Pharmaceuticals - Political pressure

RECENT NEWS
New York Times  Mar 22  Comment 
The president’s second pick to lead the Labor Department told senators he would not allow partisan considerations to influence his decisions.
Wall Street Journal  Mar 20  Comment 
Eli Lilly’s disclosure on net drug prices should help reduce public and political pressure on the industry.
The Economic Times  Mar 17  Comment 
An easing in US banking regulations could bring political pressure on lenders in other regions, including India, to follow suit, said Long.
Financial Times  Mar 16  Comment 
As political pressure intensifies, friends, colleagues and even spouses are reporting each other for a range of offences
Financial Times  Feb 24  Comment 
Murilo Ferreira rejects speculation he came under political pressure to step down
Automotive World  Feb 22  Comment 
Restructuring Opel while keeping to existing labour agreements won't be easy. By Megan Lampinen The post Opel restructuring challenged by PSA promises and political pressure appeared first on Automotive World.
The Times of India  Jan 25  Comment 
The arrest of ex-IDBI Bank chairman Yogesh Agarwal has shocked bankers, who see the move as a witch hunt against executives powerless to act in the face of political pressure and forced to extend loans to companies against their better business...
The Economic Times  Jan 24  Comment 
CBI's arrests on Monday shock bankers, who see the move as a witch hunt against their powerlessness to act in the face of political pressure.
Wall Street Journal  Jan 9  Comment 
Utilities are closing U.S. nuclear-power plants as they face competition from cheaper sources of electricity and political pressure from critics.




 
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Prescription drug prices are often brought up in debates about the U.S. health care system as a whole. Many claim that pharmaceutical companies overcharge for their prescription drugs, making quality healthcare too expensive for some to afford. Drug companies cite the high costs of drug development as the reason for high end-user prices. They also often decry the length of patent protection, saying that they have to recoup all the money spent on development within a relatively limited period of time, forcing them to charge higher prices. Nonetheless, there is growing political pressure to lower prescription drug prices and relax the restrictions on generic drug production, despite pharmaceutical companies' warnings that this could slow or hinder the development of life-saving drugs.

An example of this political pressure is the recent bill passed by the House of Representatives aimed at lowering prescription drug costs for Medicare recipients. The bill repealed a previous provision that prevented the Secretary of Health and Human Services from negotiating with drug companies on behalf of Medicare recipients. Instead, the new bill requires that the Secretary conduct such price negotiations. This is aimed at lowering costs for Americans enrolled in Medicare prescription drug plans, though it would save the government money as well.

US Federal Reserve chairman Ben Bernanke warned of rising health costs and the effect it may have on the government budget. Lower income households would be the hardest hit because they depend the most on government help.[1]

Companies that benefit from increased regulation of pharmaceuticals

Health insurance companies

Companies hurt by increased regulation of pharmaceuticals

Pharmaceutical companies

The drug development process is costly and time-consuming, taking an average of $800 million and several years to develop just one commercially viable drug. Pharmaceutical companies cite these as reasons why they're forced to charge seemingly exorbitant prices for their products. If political pressure were to lead to increased regulation of drug prices or a relaxing of rules governing generics, large pharmaceutical companies would be negatively impacted.

Among the biggest issues facing the industry is the meaningful decline in the pace of new drug introductions combined with the pending patent expiration of some of the highest revenue producing drugs in the industry. Merck is likely to lose 25% of its revenue to patent expiration over the next 3 years, drugs like Vasotec, Prinivil, Pepsid, and Prilosec. Pfizer faces the patent expiration of Lipitor, it's $13 billion blockbuster, in 2011. Patented drugs are coming off patent faster than new drugs are being patented. This is steadily eroding the profitability of the industry as price per pill declines dramatically upon the introduction of generic competition, and operating margins move into the single digits. Firms are reacting with cuts in R&D and Sales Expenses, and are finding growth through acquisition and the economies of scale of size. The largest firms are moving toward a model that recognizes their core strength as distribution while innovation is purchased on the outside.

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