Gilead Sciences Essay

The barrier to enter Biotechnology industry is high. The first barrier is the extensive requirements in funding coming from heavy expenditures in R&D, along with the risk of little to no returns or even heavy losses if the drug fails to reach the market. Regulatory environment partly contributes to the barrier as the new drug approval process can be time-consuming with relatively 89% of failure to pass through. The second barrier is specialization. Companies with knowledge in obscure diseases will enjoy low threat of new entrant for there are few experts in the field.

There are multiple health concerns worldwide and more and more drugs are needed every day. Many drugs however, are extremely expensive to develop, test, and produce. According to the Tufts Center for the Study of Drug Development (2002), it costs up to $802 million to bring a new drug to the market. In 2002, pharmaceutical companies spent $34 billion in research and development (Center-Watch, 2003). In addition to the costs, the overall time from the discovery to approve and market the drug can take up to 15 years.

Improvements in health care and life sciences are an important source of gains in health and longevity globally. The development of innovative pharmaceutical products plays a critical role in ensuring these continued gains. To encourage the continued development of new drugs, economic incentives are essential. These incentives are principally provided through direct and indirect government funding, intellectual property laws, and other policies that favor innovation. Without such incentives, private corporations, which bring to market the vast majority of new drugs, would be less able to assume the risks and costs necessary to continue their research and development (R&D). In the United States, government action has focused on creating the environment that would best encourage further innovation and yield a constant flow of new and innovative medicines to the market. The goal has been to ensure that consumers would benefit both from technological breakthroughs and the competition that further innovation generates. The United States also relies on a strong generic pharmaceutical industry to create added competitive pressure to lower drug prices. Recent action by the Administration and Congress has accelerated the flow of generic medicines to the market for precisely that reason. By contrast, in the Organization for Economic Cooperation and

U.S. based companies hold rights to most of the world’s rights on new medicines and holds thousands of new products currently being developed. As of 2012, the industry helps support almost 3.4 million jobs in the U.S. economy. It is also one of the most heavily R&D based industries in the world. In the United States, the environment for pharmaceuticals is much friendlier than other countries around the world in terms of pricing ability and regulations. Both the Pharmaceutical and Biotechnology industries have experienced significant growth in the past year with year-over-year increases of 13.02% and 34.69% respectively. It is an even more striking when looking at the past five years considering both have beat out the S&P 500 with pharmaceuticals increasing an additional 31.44% and the biotechnology sector besting an astonishing 269.3% more return than the

The company is so large that no one drug can lift it from its current sales doldrums. In addition, the company was once highly attractive to investors, but its recent stock price fell to 1997 lows. This may put pressure on the company to attempt acquisitions at a time when the company is ill-equipped to integrate a new company into its organization, and it is engaged in a cost-cutting program at a time when it may need to invest even more in research and development (McTigue Pierce, 2005).

Extremely risky drug discovery and development, lengthening development times which increase development cost, return on investments, and generic competitors.

From a strategic viewpoint, it is my belief that Pills & Co should make a play to purchase Star Genomics for these reasons:

Recently, there has been a debate about the high prescription drug prices in the United States. Accounting for 9.7% of the national health expenditure, $329.2 billion was spent on prescription medications ($931 per person) in 2011 (Linton, 2014). So what exactly is the average American getting with their $931? Well, because there is an extraordinary amount of time, effort, and energy that goes into creating, manufacturing, and distributing a new drug, it’s no wonder the prices are so high. But what other costs are folded into the prices of your prescribed medications? This review looks beyond just the research and development costs needed to take a new drug from idea to shelf by examining several journals and other credible, secondary sources, to shed some light on how much pharmaceutical companies are spending to develop, advertise, and sell their drugs.

Medicaid officials across the country are pushing for the access to the new hepatitis C drugs to be widened by state Medicaid programs because the guidelines are unreasonably strict and these medications can cost up to $1,000 per pill. The Food and Drug Administration approved the new hepatitis C drugs, Sovaldi and Harvoni, on July 24 of this year. These expenses can cost up to $84,000 for the recommended treatment period of 12 weeks. The hepatitis C drugs can help cure thousands of people with hepatitis C, which is why Federal and State officials are pushing for access to these drugs to be widened.

Even though the capital requirements are less demanding in generic pharmaceuticals, it is still a very expensive venture and extremely competitive, making it hard to penetrate as well. The biosimilar industry is undeveloped and competition is scarce, but it takes a lot of money and expertise to produce products that are as complex as these pharmaceuticals.

My uncle was not the only person to become infected with the hepatitis C virus, but in fact many people are presently struggling to keep it under control. Today four million Americans are infected with the hepatitis C virus and there are thirty thousand new cases of this virus found each year (Turkington 9). Hepatitis C takes ten thousand lives each year just in the United States, and without effective treatment the death rate is expected to triple in the next fifteen years (Turkington 9). Seventy-five percent of those infected with the virus will develop chronic hepatitis and half of those people will develop cirrhosis of the liver (Turkington 9). The hepatitis C virus is sometimes referred to as the “Hidden Epidemic” because an

On one hand, new drugs for treatment of Hepatitis C have been recently approved and introduced to the market (i.e. Solvadi and Harvoni), which is the main reason of the observed increase in the expenditure. However, these drugs cure the disease and therefore the total costs for treating the disease are expected to slow down in the future. On the other side, other drugs such as oncological treatments offer marginal improvements in health outcomes at a large increase in the cost. “The cancer drug Zaltrap, for example, was initially priced at double the price of the pre-existing

In order for biotechnology and pharmaceutical companies to market their biologics and drugs, companies must receive approval from their respective regulatory authority. The three global leaders in the pharmaceutical industry US, EU, and Japan all have their own regulatory authorities. Each have their advantages and disadvantages and as a regulatory representative. Though there is a push to harmonize regulatory requirements at a global scale for the past 20 years development and approval of global guidelines has had drawbacks in approving drugs at a globally. The high regulatory uncertainty is considered as a major barrier for efficient development of safe and effective biological therapies, hence deterring entry for large multinational pharmaceutical companies to develop innovative biological products at a global level.1

Hepatitis C virus (HCV) has become a major problem within the human population, affecting individuals from everywhere, but especially from poor regions. At the moment, 130 to 170 million people worldwide are infected with this virus and it keeps increasing at a rate of approximately 3.5 million people per year. (1) It is estimated that about 0.2 to 26% of the general population in different countries are chronically infected by HCV. (2)(3)

Although R&D has been retained by the large pharmaceutical firms, there has been a continuous decline in the R&D productivity. Controlling R&D is imperative to the success of a Pharmaceutical firm. However, as the pharmaceutical industry is maturing, there are diminishing returns to the R&D investment. Fewer and fewer blockbuster drugs are being discovered and therefore R&D is not the most value adding component in the value