If generic drugs are too cheap, it seems (3) is the real issue here. (2) can be accounted for by large companies if they are allowed to raise the costs of their products.
(4) wouldn't be a concern if there was room to innovate on the business model of pharmaceutical manufacturing. It seems like this sort of thing would be a great opportunity for disruption in other industries. I'm assuming that the regulatory burden makes this difficult? Car dealerships, restaurants, and grocery stores all have razor thin margins as well.
I don't disagree with your assessment. (3) is a major factor in drug shortages.
There is room to innovate in the generic drug industry. Most generic drug manufacturers have R&D budgets aimed at reducing the cost of manufacturing.
However, the generic drug market is an odd one. It all comes down to price and some companies price certain generics at below cost (i.e. loss leaders) in order to gain other business.
The most interesting quote I've read was from Barry Sherman who runs Apotex, one of the biggest generic drug makers. I don't have the quote in front of me, but to sum it up: "I rarely make any profit on any of my drugs. Most of my profit comes from patent settlements and court cases I win again the branded drug makers."
Comments
If generic drugs are too cheap, it seems (3) is the real issue here. (2) can be accounted for by large companies if they are allowed to raise the costs of their products.
(4) wouldn't be a concern if there was room to innovate on the business model of pharmaceutical manufacturing. It seems like this sort of thing would be a great opportunity for disruption in other industries. I'm assuming that the regulatory burden makes this difficult? Car dealerships, restaurants, and grocery stores all have razor thin margins as well.
I don't disagree with your assessment. (3) is a major factor in drug shortages.
There is room to innovate in the generic drug industry. Most generic drug manufacturers have R&D budgets aimed at reducing the cost of manufacturing.
However, the generic drug market is an odd one. It all comes down to price and some companies price certain generics at below cost (i.e. loss leaders) in order to gain other business.
The most interesting quote I've read was from Barry Sherman who runs Apotex, one of the biggest generic drug makers. I don't have the quote in front of me, but to sum it up: "I rarely make any profit on any of my drugs. Most of my profit comes from patent settlements and court cases I win again the branded drug makers."