...depends on how you look at it, some people conceder drug companies to be monopolistically competitive but I think it is an oligopoly. Oligopoly is a market structure with significant barriers of entry and exit, many consumers and few firms. With a close look of the drug business you will realize that is it has all the characteristics of an oligopoly started above. Because of the fewer number of firms there is always the tendency of collision, secondly in a relatively un-concentrated market barriers to entry and may simply reflect high operating cost. The high cost of getting this product to the market include clinical trials, patent approval and FDA approval; industry-financed studies claimed $114 million 1987, later went up to $231 million, $403 million, and then $2.1 billion in 2006 for FDA approval, patent approval and clinical trials. Oligopolies in most cases tend to go multinational which is largely associated with todays’ drug companies. In terms of research and development, I will say it is the backbone of the pharmaceutical industry which makes it very important. I will want to focus on Pfizer one of the big names in this industry. Pfizer’s Global Research and Development is probably the group that the company takes the most pride in for obvious reasons. If we...
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...Problem Definition Should Rich Kender recommend licensing Davanrik, making Merck & Company responsible for its manufacture and its marketing? In order to provide Rich Kender with a good and thorough analysis and recommendation on the Davanrik licensing project, we need to answer the following guidance questions: I. How has Merck been able to achieve substantial returns to capital given the large costs and lengthy time to develop drugs? II. How much should they pay? III. What is the expected value of the licensing arrangement to LAB? IV. How would our analysis change if the costs of launching Davanrik for weight loss were $225 million instead of $100 million? In our analysis we will build a decision tree that shows the cash flows and probabilities at all stages of the FDA approval process. We will assume a royalty fee of 5% on the cash flows that Merck receives from Davanrik after successful launch. Analysis Merck is in the business of developing compounds for pharmaceutical compounds. The required research and development efforts preceding the launch of a successful blockbuster drug is extensive and lengthy process and is therefore a very expensive one. Nevertheless, Merck has proven perfectly capable to achieve high returns on capital. This is a result of numerous factors. First of all, Merck has been able to generate tremendous amounts of sales. Since 1995, Merck has launched 15 new products, resulting in 1999 sales of $32.7 billion, which...
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...sold at lower prices abroad (say, in Canada)? Pharmaceutical companies try to maintain a monopoly in the early stages of a drug in order to recover R&D investment. During this period of exclusivity they will try to make a fair profit. This is not a monopoly in the true sense of the word because this period is limited in time. It is perhaps better to describe it as a limited warranty. There are also other limitations. Pharmaceutical companies in some countries may not respect intellectual property and may copy or produce generic drugs even before the patent expires. An important criterion of a monopoly is price control. However, in many countries, a governmental agency is responsible for setting the prices of drugs, making the influence of the manufacturers somewhat limited. This puts pressure on the manufacturers to seek overseas markets in order to maximize their chances of recovering R&D costs and to earn a profit within the period covered by the patent. By so doing the market for re-importation and parallel imports is opened. Some of the prices that the pharmaceutical manufacturers end up accepting under these circumstances do not define a true monopoly. There are several barriers to entry that prevents re-importation into the US of drugs sold at lower prices. These include the following: Price difference Regulatory considerations Trade tariffs Cost of transport Reimbursement procedures Drugs would need to be kept under the same regulatory provisions as...
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...WESTERN DRUG COMPANIES AND THE AIDS EPIDEMIC IN SOUTH AFRICA | | | | | | | | INTRODUCTION The AIDS epidemic in South Africa is at an extreme where 4.2 million of the country’s 43 million citizens are afflicted. This translates into one in every ten citizens being infected with the virus. Additionally 34 million Sub Saharan African citizens have been afflicted and 11.5 million have died and that total accounts for 83% of the world’s AIDS related deaths. Treatment is available in the form of an anti-retroviral, but it is very costly and as such unaffordable for the already impoverished nations in Africa. The AIDS crisis and the expensive treatment have caused the government of South Africa to pass laws authorising the practice of parallel importing and compulsory licensing. Parallel importing allows importers to purchase the medication from the cheapest source whether or not the patent holders gave approval and compulsory licensing allows the government to license local companies to produce cheaper versions of the drug patented by foreign companies with or without their consent. The passing of the law by the South African government caused a legal dispute with the US drug companies regarding intellectual property rights, compulsory licensing and parallel importing. The dispute caused a debate among public health officials, activists, law makers and the drug companies over the importance of public health versus corporate profits and the bad public relations...
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...Question One: Why is it so important for the drug companies to protect their patents? Answer: In the field of medicine, people begin to focus on intellectual property. Health care related Intellectual Property Right (IPR) is deemed as a special and complex issue, which distinguishes itself from other kinds of IPR with its particular nature and different legal provisions and covers a wide range of subjects. Firstly, medicine is a special and important field of technology. The feature of drug development is large investment, high rise and long cycle. Currently, developing a new chemical drug takes 8 to 10 billion. Moreover, it takes more than ten years to screen a drug and bring it to market. If they don’t protect their patents, new drugs that consumed significant cost will be imitation. Therefore, drug development needs more dependent on protecting patents than other sectors. Secondly, the sustainable development of pharmaceutical industry relies on strong support of new technologies and new products. The return of new drugs is huge and it is over 30 percent of sales. So the huge return needs to be protected. Otherwise it will create duplication of research and development and waste of resources. It is easy to form a vicious marketing competition and goes against technological advances in pharmaceutical industry. For example, an anti-HIV drug successes to be researched and developed in Taiwan. It is said that the effect of prevention of AIDS is 90 percent and an injection...
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...Could Changing the Way Drug Companies Create Profits Raise Global Average Life Expectancy? Do you believe the “Fixed Reward Pool” model could help raise global life expectancy? Explain how you came to this decision giving at least 4 pieces of supporting evidence. I do believe that the “Fixed Reward Pool” could potentially raise global life expectancy greatly. The program focuses on rewarding pharmaceutical innovators for their activities. This means pharmaceutical innovators will be driven to help more people, because it will correspond with the amount of profit they will gain. Firstly, the program has a fixed budget. It is a $6 billion plan to decrease unequal distribution of medicine globally, focus more money towards research on diseases with the highest global burden, as well as deliver more medicines cheaply to the poor and develop new medicines for the diseases of the poor. This portends that areas of low income will be more focused on (such as Africa). Areas like Africa with low income are usually areas with low life expectancy, which means these areas will be treated. The people in these areas will get good medical care and medicines, and with a life expectancy rise in this one area, the global life expectancy can potentially have a big rise. The current diseases more looked upon currently, are the less dangerous, more common diseases. In less developed countries, about 50,000 people die daily from diseases caused by poverty (diarrhea, tuberculosis, malaria, etc)...
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...Problem Definition Should Rich Kender recommend licensing Davanrik, making Merck & Company responsible for its manufacture and its marketing? In order to provide Rich Kender with a good and thorough analysis and recommendation on the Davanrik licensing project, we need to answer the following guidance questions: I. How has Merck been able to achieve substantial returns to capital given the large costs and lengthy time to develop drugs? II. How much should they pay? III. What is the expected value of the licensing arrangement to LAB? IV. How would our analysis change if the costs of launching Davanrik for weight loss were $225 million instead of $100 million? In our analysis we will build a decision tree that shows the cash flows and probabilities at all stages of the FDA approval process. We will assume a royalty fee of 5% on the cash flows that Merck receives from Davanrik after successful launch. Analysis Merck is in the business of developing compounds for pharmaceutical compounds. The required research and development efforts preceding the launch of a successful blockbuster drug is extensive and lengthy process and is therefore a very expensive one. Nevertheless, Merck has proven perfectly capable to achieve high returns on capital. This is a result of numerous factors. First of all, Merck has been able to generate tremendous amounts of sales. Since 1995, Merck has launched 15 new products, resulting in 1999 sales of $32.7 billion, which includes $15.2 billion...
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...Table of Content | |Page | |1. Executive Summary…………………………………………………………… |1 | |2. Main Report…………………………………………………………………….. |2 | |3. Bibliography…………………………………………………………………….. |6 | 1. Executive Summary In 2002 the patents for the most popular drugs which generated $5.7 billion in worldwide sales would be expired. In order to anticipate the loss of sales, it is recommended to update the product portfolio by investing in the development of patented new products. LAB proposed 17 years exclusivity on Davanrik, a substance which has probability to be efficacious for depression or weight loss or both indications. Up to now LAB has completed preclinical testing and entering clinical testing. The clinical testing will take about 7 years which is divided into 3 phases. Based on the analysis given on the report, the cost on Phase I will come up to $30 million and the Phase II will be $25 million. The outcome of Phase III varies and depends on the result on Phase II. The expected outcomes are: Davanrik is 10% effective for depression only, 15% for weight loss only and 5% for both indications...
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...INTRODUCTION Merck & Company : Evaluating the Licensing Opportunity Various recently-born biotech companies sell their technologies in either finished or early stage to bigger companies in need of financing capital to preceed business, while those bigger companies acquire technologies to scout for promising profitable business. This sort of process needs numbers of decision makings and agreements from both parties on the valuation methods is crucial here. The valuation method being used has to hold objective validity and generality. For the managers to make accurate forecast of future profitability in managing companies, quantified decision making process is needed. Here we are dealing about whether Merck should give financial support to the R&D project of Davanrik offered by LAB, and about the process of valuation and the final decision. First we are to make brief of LAB’s business proposal and practice detailed valuation functions to decide if the proposal is profitable or not. And finally we will make a decision based on the valuation process in perspective of Rich Kender, Vice President of Financial Evaluation & Analysis of Merck. Brief introduction of Merck and its agenda regarding Davanrik project As a world-class pharmaceutical company concentrated on R&Ds, Merck is performing various researches and developments upon medical supplies for human and animals. Merck is providing Pharmaceutical Benefit Management (i.e. PBM) through a company called Merck-Medco Managed...
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...Anti-Cancer Drug Cost Regulations- Cost-Containment for the Pharmaceutical Companies Brenda Roberson University of Maryland University College Abstract Drug development is a long, inefficient, and expensive process and takes 10 to 15 years for development at a cost of about $1.3 billion (Nelson, 2014). When speaking of research and development (R&D) for new drugs; a large number of drugs that go through research do not make it to the FDA or the marketplace. Critics of pharmaceutical companies point out that only a small portion of the pharmaceutical companies’ expenditures account for research and development (R&D). The majority of the money’s spent in marketing and administration. There is also controversy over the $1.3 billion figure as an actual cost. Reported by Nelson (2014) Dr. Kantarjian of M.D. Anderson disputes the $1.3 billion figure for development; he believes this figure to be inflated to cover ancillary expenses, salaries, bonuses, stock market returns, and other indirect costs not related to R&D. The cost of cancer drug therapy is becoming impossible to justify or rationalize for both patient and society. New cancer drugs being approved by the Food and Drug Administration (FDA) are typically costing upwards of $100,000 per year and many times used in combination with other agents (Bunnell, 2012, p. 932) increasing the cost even more. These high priced anti-cancer drugs achieve only marginal benefit for the patient. Benefits achievements of...
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...its criminal and civil liability arising from the company’s unlawful promotion of certain prescription drugs. GlaxoSmithKline committed unethical behavior by neglecting to turn in all research on their pharmaceuticals. By them not turning in all the research it hid some information that was critical to rather or not the drug was legal and healthy for the prescribed patients. GlaxoSmithKline failed to report certain safety data that could have caused major harm to anybody that used their product. Blinded by the greed and wanting to produce a well profitable product, GlaxoSmithKline withheld the information and released their drugs. With the safety data withheld and the health care representatives still passing out drud samples to hospitals and clinics throughout the United States, this could have caused a significant medical problem. The possibility of the drug medically injuring a patient would be the worst situation imaginable. The patient is not the only one that could have been injured due to the lack of research GlaxoSmithKline announced about the product. The doctors and clinics who the patients received the drugs from would also be hurt. Granted the doctors and clinics would not be hurt physically, their reputation and image could be significantly damaged if they were the ones who prescribed the drugs to the patient that ended up dead, do to a side effect that the drug caused. Doctors and clinics could lose some previous patients and creditability, but one group of individuals...
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...Delirium is marked by disorientation without drowsiness, hallucinations, delusions; difficulty in focusing attention; inability to rest and physical and autonomic over activity. Common causes of delirium are drug and alcohol withdrawal; medication side effects, infections, pain surgery or trauma, hypoxia, and acid-base electrolyte imbalances. Treatment of delirium includes determining the cause of the delirium. Antipsychotic drugs and benzodiazepines may be used cautiously when other non-pharmacological interventions have failed. (Tabors 2009) Dementia is a progressive irreversible decline in mental function marked by memory impairment and often deficits in reasoning, judgment, abstract thought registration, comprehension, learning, and use of language. Symptoms may take months to years to progress and they include poor judgment, clouding of consciousness and orientation, depression, agitation sleeplessness, Patient may become dependent of activities of daily living. Dementia may result from AIDS, chronic alcoholism, Alzheimer’s disease, vitamin B12 deficiency, carbon monoxide poising, hypothyroidism and subdural hematomas. 4.5 million People in the U.S are affected by dementia. 20-40% of patients with dementia are over the age of 85. (Tabor’s 2009) Some of the most common drugs used to treat dementia are Tacrine (Cognex), Donepezil (Aricept), Rivastigmine (Exelon), and Galantamine (Razadyne). When administering these medications to a patient it is important to remember that each...
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...available solutions. Finally, recommendation and action plans will be devised on the best route for Adnexus. The company competes in the biotechnology industry. A large portion of the market (65%) is controlled by fewer players. The market is characterized by high R&D spending. Adnexus had a successful strategic partnership with Bristol-Myers Squibb (BMS), and leadership was considering weather to further negotiate an acquisition deal with them or instead, go public. One of Adnexus key problems was the struggle to generate a study revenue stream. This is why the company has to decide on an exit route that will generate high liquidity and preserve its mission. Recommended course of action is to take the acquisition exit route. First, on average an IPO can generate up to $52.6 million, which is not enough for Adnexus expenses and operations needs. Prior to acquisition offer, BMS offered Adnexus a deal of $1.5 billion. This is why for an acquisition the company might be welling to pay more. Going public is a costly process, and public companies obligated to comply with higher regulatory standards. With a well devised multi-phase integration and implementation plan, the acquisition will be more favorable. Adnexus can sell 48% of its share and maintain the controlling part of the shares to preserve its purpose. The acquisition will provide a combined leverage the new company, more efficiency, access to resources, and greater economies of scale. Introduction Just when Adnexus was ready...
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...tactics to motivate his audience to take such actions. A reformed drug addict can inspire teenagers to prevent drug abuse, for example, or a former managing director, the company can now talk to the vendors to boost morale. The ultimate goal of an effective motivational speaker is to convince his audience to do some kind of personal or professional change in themselves. A former New York detective named David Toma is perhaps one of the most recognized motivational speakers in the United States. Toma personally witnessed the devastating effects...
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...Drug pricing and accessibility were the main issues discussed in this article. The topic was discussed in a very great debt, and it also showed how it is affecting the world as a whole. It talks about how drug price is so high in very developed countries, to an extent that even the rich can barely afford them. Most companies even go as far as suing government and others who try to work out modalities to see that drugs can get to as many people as possible. There are even cases in a country like the United States of America were people with insurance can barely afford. It is true that it cost so much to make a drug, both money and time wise, but at the same time this drugs are developed for people, to say alive. While some health activist, companies and government agencies are fighting so hard to make drugs accessible and affordable, pharmaceutical companies are also fighting to maximize profit as much as possible. Profit and utility maximization is an ethical issue, as well as it is an economic issue. If there is no balance between these two factors, there will definitely be a great reason for concern. So if drug companies fight the society and the people it should be serving in, then there is no balance. Also, there should be justification of the market system and this is archived by promoting the welfare of the whole society. In an instance where pursing profit seems to be most important to these pharmaceutical companies than anything else, then the purpose of justification...
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