Big Pharma making big cuts in R&D

According to reports, the axe is coming down all over the pharma world on research and development projects that are not yielding immediate results.

AstraZeneca (Atacand, Crestor), GlaxoSmithKline (Advair, Boniva) and Pfizer (Benadryl, Lipitor) have all already begun to scrap projects, while others like Sanofi-Aventis (Allegra, Plavix) are about to pick up the trend and start making cuts.

The cuts come as no surprise, as big pharma companies have been seeing there pipelines shrink since 1998, when the trend to buy out drug rights from smaller bio-tech companies began.

Despite the increased cost efficiency of buying drugs from smaller bio-techs, I am not so sure that big pharma is going to like the end result of their decision.

Stephen Foley raises some excellent questions in a recent post, saying

those calculations about the benefits of in-licensing over in-house could change rapidly if the competition for licensing deals, which has been getting more ferocious for several years, increases dramatically. It could be that they will regret swinging cuts to their R&D budgets sooner rather than later.

And there is another reason for executives to pause. There are very great political benefits from drug companies being able to trumpet the life-changing discoveries that have emerged from their research labs and their scientific trials. Yes, these are companies that have manipulated the publication of scientific data, made over-reaching claims for their drugs, and practiced price gouging of government health and insurance services, but they are also companies that lower our cholesterol, shrink tumors, keep diabetes in check and lift the burdens of depression. In the UK, there is an explicit compact with the government on this score: drug prices charged to the National Health Service are set to allow for investment in research. In the US, the good works of drug research help keep in check the demands for re-importation of drugs from lower-priced Canada, and other cost-cutting measures.

It sounds like big pharma is trying to have their cake and eat it too; outsourcing research and development to cut costs while still maintaining control over patents on drugs to protect their profits.

Cutting the cost of research and development is like cutting off your leg to lose weight. Why not cut the fat of advertisement out first. After all, aren’t doctors suppose to tell us the medicines we need?

After they get rid of the cost of research and development, what excuse will big pharma have left to overcharge consumers?

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