemistryworld/News/2008/March/07030802.asp European Affairs [A Publication of the European Institute] : www.europeanaffairs.org/current_issue/2007_summer_fall/2007_summer_fall_08.php4 - The Office of Fair Trading: Pharmaceutical Price Regulation Scheme:www.oft.gov.uk/advice_and_resources/resource_base/market-studies/price-regulation The Office of Fair Trading: OFT makes recommendations to ...:www.oft.gov.uk/news/press/2007/173-07 - Drug buddies | Comment is free:commentisfree.guardian.co.uk/joe_collier/2007/02/joe_collier_professor_of_medic.html The Hindu Business Line: Pharma prices: Deregulate in tapered doses.www.thehindubusinessline.com/2004/09/28/stories/2004092800660900.htm Read More