While the problems with Vioxx might be scaring the CEOs of pharmaceutical companies, they have some reason to celebrate - the regulatory agencies and public policy for next four years is likely to be friendlier to the industry.
iProceed's situation assessment, however, shows that the pharmaceutical industry still needs a business model transformation. Any industry that relies on regulation as its savior (e.g. steel is a great example) does not have a very bright future unless the government starts to offer subsidies to it (the way we give subsidies to our farmers).
Here are several interesting issues that we have identified with respect to the pharma sector:
- Drug pricing has now become an issue that even a grandma in Oklahoma understands. Which means that there will be more pressure on the regulatory agencies and the government to do something about it.
- Several experts predict that some drug importation from Canada may be allowed but iProceed is still skeptical that it is going to happen during next four years.
- Market forces are more powerful than many of us like to admit. Many Americans already go overseas for medical treatment and we expect that with the advancements in communication and improvement in infrastructure overseas, this trend will grow. A major driver for this is the prohibitively high cost of health insurance in America.
- Offshore drug companies are already recognizing an opportunity to provide cheaper healthcare and drugs to Americans.
Advice to pharmaceutical industry CEOs
- Stop being in denial or hope that regulation and government will continue to be your savior forever.
- It is a great time to reevaluate your business model. You can still manage to influence policymakers so that they can drag their feet on doing anything substantive and this will give you enough time not only to come up with a new business model but also to implement it. So that when the time comes, you are ready to move on.
- While you may have the government on your side and this might give you an incentive to move slowly, offshore competitors are marching ahead. Look what happened to the steel industry!
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