Pharmaceuticals - Political pressure

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BBC News  Aug 21  Comment 
MPs demand details from Chancellor about possible political pressure over failed Co-op plan to buy 623 Lloyds branches.
guardian.co.uk  Aug 6  Comment 
After intense political pressure, Walgreens decides to stay in Chicago, rather than take advantage of Alliance Boots' domicile in Switzerland The US drugstore chain Walgreens has abandoned plans to shift its headquarters to Europe as part of its...
Forbes  Aug 6  Comment 
Bowing to potential consumer and U.S. government backlash amid intense political pressure from the White House and its powerful hometown Chicago Congressional leadership, Walgreen (WAG) this morning said its takeover of European retailer Alliance...
Wall Street Journal  Aug 5  Comment 
Walgreen Co. has decided not to relocate its corporate headquarters, people familiar with the matter said, amid complications in pulling off the transaction and a backdrop of heavy political pressure from Washington to end the controversial...
BusinessWeek  Jul 25  Comment 
A union campaign to organize workers at a security company uses political pressure on a famous client
Financial Times  Jul 22  Comment 
The European Commission will take a decision on what to do in September, but meanwhile political pressure is mounting in Europe
Forbes  Jul 14  Comment 
Despite mounting political pressure in the U.S., drug maker AbbVie appears on the verge of convincing Dublin-based Shire PLC to consider a sweetened offer of nearly $54 billion for the Irish pharmaceutical company.
guardian.co.uk  Jul 9  Comment 
City grandee will consider lessons from the £3.3bn privatisation, as MPs prepare to publish report critical of Vince Cable The government has bowed to mounting political pressure and announced a review of how it handles privatisations following...
Wall Street Journal  Jul 2  Comment 
European Union antitrust authorities approved Telefónica SA's $11.7 billion takeover of German mobile operator after a lengthy review marked by political pressure and an unprecedented revolt by national regulators.
Forbes  Jun 24  Comment 
Walgreen Co. (WAG), closing in on key deadlines in its three-year plan to acquire European drugstore giant Alliance Boots, said an inversion remains on the table that would relocate the iconic brand from the U.S. to take advantage of a loophole...




 
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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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