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The Myth Of Big Pharma

By Edited Nov 13, 2013 0 0

There is a myth of "Big Pharma". A suspicion exists that some powerful pharmaceutical executives are controlling and limiting access to potential medical breakthroughs. It is not unusual to hear statements like "Big Pharma is not looking for a cure". or "Big Pharma has the cure for cancer (or Aids, or heart disease, etc), but is keeping it from the market because they make too much money on treatment that does not work."

Big Pharma



While the root of the cynicism is understandable, such absolute power is just is not possible. Why? There is no such thing as "Big Pharma". The pharmaceutical industry is actually composed of hundreds of pharmaceutical companies which include a few giants and many small companies hoping to become giants. The largest pharmaceutical company controls approximately 10% of the entire market. The top ten pharmaceutical companies control less than 50% of the entire market. This means that no one company or group of companies are so powerful to control the industry.

As a comparison, consider the automobile industry. The top ten car manufacturers control approximately 2/3 of the market. There are a few, very powerful car companies. But when the US manufacturers got lazy and failed to produce cars which met the demand of the market, these powerful giants were not able to control the market and force consumers to buy what they were producing. The powerful giant car companies were not able to prevent smaller hungry competitors from rushing in to meet the demand and take market share away. A pharmaceutical giant would have even less ability to control the market.

The difference between the pharmaceutical industry and the auto industry is that a drug has a patent protection, which usually lasts about 10 years after the drug has been launched. For that period of time, only the patent holder can make a particular drug. But after the patent wears off, the drug becomes generic and small generic companies can quickly canabilize the product and sales of that drug drop dramatically. Typically 80% of sales are lost within 2-3 years of patent expiration. Then the company better have another patented drug in order to keep the sales coming in or else that company will die.

Every drug company has drugs that will soon lose patent protection. Every drug company has competitors working to develop a better drug. Each company is frantically looking for the next big drug to bring to the market so that they can have another 10 years of good sales. There is no incentive for a pharmaceutical company to stop the search for the next blockbuster. If one company tried to stop progress on particular class of drugs, much like in the automobile industry, another company could bring a newer better drug to the market and take the market away.

If there were only a few pharmaceutical companies and if there were no generic companies waiting to devour the sales of the current products, there could be some reason to be suspicious that the "Big Pharma" was secretly working to control the market. But with the fierce competition and the ever urgent need for a new drug in the pipeline, there can be no reason to believe in the myth of "Big Pharma".


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