I hope the post finds you well. I am sorry the post is a day behind schedule, but I wanted to wait until I had more insight into the new book I am reading for the project, Bioindustry Ethics.
Over the past week as I continued the interviews, I began reflecting on many of the assumptions/generalizations I have been encountering in the project thus far. These assumptions from outsider perspectives can take many forms and can often be simplistic or misleading such as these following examples: large pharmaceutical companies focus solely on profits; companies do little to address questions surrounding access to their products; companies put minimal effort into R&D in comparison to marketing and promotion of products. Continue reading
I hope last week’s economics overview provided a beneficial background to the subject. That background will be important today as I review the past week of interviews. This past week I conducted two interviews—one with the CEO of a small vaccine technology company and the other a chief business officer of a small pharmaceutical company. During the interviews I was able to learn a few things—1) I still have much to learn on the business side, 2) companies experience financial strain that academics don’t always discuss, 3) in order to avoid financial strain, companies are exploring business alternatives 4) there is unfamiliarity with prize funds and 5) I learned some new perspectives of ethics in the industry. In the subsequent paragraphs I will be elaborating on these points.
In both conversations I quickly discovered the business side of the industry is very complex. There are many factors affecting the development and operations of the business that I had not understood well until the interviews. Among these lessons was an emphasis on the financial strain businesses face bringing the patent to product. In the past 15 years, the interviewees stressed the different investment atmosphere. Because of the high R&D costs, companies rely on attracting investors or receiving funding from a variety of sources. I was told that 15 years ago it was possible to receive investment from venture capitalists solely with a patented idea. Now, companies must first be able to demonstrate the efficacy of the product and in many cases safety in the form of stage 1 clinical trials before venture capitalists are willing to invest. Continue reading
As promised last week, I will be discussing some of the economics surrounding the project and then relate that to the ethics discussion.
From an economic perspective, the industry presents a unique set up. On the demand side (in this case the consumer side) which includes everyday people like you and me, there are several unique aspects: medicines are largely controlled by prescriptions and we place a high value on life. These factors and others lead to a demand from the consumer that is largely insensitive to price changes, commonly called inelastic demand.
On the supply side, there are additional unique factors; most importantly is the high cost of research and development of drugs. The development can be broken down into these simplified stages: drug discovery/development, pre-clinical trials, clinical trials, FDA review. All of these stages lead up to a final cost that can be very high. Industry estimates place the production cost to be $800 million (Sampat, 2012).
Furthermore when we look at the market for innovation of new drugs, we can view it as knowledge. Continue reading