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threatened to become major generic drug suppliers now appear to be backing off (e.g., Merck & Co.). Surprisingly, in 1994, the best-selling drugs appear to have held off the challenges of new generic and low-cost branded drugs. Some market inroads were made, but not the massive slippage predicted for all competing brands [80]. |
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An even greater impact on the market life of a breakthrough product has come from the introduction of me-too drugs, which are chemically different from the breakthrough compound but are based on the same mechanism of action. They compete with the breakthrough drug before its patent expires. Me-too drugs have historically absorbed a large share of R & D budgets. From 1978 to 1991, 153 NMEs approved by FDA were classified as little or no therapeutic gain, while only 42 were classified as important therapeutic gain [81]. Pharmaceutical manufacturers are finding it difficult to get me-too drugs added to managed care formularies, especially for crowded therapeutic areas (e.g., cephalosporins, beta blockers, Angiotensin-Converting Enzyme (ACE) inhibitors, nonsteroidal anti-inflammatory agents). Therefore it is even harder for companies to recoup their R & D investment in me-toos. In fact, seven out of ten marketed prescription drugs do not recoup the average cost of R & D [82]. For example, last year G.D. Searle stopped development of an antihypertensive because it was decided the drug was not sufficiently unique from the competition. Because health insurers efforts are making me-too drugs harder to market profitably, pharmaceutical manufacturers are now increasing their emphasis on potential breakthrough drugs. |
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Congress and consumer groups have accused the industry of outright greed. In 1993, seventeen companies representing two-thirds of the market publicly promised to voluntarily restrain price increases. As a result the increases in drug prices have dropped to below the inflation rate in the past year for the first time in decades (Table 2) [83,84]. Most new drugs still face competition from drugs in other classes and from other treatments such as surgery. Even new breakthrough drugs are being introduced at prices lower than those of existing market leaders [85]. This trend is likely to continue as managed care organizations require cost-effectiveness documentation and low prices to gain entrance to their formularies. |
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In almost every country, with the exception of the United States, there are strict price and budgetary controls on pharmaceuticals. There have been major pricing pressures in the past two years from health care reform in European countries and government-imposed price cuts in Japan. Pricing is a marginal option in the global market today. In certain countries this type of cost-containment measures have gone as far as they can. For example, how much further can pharmaceutical prices fall in countries such as Spain and Greece? |
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