Official 2004 State of the Union Address Thread

[revprez]

Revprez, you could be correct, in theory, but if the industry is as volatile and high-risk as you claim, we'd see drug companies reporting quarterly losses far more frequently than they actually are.

They do. During a pharm's life cycle, it will show positive earnings when its R&D is attracting investment (pharms "derive
the bulk of their value from a patent or patents and young start up companies," pg 33) and post weak or negative earnings for the rest of the time. Because weak and negative earnings are actually inherent risks in pharm investment, it's not given the spotlight in the news.

They've got all the demand in the world, literally, and those companies are a veritable cartel.

If they got together to set prices and/or avoid inter-product competition, I might go along with that. But the fact remains that in 1993 "me too" drugs made up 58% of the R&D investments simply because there was a lower risk in bringing those to the shelf. Pharms aren't colluding to fight off competition, but they're competing with each ohter.

They've maintained sky-high profits (actually, the highest of any industry in existence) consistently. They can afford lower prices.

I keep hearing this assertion, but unless you have some proof that they are gouging and not just meeting their investor's high risk expectations then I'm less inclined to fault them.

The only reason they charge so much in America is because we're the only government that allows them to get away with it. European drug companies must live with price ceilings in their principle markets, and they're still very profitable and have enough leftover for R&D.

European drug companies due very little R&D compared to American drug companies; in fact, American dollars finance up to 40$ of what they do. The fact remains that American R&D spending is far higher than European spending because American firms can afford to do more; a complete reversal from ten years ago. For that reason, no new Nobel Prize for medicine has been offered to a team that didn't include at least one American since 1950.

Rev Prez

[revprez]

And, by the way, if a company can't impress its investors by any means other than promising to charge excruciating amounts of money for their products because they have no price ceiling and know that people will pay, they hardly have my sympathies.

It isn't just the company, it's the entire industry. The pharms didn't write the approval process or the patent law. They get at most five years to put their product, the one they research and developed on their own, on the market without generics, and zero years to avoid competing with "me too'ers" from competing pioneer drug companies. And if anyone's to blame for the ridiculously high prices, it's the other countries who leech off of American innovation without paying their fair share.

That's reprehensible abuse of their position in the market, and if they dug themselves into a hole where they must charge up the ass for their products or investors will scatter because of that abuse, that's their internal problem.

Or, they can stop doing so immensely. Would you like to see Celebrex clones jump over 60% of R&D costs? Seriously, if there's no money to be made in pharmaceuticals who's gonna do it? In Canada they have mass strikes amongst their doctors who are sick and tired of being effectively taxed upward 40 to 50% of their income while their workloads increase and pay remains flat. What makes you think that people will decide the investment in drug discovery in the states will be worth the principal risk involved? You'll have more mergers, less drugs, and less competency. We know this; it's happened in Europe.

They're fucking rich, so they can afford to hire some new investment recruiters and marketing people. Other companies entice investors by showing them that products are useful, needed and solve a problem, not by saying, "Oh, we'll just charge up the ass for it, don't worry."

How do you think drug discovery works?

Rev Prez

[revprez]

A large proportion given antibiotic resistance in this day and age. The doctor is at fault as much as the consumer in every respect and the dwindling number of drugs capable of tackling the higher calibre bacterial infections shows that overuse or improper usage has taken its toll.

That doesn't answer my question. I want a number.

And what? It was a statement to show the drug companies avidly try to get many drugs easily attainable without prescription.

And what's the point? I could understand if you were arguing that they avidly try to get as many drugs as possible onto the shelves rather than behind the counter, but so what if they make non-prescription drugs? The cost increases in this country are in prescription drugs.

It’s not improper use, where the hell did you get that from?

You suggested that people are better off sucking lemons. Claiming they're substituting a higher cost alternative at the behest of some company seems to me that some said company is improperly advertising its product.

And if they didn’t like lemons, why are they buying Lemsip made from *gasp* lemons?

I hate apples, but I love apple pie. Go figure.

As to the revenues brought in, a sizeable chunk given this is a leading brand “flu cure” during the winter months. It obviously doesn’t rake in as much in mid-summer.

Well, only one in five drugs recoup their losses.

And the paracetamol. Yes, other than alcohol and the analgesic, there is nothing else there.

So what's the problem?

The first person to cure a viral infection with drugs will win a Nobel prize. But this just illustrates that there is actually NO benefit from some drugs. Zovirax is a drug used to combat the herpes simplex virus and it sells well, but the aciclivir active ingredient doesn’t stop the thing, just hamper infection rates. But not everyone knows that so a placebo effect can help in the long run as well you could say. If GSK did happen to make some miracle anti-viral drug next week, can you imagine how much cash they’d make? Look at Viagra. That alone made over $2.5B for Pfizer in the first year. That’s just one drug which now has many copies, but to have something even more revolutionary and actually aid medical science such as anti-virals, that’s a Holy Grail.

I'm not familiar with the data on Zovirax so I'll pass on that. However, the point is that if GSK breaks big on a new discovery shareholders get paid big for their investment, because the likelihood is you're not likely to stumble upon some anti-viral miracle and in the meantime you've got to deal with "me too's," generics and generally lousy earnings compared to your star moments.

You do know that two of the biggest drug companies, GSK and AstraZeneca are British and thus European?

Yes, which makes you wonder why Pfizer spends [url=http://www.medtrack.net/research/Servic ... lyst#list5]60 percent more[/url in R&D than Glaxo and twice as much as Astra.

Market fluctuations like that is nothing to be concerned about; 20c on the US market is hardly a turn for the worst.

Market drops like that are typical for pharm companies who have not attracted interest in the principal risks their about to assume. This is a full two months tracking after the announcement was made.

And far more potential profit and given the wide range of pharmaceutical companies recruiting every month in New Scientist across the globe, I’d have to say that the industry isn’t as risqué as you think it is.

It's high enough risk/returns trade off enough to justify the high profit margins and $2/shr dividend payouts.

It is by all means a big market with major profits to be had. You accept these risks, quite frankly, if you’re investing and don’t expect risks then you’re an idiot. For all the potential pay off, these risks don’t come as any surprise.

Yes, but if you expect higher risks you expect higher pay offs.

Rev Prez

[Iceberg]

Revprez, the dividends on pharms are ridiculously out of proportion to the actual risks.

[LadyTevar]

As a side note: Senator Robert C Byrd said that the President's speach was 'All hat and no cattle'.

[revprez]

Revprez, the dividends on pharms are ridiculously out of proportion to the actual risks.

Got any proof?

Rev Prez

[Admiral Valdemar]

That doesn't answer my question. I want a number.

It’s a fact, not a number. Antibiotics have been used excessively to the point of becoming rarities in being effective countermeasures to even common bacteria. That is why drugs companies are trying to get all the talent they can to help form a new line of defence to counter the likes of MRSA or god forbid VRSA. This isn’t a matter of “We see money here” it’s a matter of “If we don’t bloody do something we won’t have any patients left to buy drugs”.

And what's the point? I could understand if you were arguing that they avidly try to get as many drugs as possible onto the shelves rather than behind the counter, but so what if they make non-prescription drugs? The cost increases in this country are in prescription drugs.

It was merely an indication of the type of strategies modern drug companies go for now that, at least in the UK, new gov’t legislation allows higher dosages to be administered over the counter. OTC medicines make as much of a difference as the hard-line stuff and if Joe Public can get them without going to the GP then profits may inevitably rise, for that product at least.

You suggested that people are better off sucking lemons. Claiming they're substituting a higher cost alternative at the behest of some company seems to me that some said company is improperly advertising its product.

It’s not that fact, actually. The point is, to anyone who has studied virology (that’d be me) I know that sucking a lemon and taking paracetamol is just as effective. You can, of course, always buy Lemsip Max Strength (the “max strength” implying it’s going to the limit of new gov’t dosage laws) but the fact is I can use a homemade alternative. The company is simply filling a niche which the majority of desperate flu sufferers will squabble over for their products. Call it a rip-off if you will, but it’s not dishonest, good PR I’d say.

I hate apples, but I love apple pie. Go figure.

Eh, personal preference is an odd thing.

Well, only one in five drugs recoup their losses.

Depends on the market. I’m thinking once we see the main players of the drug industry get their act together like Glaxo Wellcome and Smithkline Beecham did then we may see a turnaround in marketing strategies. It can be a demanding task trying to get new drugs to take off and meet their projected goals. Some do poorly, others are blockbusting.

So what's the problem?

It’s a con.

I'm not familiar with the data on Zovirax so I'll pass on that. However, the point is that if GSK breaks big on a new discovery shareholders get paid big for their investment, because the likelihood is you're not likely to stumble upon some anti-viral miracle and in the meantime you've got to deal with "me too's," generics and generally lousy earnings compared to your star moments.

I’m sure they all go through that phase, it’s hardly fair to say one company makes the pioneering stuff and the rest act as copy-cats. It’s hit and miss, as with any industry. Ford cars made a lot of advances before many other companies, but you’d hardly call investing in anything other than Ford as bad business. The rise of the megacorporations like these pharmaceuticals is a new thing and with the new technology we have you’ll see many more mergers in order for any real kind of competition to stay in the game, much like the car industry had to do and aerospace since costs were spiralling out of hand.

Yes, which makes you wonder why Pfizer spends [url=http://www.medtrack.net/research/Servic ... lyst#list5]60 percent more[/url in R&D than Glaxo and twice as much as Astra.

Costs mean nothing if you don’t have the expertise. I’m no lover of number crunching, but I do know that throwing money at a problem, as is common in many American companies in the past, isn’t always the answer. These companies have the skill still as do the likes of Pfizer even if they spend less than the US company. Having the funds is one thing but money doesn’t make drugs on its own, people with skill do.

That’s why I’m seeing many biotech companies have to merge to meet the demanding costs, though they have the skill to get where they want, teams work better.

Market drops like that are typical for pharm companies who have not attracted interest in the principal risks their about to assume. This is a full two months tracking after the announcement was made.

The stock market is a volatile entity I have no delusions about understanding. I think the general economic atmosphere today is a big blow for major industry as it is.

It's high enough risk/returns trade off enough to justify the high profit margins and $2/shr dividend payouts.

I would say so, depends on the investor. Play it safe and get lesser benefits or go in for the big league stuff and take what comes at you. I’m in no state to attempt any of this, but I’d like to invest in the future in one of these companies if I work for one or any general biotech institute.

Yes, but if you expect higher risks you expect higher pay offs.

Rev Prez

Again, I’d have to say case-by-case. No one could’ve predicted Viagra’s success, at least I never heard anything. That’s just life and even safe bets can end up a disaster and even the big companies can fall such as Enron or Parmalat.

I'm tired, but I hope that made some sort of sense. My field is in what these drug companies make and sell, not how much the fat cats and investors line their pockets with.