Crestor, Lipitor...or the Generic

[disneysteve]

I didn't say that.

I said the business model: research new drugs to make money. vs making things at the cheapest price possible. When not being able to make things at the cheapest price will kill you, you tend to spend extra efforts at it and sometimes thing break when cut too close.

I'm not sure people understand how generic drugs work from a business standpoint.

The profit margin on generics is much higher than the margin on branded drugs. The stronger cost-cutting incentive actually lies with the brand manufacturer, not the generic one. The generic company has it relatively easy. All they have to do is produce the product. The brand company has to recoup billions in development and marketing costs.

[sv2007]

I'm not sure people understand how generic drugs work from a business standpoint.

The profit margin on generics is much higher than the margin on branded drugs. The stronger cost-cutting incentive actually lies with the brand manufacturer, not the generic one. The generic company has it relatively easy. All they have to do is produce the product. The brand company has to recoup billions in development and marketing costs.

Can you cite reference?
Because I've put money into drugs and earning reports don't support you at all.
Even the total cost including R&D, the big names are making more money.
Now how can that be if what you say is correct?

[Like2Plan]

Do you really believe that big pharma companies (Merck, Lilly, Pfizer, etc.) are not focused on cutting costs and maximizing profits?

I think that is true, too, but I also agree with sv2007 that they have a brand name to protect.

Look at what happened to Tylenol--they took a huge hit when they had the deaths from product tampering. It took the company a long time to recover from that.

[disneysteve]

Can you cite reference?
Because I've put money into drugs and earning reports don't support you at all.
Even the total cost including R&D, the big names are making more money.
Now how can that be if what you say is correct?

Brand companies make more money in absolute dollars because the amounts involved are larger but generic companies have a higher profit margin.

[Like2Plan]

I find it so amusing that people in one thread you've got someone saying how Big Business are such Good Guys, using high quality stuff, yet in another thread ("Question about bank to bank transfers in the USA") how Big Business is trying to screw us.

I don't think anyone is saying that. But, I feel you can make "Big Business" more accountable.

[sv2007]

Brand companies make more money in absolute dollars because the amounts involved are larger but generic companies have a higher profit margin.

Oh man, sometimes I don't even know where to begin : )

Ok, since you don't seem to care about GAAP or anything using in annual reports, let's use a simple question and exmaple. Why wouldn't a brand name company make generics if , as you say, margins are higher? Now, look at it another way: If company A uses $10 to make xyz and no-name Company B wants your business, it'd better make it less than $10 to get the same margin (assuming people buy brand name is it's the same prie as generics); compute the margins yourself and you'll find logical holes in your statement immediately.

Read the reports and it'll outline these things of this exact nature very clearly.

Business is pretty efficient (usually); and high margin business with little barrier to entry gets cut down quick!

[disneysteve]

Why wouldn't a brand name company make generics if , as you say, margins are higher?

They do. I already mentioned that.

The top 2 generic companies in the world are Teva and Novartis, both long-time makers of brand name drugs along with being the leaders in the generic marketplace.

high margin business with little barrier to entry gets cut down quick

I never suggested that getting into the generic business was easy. On the contrary, it's very difficult and highly regulated.

[rennigade]

Good luck with that. 80% of prescription drugs sold in the US come from India or China. Of the remaining 20%, a fair number of those come from other non-US sources.

If you limit yourself to drugs made in the US, you're going to have a really tough time treating pretty much any condition that you can think of.

Yup...still important to read labels and try to get stuff made here. Funny you should bring up china and india...they're some of the worst offenders. Europe isnt too bad.

Just more of a reason to find alternatives if you have a certain condition without always going for a pill. Exercise anyone?? Eating healthy maybe?? Just a thought

[Nutria]

Brand companies make more money in absolute dollars because the amounts involved are larger but generic companies have a higher profit margin.

This seems not to be the case.

Teva
Merck

[disneysteve]

Just more of a reason to find alternatives if you have a certain condition without always going for a pill. Exercise anyone?? Eating healthy maybe?? Just a thought

For sure. The vast majority of what I treat day in and day out is preventable, self-induced illness. Prescription drug use would plummet if people would take better care of themselves.

[disneysteve]

This seems not to be the case.

Teva
Merck

So Teva is at 13.22% and Merck is at 12.08%. Not a huge difference but still a bit higher for Teva which is the #1 generic company in the world. They also sell brand drugs, though, so they are a hybrid company, not a pure generic producer.

[Nutria]

So Teva is at 13.22% and Merck is at 12.08%. Not a huge difference but still a bit higher for Teva which is the #1 generic company in the world. They also sell brand drugs, though, so they are a hybrid company, not a pure generic producer.

13.22% and 12.08% for just this past quarter. Looking back over time, Merck has a slightly higher net margin.

[creditcardfree]

That's just so, so, so wrong for so many different diseases.

My uncle was a health food nut, but died of cancer at age 58. Would have painfully wasted away many months earlier had we not surreptitiously doped his disgusting health food smoothies with ice cream in order to make them more palatable and boost the calorie count.

Nutria, sorry to upset you. I don't doubt that the ice cream increased your Uncle's calories which I'm sure did help him live longer.

My only point is many people recover fully from some medical problems through intense nutrition. Some drugs simply cover up symptoms. There is a lot of information out there supporting this, but I'm not going to try to convince you one way or the other. And, of course, my statement wasn't intended to cover ALL situations.

[Nutria]

Nutria, sorry to upset you. I don't doubt that the ice cream increased your Uncle's calories which I'm sure did help him live longer.

My only point is many people recover fully from some medical problems through intense nutrition.

The operative word is "some". And they mostly have to do with First World Problem diseases.

Some drugs simply cover up symptoms.

Carbamazepine sure does "cover up" my "symptoms", but no amount of açaí and quinoa are going to cure what causes my seizures.

There is a lot of information out there supporting this, but I'm not going to try to convince you one way or the other.

Anecdotes don't count. Even ones that people believe must be true, because it's So Obvious. Like sugar causing hyperactivity in children.
More studies:

http://www.ncbi.nlm.nih.gov/pubmed/7963081

http://www.nejm.org/doi/full/10.1056/NEJM199402033300501#t=articleResults

[Like2Plan]

I remember reading some news on this where brand name drug either lower price or started a generic label themselves to discourage the onset of cheap generic drugs. I only casually read the news because I have some drug company shares so got the news feed and it wasn't too relevant to my investments; i.e. I can't recall precisely. Anybody else remember this?

This is the article that I remember on this: Prices Spike for Some Generic Drugs
From the article:
"Because brand-name drugs reap such huge rewards, pharmaceutical companies have begun to resort to controversial ways to protect their monopoly. One strategy is to change the formula — to create a time-release version, for instance, that continues to remain under patent. Another strategy has been dubbed "pay for delay." "Essentially, brand-name drugmakers pay generics not to enter the market," explains Geoffrey Joyce, an associate professor of pharmacy at the University of Southern California who studies drug policy.

One of the most egregious examples he cites is Plavix, an anticlotting medication prescribed to prevent stroke. When the patent was challenged, the company that makes the drug agreed to pay a generic manufacturer tens of millions of dollars not to enter the market. "The brand-name drugmaker wins because they get to go on charging high prices," Joyce says. "The generic companies win because they get paid not to make a drug."