Michael Steinberg at Click Broker discusses how a widespread decline in our economy will affect pharmaceutical sales. We may think that health care or medicine expenses will not be dramatically reduced by an economic downturn, but as Michael argues, people will have to make choices between their drugs and life’s necessities. Even badly needed drugs may get dropped. 
The cost-benefit analyses won’t be limited to Big Pharma but will be felt by companies selling other health promoting products. Arguably, less medication may prove beneficial, e.g., more conservative use of antibiotics, greater attention to costs, a change in attitude towards disfavoring over-medicating ourselves. On the other hand, there will be increasing numbers of people needing medication who won’t be able to afford it.
Free Market Pain for Big Pharma
The New York Times “In Sour Economy, Some Scale Back on Medications” reports on a prescription for a dose of reality for big pharma. Pfizer’s (PFE) Lipitor sales were down 13% year over year for the third quarter as consumers with limited resources must choose which medicines are most important. Drugs which don’t fill immediate needs, such as pain relief and controlling diabetes, become consumer’s lowest priorities. Feel good drugs, which help patients stay awake or sleep, become a luxury in tough economic times. And cholesterol drugs for potential future disease prevention dropout entirely.
Capitalism is about making choices and private healthcare is facing is facing real capitalism for the first time in years. Pfizer realized this and announced it’s refocusing on more value adding products. The statin days are waning. Too bad for Pfizer and rest of big Pharma that the next Administration will likely implement cost-benefit guidelines following the UK’s National Health Service, which private health insurers will likely adapt. Big biotech is not exempt, as Genentech (DNA) found out with Avastin in the UK.
When healthcare capitalism faces limited resources the industry rhetoric turns to socialism. The perversion is choice and rationing is called socialized medicine, while unlimited resources imply free market medicine. Isn’t the opposite the truth?
Seniors have to be convinced to continue buying pharmaceuticals when they hit the doughnut hole in Medicate Part D ($2510 to $5726). If the seniors don’t see immediate value they stop buying the drugs. Co-pays are also increasing for working families. For the first time since direct to consumer advertising started, consumers are questioning the value proposition of their drugs. And the drug companies have not done a very good job of creating value in the consumer’s mind.
The new mantra will be to advertise value and cost-benefit to consumers, because consumers won’t “ask their doctors” for a drug that costs too much and has little therapeutic value.
Disclosure: Author is long PFE.
