KEY TAKEAWAY: Net price hikes in the U.S. last year created $8.7 billion in net income for top pharma companies, equivalent to all of the sector’s earnings growth according a new report from Credit Suisse. Profits aren’t enough for pharma companies as The Street wants to see “growth”.
If a pharma company had a portfolio of drugs that allowed them to make profits for the foreseeable future their stock would probably tank because the so called “analysts” want to see growth (there is a reason that analysts starts with the work anal).
Given the fact that more than 85% of all Rx’s are generic and insurers want to see proof that new drugs provide better outcomes than older drugs, it’s easier to just raise prices every year and take a bigger piece of the pie that has become to be known as “profitable health care”.
The pharma executives were quick to stroke Trump’s ego to shelve talk about his promise to put a cap on drug prices and to date they have all remained quiet when it comes to the proposals to strip more people of healthcare and fire a good Surgeon General without cause. Their conscience has been replaced with a need to be accepted by the people on Wall Street who recommend their stocks thus ensuring they maximize their bonus.
Of course the way around all this is something we call innovation but when it comes to innovation the bureaucracy of most pharma organizations is their worst enemy. There are so many good, hard working, people within the industry who never get to add real value because pharma companies love people “who fit in” and don’t rock the boat. Not too long ago I was reviewing an online marketing plan for a new product launch that was innovative, creative and well thought out. Unfortunately the person who developed the plan had been given a pink slip a week after presenting the plan which management said was “too costly”. Not surprising she now works at Apple.
There was a time when pharma was not addicted to growth, when reaching out to patients was more important than the balance sheet. That changed with the influx of MBA’s who like to quantify everything without understanding their value and CEO’s whose background was more finance than drug development. Those days are behind us, but I hope that the good people I work with continue to grow and not get frustrated and say “I’m outa here”.