Three decades ago, healthcare was practiced on a regional level and structured according to the unique cultural, political and economic factors that defined its region.
But that is a way of the past, said Joseph Pieroni, GSAS ’71, former president and CEO of pharmaceutical giant Daiichi Sankyo, Inc.
In his lecture “Changes in the Healthcare Environment: Move Toward Globalization,” delivered Dec. 8 at Fordham’s Rose Hill campus, Pieroni explained that the sharply rising cost of healthcare has forced the industry to expand beyond the regional level to operate in a multi-national market.
“In order to recoup the cost of development, global development and commercialization is a must,” Pieroni said.
A 40-year veteran of the pharmaceutical industry, Pieroni said that changing regulatory practices in drug manufacturing has placed a strain on research and development.
“The productivity of innovators is going down because of challenges with regulatory agencies,” he said. “Products that a few years ago would’ve cost $150 million to make now cost $600 million… I don’t think Advil and Tylenol would’ve been in our medicine chest in the current regulatory environment.”
In addition, the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, amplified competition between brand name drugs and generics. Under Hatch-Waxman, pharmaceutical companies can market their brand drug exclusively only until its patent expires. Following that period, manufacturers can seek approval for a generic version that is biochemically equivalent to the brand drug. Once approved, generic manufacturers are permitted access to all data relating to the brand drug.
Since the 1984 bill, generic drugs have grown to occupy nearly 70 percent of the U.S. prescription market. As a result, Pieroni said, research and development has suffered. While the cost of drug development continues to increase, cheap generics, which can sell for 90 percent less than a brand drug, are dominating the market.
“It’s very difficult for a company to introduce a product that can meet that competition,” Pieroni said. “The enormous cost of discovering and developing innovative products is forcing smaller companies out. Only larger companies with global reach will survive.”
The situation is similar in other countries, he added, where brand drugs cost substantially less than even in the United States. Consequently, many foreign companies have increased their presence in the United States, where they can profit more, encouraging multi-country research and development. Both of these factors, Pieroni said, ultimately influence medical practices.
Pharmaceutical companies are not the only sector facing challenges, he pointed out. Because of the changing environment and rising costs of healthcare, all of the main constituents of the industry—providers, patients, payers, such as governments and private insurance companies, as well as pharmaceuticals—are feeling the strain.
“Healthcare cost is a huge burden to society,” Pieroni said. “Pressure is increasing on all stakeholders to contain costs… The model must change.”