Pharmacology II. The Business of Sick

Pharma – A Business Model from the 20th Century The pharmaceutical industry develops, produces, and markets drugs licensed for use as medications. Pharmaceutical companies are allowed to deal in medications and medical devices. They are subject to a variety of laws and regulations regarding the patenting, testing and ensuring safety and efficacy and marketing of drugs.

Pharmaceutical Milestones Morphium 1827 Merck Ger pain Aspirin 1898 Bayer Ger pain, fever, inflammation Heroin 1898 Bayer Ger pain ‘nonaddictive’ Insulin 1921 Eli Lilly USA diabetes Prontosil 1932 Bayer Ger 1st antibiotic Redoxon 1934 Hoffman-LaRoche Switz Vit C Penicillin 1942 Merck USA antibiotic Valium 1957 Hoffman-La Roche Switz sedative

2011 - Top Ten Pharma Company Headquarters Revenue USD million Employees Pfizer USA 67,809 122,200 Novartis Switzerland 53,324 138,000 Merck & Co. 45,987 74,372 Bayer Germany 44,200 106,200 GlaxoSmithKline United Kingdom 42,813 106,000 Johnson and Johnson 37,020 102,695 Sanofi France 35,645 100,735 Hoffmann–La Roche 33,547 100,289 AstraZeneca 26,475 50,000+ Abbott Laboratories 22,476 66,800

How to Make a Drug? There are 3 main stages Drug Discovery Drug Development Drug Marketing

1. Drug Discovery Structured research: chemical compound design and synthesis, invitro and animal studies 3 – 8 years 10-50 scientists cost: 2-8 Million USD Patent: dated document giving the inventor exclusive rights for manufacturing, sales and marketing of drug for 20 years The most promising drug candidate enters Stage 2: Drug Development

Drug Development Hundreds of health care professionals, administrators, lawyers, scientists Humans Trials: random, blind and placebo controlled – clinical studies Phase I: Safety - healthy subjects Phase II: Efficacy - subjects with disease Phase III: larger group, statistics FDA Application for approval of drug cost: 1 Bio USD

Manufacturing, Sales and Marketing Permits, building of production facilities – where? Packaging, branding Targeting of medical communities Advertising, Sales Rep Force revenue flow varies

Drug Market Classifications Original Drug: full priced, patent protected, maximum revenue phase: 8-10 years Generic Drug: expired patent, everybody can manufacture, price drops Orphan Drug: drugs for very small patient group/ rare diseases, little revenue, public funds help offset cost, extreme high price Me Too Drug: similar products/incomplete patent protection, lowers revenue base Blockbuster Drug: highly effective drug with large patient base, symptomatic life-long treatment, broad substance class patent protection

Economics of Drug Development Total costs: up to 2 billion USD (includes costs for failed drugs) Only 3/20 drugs can recoup that A pharmaceutical company needs to produce a block buster drug every 5 years Top Selling Drugs