Pharmaceutical Firms Finally Realizing They Need To Innovate Beyond Pills

from the squeezed-those-monopolies-dry dept

Wed, Oct 31st 2007 12:58pm — Mike Masnick

Last week we wrote about a proposed bill that would push pharmaceutical firms to turn their patents over to the public domain in exchange for prizes. As we noted in the post (and the ensuing discussion), there are some serious problems with the way the current patent system sets up incentives for the healthcare industry. It really focuses research dollars into pharmaceuticals, rather than other types of technology that would not only be cheaper to make and to use, but also much more effective in helping and saving lives. It's a fascinating area that I've been researching for a separate project, trying to help design better business models for the healthcare industry that will still allow for massive profits, but do so in a way that creates better incentives for actually keeping people healthy. There's been some interesting research in this area, and I plan to share some of my own results when they're ready (hopefully early next year).

The key, as always, is to recognize the real market that the business is in. For too long, pharmaceutical firms have believed they're in the pill making business -- rather than the "saving lives" business (even if they use the "saving lives" claim to get an emotional response when trying to push for legislation in their favor). The good news, though, is that it appears that some pharma firms are finally recognizing this. As Against Monopoly points out, the Economist notes that pharmaceutical firms are finally starting to experiment with new business models that go "beyond the pill." They're changing how they market and sell pills as well as starting to look into other areas of healthcare as well, from biotech to medical devices. The other interesting thing is that they're starting to look at interesting ways to drastically reduce the costs and time of clinical trials using technology. While this won't change their reliance on patents, it is a step in the right direction. With that diversification underway, it will hopefully be easier to show them additional new business models that can help them become more innovative, creating new opportunities to profit, without having to rely on artificial scarcity.

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Filed Under: business models, patents, pharmaceuticals

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Anonymous Coward, 31 Oct 2007 @ 1:43pm

"The other interesting thing is that they're starting to look at interesting ways to drastically reduce the costs and time of clinical trials using technology."
The way to "drastically" reduce the costs of trials is to improve the way the data is collected. So much time is wasted with data entry (read paperwork,paperwork,paperwork) and trying to comply with the FDA. It's quite insane the amount of man hours spent on this task.
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Massive Missive, 31 Oct 2007 @ 1:45pm

Jeeze
There, in your first paragraph, is the very problem with most big business today - the expectation of massive profits and the pursuit of them at all costs. Massive profits are the rare exception and should not be considered the norm. Massive profits are a sign that something is out of balance and when companies maintain massive profits it's a sign of a future calamity. Employees, customers, others citizens, companies and the country at large all pay dearly for those repeated massive profits. Then, when the mess finally tips and crashes, we all pay again - all except those who raked off their tens or hundreds of millions as the drove the companies and the market to a depression.
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Trevor, 31 Oct 2007 @ 2:00pm

A lot of pharmaceutical companies are also focusing on better ways to deliver their medicines (not everything is in pill form anymore). Things like inhalers or auto-injectors are being considered more often for more convenience for their patients/customers rather than going to the hospital and having an IV stuck in your arm for a couple of hours. In some ways, this lowers the cost of the drug to the patient (time spent, etc.) AND makes the drug more valuable because it's selling ease of use of that drug, not the drug itself.
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Danny, 31 Oct 2007 @ 2:12pm

Greed is the root...
Medication
Music distribution
Outsourcing jobs

The root of most of the troubles in those three (and many more) areas lies in greed. Like comment #2 says the expectation of massive and constantly growing profits's really hurting people. Companies will do whatever they can to score a big quick pay off so they can get away before the house comes crashing down. This focus on short term profit over long term stability keeps them from having to face the unavoidable ebb and flow of a market. Trying to apply technology to reducing the costs of phamacuticals is a noble cause but greed will just lead to history repeating itself in which companies will use the technology not to reduce the end user's price (in fact I would dare say the end user's price would go up) on pharmacuticals but to up the company's bottom line.
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Michael Long, 31 Oct 2007 @ 3:37pm

Doesn't work that way...
"The other interesting thing is that they're starting to look at interesting ways to drastically reduce the costs and time of clinical trials using technology."

And once they do so, prices will STILL remain high, with the difference in reduced costs reflected solely on the bottom line.
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Anonymous Coward, 31 Oct 2007 @ 3:49pm

Massive profits
Massive profits - what an admirable goal for the health care industry!

Plainly, Mike thinks that's just fine. How about good profits, or excellent profits, or even high profits, Mike?

Nope! Has to be massive, right? Screw the people who can't afford medicine. Who do they think they are? Human beings or something? Citizens of the richest country in history?

Yes - let's "drastically reduce the costs and time of clinical trials". So what if we have a "thalidomide type" of disaster that Europe had.

We didn't have a thalidomide problem because the FDA had teeth in those days - and actually worked for the public good. Now they work for big pharma - where the political money bribes come from.

Nothing Mike said, or anything I have seen in my 68 years gives evidence of any big business giving a flying f**k for ANYTHING except massive profits - when they can get them.

Oh, the terrible burden of FDA paperwork! Dear me! Dear me! Screw them!

And nobody mentions the government subsidized research that pharma gets the profits from.
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The Man, 31 Oct 2007 @ 4:21pm

Let me guess .......Free
Since these pill pushers are creating an artifical scarcity, and the industry (like all others) do not understand business as well as tech dirt. They need to realize that to survive and make money they have to give away their pills and make money on other streams of revenue like selling coffee mugs and do live spoken word performances. Everyone should be able to freely download the recipe for Xanax and make it in their kitchen. Phiser should get rich off of the Xanax branded key chain I buy to show the world that I make my own Xanax.

"We would all be rich if everything was free." - Mike
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dorpus, 31 Oct 2007 @ 4:22pm

Know-it-all as usual
I see Mike is sticking his ignorant nose into the healthcare industry, which he knows nothing about. Plenty of "geniuses" have gone into the health care industry before and walked away embarrassed. Does he really think he will fool all the clinicians, biochemists, etc. etc. with his harebrained schemes? Every cliche Mike mentions has already been talked about for decades, and there are many masters/PhD degrees offered on health care economics.

Despite the propensity of outsiders to whine about our "broken" health care system, it is here to stay. Everything has a reason why it works the way it does, but most people lack the maturity to understand the complexities.
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Anonymous Coward, 31 Oct 2007 @ 4:32pm

So what's your idea for containing those "Massive
I agree that ideally, pharma companies should be in the business of curing patients, not massive profits. But just saying so won't make it happen. Higher regulation or punishing the successful ones won't make it happen either.

The only way to make it happen is:
- increased competition
- a better educated customer.
- Period.

Of course, these things are harder than passing some law or regulation or taking some company to court. But then, if we, as citizens aren't going to do the hard things ourselves, can we realistically expect large pharma compaies to do hard things?

In a democracy, there are no shortcuts. (or, at least, if you take shortcuts, you end up paying far more in the end).

And, oh, democracy itself is definitely not a shortcut. (And again, ifg you tried to get a shortcut alternative to democracy (e.g. lobbying by special interests to game the system), you will end up paying more later.)
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Anonymous Coward, 31 Oct 2007 @ 5:23pm

Just free enterprise being enterprising
�The number of mental disorders that children and adults in the general population might exhibit leaped from 180 in 1968 to more than 350 in 1994,� notes Lane, Northwestern�s Herman and Beulah Pearce Miller Research Professor. In a book that calls in doubt the facade of objective research behind psychiatry�s revolution, Lane questions the rationale for the changes, and whether all of them were necessary and suitably precise.

By labeling shyness and other human traits as dysfunctions with a biological cause, the doors were opened wide to a pharmaceutical industry ready to provide a pill for every alleged chemical imbalance or biological problem, he adds.

�It might be funny,� he says, save for the fact that the DSM's (The Diagnostic and Statistical Manual of Mental Disorders) next edition, due to be completed in 2012, is likely to establish new categories for apathy, compulsive buying, Internet addiction, binge-eating and compulsive sexual behavior. Don�t look for road rage, however. It�s already in the DSM, under intermittent explosive disorder.

Link to article:

http://www.northwestern.edu/newscenter/stories/2007/10/lane.html
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Anonymous Coward, 31 Oct 2007 @ 5:28pm

Re: So what's your idea for containing those
Do you think all the knowledge and experience of the world resides within our borders? Look around.

Plenty of real innovation and profits happening in other countries that don't allow their citizens to be treated like prey. Yes - even in pharmaceuticals and other health related industries.

Denmark, Germany, England, etc.
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dorpus, 31 Oct 2007 @ 6:17pm

Re: Re: So what's your idea for containing those
Is there a pill that will cure the European disease for patting themselves on the back?
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Mike (profile), 31 Oct 2007 @ 6:27pm

Re: Massive profits
Plainly, Mike thinks that's just fine. How about good profits, or excellent profits, or even high profits, Mike?

Nope! Has to be massive, right? Screw the people who can't afford medicine. Who do they think they are? Human beings or something? Citizens of the richest country in history?

Actually, you're totally missing my point. You're not going to get businesses to change unless they can get massive profits... but what if they can get massive profits AND make medicine much more affordable. THAT is what I'm talking about here. By lowering the costs associated with creating healthcare solutions, that's absolutely possible.

And nobody mentions the government subsidized research that pharma gets the profits from.

Umm.... I talk about it all the time, as an example of why the pharma industry's insistence on patents is misguided, since so much of what they do is based on publicly funded research.
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Mike (profile), 31 Oct 2007 @ 6:30pm

Re: Doesn't work that way...
And once they do so, prices will STILL remain high, with the difference in reduced costs reflected solely on the bottom line.

Not so at all. When there are cheaper options out there, if there's real competition, prices will drop.
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Mike (profile), 31 Oct 2007 @ 6:32pm

Re: Jeeze
There, in your first paragraph, is the very problem with most big business today - the expectation of massive profits and the pursuit of them at all costs. Massive profits are the rare exception and should not be considered the norm.

But they're already making massive profits, and because of that, there's no way in hell they're going to allow any kind of real change to happen unless they know they can continue to make that kind of profit.

So which would you rather have? An impossible world where you hope and pray that these firms will agree to less profit? Or a world in which they can still make their profits, but more people can remain healthy? I'd take option 2.
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Max Powers at http://ConsumerFight.com, 31 Oct 2007 @ 7:51pm

Whats Wrong With Any Kind Of Profit?
These companies again are taking the blame for trying to make gazillions of dollars.

These are big businesses that do whatever they can to make money. They are not obligated to do anything more. If you can benefit from their product (like stay alive) so much the better.
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Scotty the Menace, 31 Oct 2007 @ 8:46pm

Re: Let me guess .......Free
Great sarcasm, "The Man," and dead on. Here's another quote for you:

"You think it's expensive now? Wait 'til it's free."

It amazes me that tech writers are so eager to give away everyone else's property. It is completely irrelevant whether giving stuff away free is a better business model. It's not your decision to make, nor is it the government's. When did it become the Congress's responsibility to impose proper business models on businesses? Are we going to follow the lead of the only avowed socialist in Congress (Bernie Sanders) and push this ludicrous bill?

"Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action." ~George Washington

Right on, George.
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Scotty the Menace, 31 Oct 2007 @ 9:02pm

Re: Re: Re: So what's your idea for containing tho
...better yet, is there a pill that will cure Europeans and Canadians for fleeing their "free" health care systems to get care in the U.S. where they don't have to wait in line for six months for routine procedures? Every country that has tried socialized medicine has, to one extent or another, backed away from it.
Pharmaceutical companies will not spend decades researching cures without the promise of profit; that is a fact. It would be nice if everyone did everything out of the goodness of their hearts and out of concern for their fellow man, but I can guarantee you that no one posting here, and certainly not the writer of this article, has yet reached that level of human perfection. You do your job because someone pays you to do it. Period.
Don't bemoan the profit incentive. It brought you just about everything that is good in your life.
"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." ~Adam Smith
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Mike (profile), 1 Nov 2007 @ 1:49am

Re: Re: Let me guess .......Free
It amazes me that tech writers are so eager to give away everyone else's property.

If you think I'm eager to give away anyone else's property you're are seriously mistaken. I've never advocated anything along those lines.

What I have said is that businesses can do a much better job making money if they learn where to embrace free as a *part* of their business model.

It's not your decision to make,

Never said it was. It's the market's decision to make. The point I've been making is that companies that don't embrace these trends will get eaten alive in the market (see the record labels for an example).

nor is it the government's. When did it become the Congress's responsibility to impose proper business models on businesses? Are we going to follow the lead of the only avowed socialist in Congress (Bernie Sanders) and push this ludicrous bill?

That's funny... did you read what I wrote about the Sanders bill? I agree that it's a bad idea.

However, I find it amusing for you to use this statement "When did it become the Congress's responsibility to impose proper business models on businesses?" from someone who appears to support intellectual property laws. Because all intellectual property laws are are Congress imposing a business model on businesses. So why is it okay for IP laws but not okay for them to adjust those IP laws?
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Mike (profile), 1 Nov 2007 @ 1:53am

Re: Re: Re: Re: So what's your idea for containing
..better yet, is there a pill that will cure Europeans and Canadians for fleeing their "free" health care systems to get care in the U.S. where they don't have to wait in line for six months for routine procedures? Every country that has tried socialized medicine has, to one extent or another, backed away from it.

Who is advocating socialized medicine here? Not I... And I certainly wouldn't consider the European or Canadian healthcare systems as being anything remotely resembling "free."

Pharmaceutical companies will not spend decades researching cures without the promise of profit; that is a fact. It would be nice if everyone did everything out of the goodness of their hearts and out of concern for their fellow man, but I can guarantee you that no one posting here, and certainly not the writer of this article, has yet reached that level of human perfection.

Again, did you read what I wrote? The whole point of coming up with these new business models is to create that promise of profit. You seem to have made a bunch of totally incorrect assumptions about my position.

The point was that you could learn to embrace important trends to make more money while at the same time making more people healthy. I don't see why anyone would be against that unless they think I said something totally different -- which you appear to have done.
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Andrew, 1 Nov 2007 @ 1:58pm

Well, personally I can't wait to read Mike's book,
What's up with all the haters on here? I'm in the health care industry, and I can't wait to see how Mike applies his amazing insight, analytical capacity, and general understanding of human nature to its significant problems. If it's a book he's writing, I'm buying it.
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DNAtsol, 1 Nov 2007 @ 5:50pm

Re:
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DNAtsol, 1 Nov 2007 @ 5:59pm

Re:
Paper work is time consuming and sorting through mountains of paper is not my idea of fun.
However, the very nature of clinical trails and what they are trying to achieve means that the can data can be collected in any two of the following ways: fast, cheap, and accurate.

Reducing cost will tend to extend the time necessary to collect the necessary data, delaying time to market.
Damn that "can't get something for nothing principle"
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DNAtsol, 1 Nov 2007 @ 6:15pm

Re: Know-it-all as usual
Quick question. Are you implying the medical care model used by the US is that way because that's the way medical care works? If so, why does every country have a unique health care system? I challenge anyone to find two countries in the world that have exactly the same healthcare system. Each system operates according to societal norms and expectations and what they consider a right vs privilege.

I'm not knocking you I'm just curious about your thoughts about why so many people say it is "broken" when it is not. It seems to me that it suggests a disconnect between peoples expectations and what they are receiving.
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Anonymous Coward, 8 Dec 2008 @ 10:58am

the problem with the medical field is that it only endorses one way of treating peoples problems rather than researching other ways. there is more than one way to do things and to cure people and what may be good for most may not be good for others.
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