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Pharma And Healthcare Reform Essay

991 words - 4 pages

The Pharmaceutical industry has played a large role in American business, society and culture for many years. On March 23, 2010, President Obama signed legislation to approve the Affordable Care Act which overhauls and re-establishes America’s healthcare system. Obama’s reform seeks to provide insurance to more than 30 million Americans who have do not have insurance or were previously denied coverage. This reform will provide opportunities for many industries but specifically, the pharmaceutical industry will see much growth. However, one must look at the effect on brand-name and generic drug manufacturers individually to fully understand the ramifications.
Overall, healthcare reform ...view middle of the document...

The generic drug market has seen steady growth due to the increased scrutiny of drug prices. In 2010, generic drug manufacturers made up 78% of the market which is approximately a 60% increase from 2000. Additionally, 5 “Blockbuster Drugs’” patents will expire in 2011 which will leave roughly $10.8 billion in sales to the generic equivalents. As consumers and insurers look to lower costs, generic drugs have capitalized on these trends.
Brand-name drug manufacturers rely on intensive research and development to fuel product sales and revenue. Although extremely costly, this R&D produces many drugs that provide large revenues and continued growth. These manufacturers will also have a huge opportunity for growth from healthcare reform but this growth relies on their research and development of new drugs. Considering that approximately 21% of drugs that enter Phase I testing ever make it to market, a substantial investment must be made in order to develop a new drug. Pharmaceutical companies can spend as much as $1.3 billion to develop one new drug and approximately 10-15 years of testing and development. Additionally, only 2 out of 10 return revenues that meet or exceed R&D costs. Given these investment figures, for a company to have two profitable drugs they have to spend ~$13 billion. These investments are necessary for drug companies to remain profitable and continue development of medicines. While brand-name manufacturers will also benefit from the increase in consumers, development of new, innovative medicines will be dependent on how much of this new market they can capitalize on.
The underlying impact of the Affordable Care Act on the pharmaceutical industry will ultimately be the future of new drug development. Seeing as though generic drugs stand to capture a large portion of the new market created by this healthcare reform the amount of brand-name drug manufacturers’ income to put towards research and development will likely shrink. Brand-name manufacturers will have to find new methods of development or cut costs in other areas in order to pay for this R&D. ...

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