Does Big Pharma still exist?

Jul 28, 2009

In many ways it was the most natural thing in the world for Roche to start aligning itself with biotech rather than pharma. Having so publicly battled for, and finally won, the whole of Genentech, it now clearly sees itself as an important biotech player.

And that would have been all very well except that, in pulling out of the pharma industry associations in the US and UK as Roche claims to be doing, it has also thrown into disarray a couple of things people have long taken for granted. The first is that Big Pharma sticks together. As recently as 2006, when my book Big Pharma was published,1 there was still a tacit understanding that that title described a collective body, one consisting of the top pharma companies whose histories were so similar, and their interests so interwoven, that they naturally prospered and fell together. Amgen was not a member of this club because it was a biotech. Teva, another big company, was excluded because it was a generics business.

Big Pharma was, it fact, little more than a business model built on big molecules, big markets and blockbuster profits. But this model, as all evidence shows, was unsustainable on a number of levels. Moreover, as individual companies started to reinvent themselves they used their surplus cash to buy up what worked, which was usually companies focused on generics, biotech or specialist drugs, anything Big Pharma hadn’t been involved in because the margins were too slim.

Figures from EvaluatePharma's World Preview 2014 show generics companies, small companies, biotech companies, any companies that aren't Big Pharma, are all still doing well relative to the performance of traditional Big Pharma. It also shows, as do IMS figures, that the global spend on pharmaceuticals shrank for the first time in its life in 2009. The picture consolidates what has been emerging for years; namely, an industry that is more diversified, more autonomous, more flexible, more collaborative, more in tune, if not with its trade associations, then certainly with payers.

A question of money
The second entrenched understanding Roche shattered by ending its membership of the US and UK pharma industry associations — the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Association of the British Pharmaceutical Industry (ABPI) respectively — is that these organisations can rely on Big Pharma funds. Roche says it will now only be a member of the US-based Biotechnology Industry Organization (BIO). "Genentech and Roche believe BIO's purpose is closely aligned with the direction of the new company and, therefore, can represent the company's interests in Washington," a spokeswoman told the Star-Ledger newspaper in the US (29 June).

Meanwhile, in the UK, Andrew Jack wrote in the Financial Times (28 June), that "the resignation has created tension within ABPI, which derives a substantial six-figure subscription from Roche, "before going on to question whether the UK body can continue to self-regulate without one of its largest members on board."

Indeed, it was these attempts to self-regulate that apparently prompted the defection in the first place. Roche had recently had its ABPI membership suspended for six months because of a serious breach of its code of practice (related to aggressive selling of its slimming drug Xenical in private clinics). After the six months was up, Roche simply chose not to rejoin. It had weighed up the pros and cons and decided not to renew its membership of the ABPI although it would, it stressed, still abide by its code of practice. Whichever way you look at it, the industry hardly seems in a position to regulate itself when companies can walk away when punished. And even less so, when the regulatory bodies themselves go to considerable lengths to win them back.

And why shouldn't Big Pharma companies walk away? Leaving aside the question of self-regulation, what is the point of an industry association that no longer reflects its members' principal earnings? The truth is the industry really is changing and the move by Roche is simply a manifestation of that fact. While people talk endlessly about how Big Pharma is downsizing and reinventing itself, they don't seem to anticipate how all this reinvention inevitably creates a situation where very different but still very large corporations start going off in different directions. Naturally, they will want different people and different bodies to represent their interests, which may or may not be those of Big Pharma.

1. Jacky Law, Big Pharma (Robinson Publishing, London, 2006).

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