Why is pharma so addicted to growth?

  • As sales of Merck & Co.’s immuno-oncology heavy hitter Keytruda soared 66% in the fourth quarter to $2.15 billion, surpassing Wall Street’s expectations they were knocked because analysts want to know ‘what’s next”?
  • Pharma is obsessed with fighting and winning and dominating even if it means making bad business decisions.
  • The wisdom of setting business goals—always striving for bigger and better—is so established within pharma that it seems like the only thing left to debate is whether the goals are ambitious enough.
  • Pharma is suffering from ambition hyperinflation.

When did pharma become such a profit-driven Wall Street favorite business? It’s not good enough to have a great product selling well, now the Street wants to know “what’s next?” and it’s one of the reasons that drug companies are taking on massive debt to acquire other companies.

The current pharma business model is dead

The current business model is pretty transparent. Develop a new drug, or buy one, charge big bucks and build annual price increases into the model and get every drop out of the lemon except those last drops are usually very sour.

Even if you generate great revenue and success Wall Street always wants to know “what’s next?” and is going to punish you if your pipeline doesn’t promise growth.

But what about just serving current customers very well and making enough money to keep shareholders and bean counters happy? Why can’t Merck, for example, lower the price of Keytruda when a biologic generic comes along?

The fact of the matter is that the expectation of continued hyper inflated growth within pharma is unreal. Every pharma company, it seems, is now working on an immune therapy cancer drug because they want a slice of Merck’s pie. It doesn’t make sense.

Gilead has seen sales tumble after their Hep-C drug had serious competition. Their executive team bolted and the new CEO has not reported for work yet because of his prior obligations.

It couldn’t come at a worse time for pharma

Right now a lot of people with years of experience are retiring from pharma leaving less experienced millennials to manage a very complex and changing healthcare market place.Lilly offered a lot of people early retirement but so many people left that the brain drain is now putting them at a competitive disadvantage.

As long as pharma puts Wall Street first they are going to pay a huge price for their false sense of loyalty.

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