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Flaws in the Culture and Business Model of the Pharmaceutical Industry

Originally Posted in Uncategorized by mavnurses09 on the April 1, 2009 on Mavnurses09’s Blog

Lawrence Hrebeniak, Wharton management professor and author of the new book entitled ‘Making Strategy work: Leading Effective Execution and Change’, points out that flaws in the culture and business model of the pharmaceutical industry is part to blame for the model’s breakdown.  Drug industries have become increasingly reliant on the blockbuster model in which huge investments in research are directed towards drugs that could reach huge sales volumes, and in the end generate profits for the entire organization.  When safety concerns arise, there is little incentive to follow up since the company has invested so much on the drugs.  Hrebeniak recommends that drug companies develop a culture that embraces error and points out that drug companies have enjoyed a high return on assets for decades, but he predicts tougher times ahead. He also predicts that the Federal Drug Administration (FDA) is going to get tougher leading to significant change in industry.
According to Robert Fields, a professor of health policy at the University of The Sciences in Philadelphia and a Wharton lecturer, there is an institutional culture within the FDA which presents an inherent conflict of interest. This was in response to an announcement by the Bush Administration to create a Drug Safety Oversight Board to review safety problems that arise with drugs already on the market.  He noted that this would be a step in the right direction but unfortunately the board would not be independent of the FDA since it would be made up of FDA staff and other governmental officials.  0nce the FDA approves a drug; it is an admission of failure to go back and pull the drug.  He noted that the system in Europe where drugs are reevaluated every five years and can be pulled off the market if problems arise, was more effective.

Mark Pauly, another Wharton professor suggests that Insurance Companies could play a key role in drug monitoring after receiving market approval since they have large national databases.
Field notes that in the long run everyone loses.  The way in which drugs are regulated and companies held liable as a result creates an atmosphere in which if a drug is not completely considered safe, there is pressure to keep it off the market.  This leaves doctors and patients with fewer options.  Everyone loses: the patients who could use the drugs safely with the right label warnings, the drug companies, and if the drug is not pulled the people who might experience the side effects.


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