Like tech firms, pharmaceutical companies acquire competitors largely for patents.But with these acquisitions can come huge, expensive problems.
One of the biggest players in the industry, Merck, is facing yet another subpoena from the U.S. Justice Department, this time over the marketing of heart drug Integrilin and antibiotic Avelox — drugs that it inherited after purchasing Schering-Plough for $49.6 billion in 2009 (via the Wall Street Journal).
And only a few months ago, the Justice Department subpoenaed Merck over other drugs, also owned and previously marketed by Schering-Plough.
It’s not an unfamiliar story in the pharmaceutical industry. The Journal reports:
The Justice Department has investigated Merck and other major drug makers for possible acts of health-care fraud in recent years, including the alleged promotion of certain drugs for unauthorised uses. This has led to some large settlements, most recently with GlaxoSmithKline PLC’s agreement to pay $3 billion to settle multiple investigations related to its drugs.
Drug companies pour tons of money into marketing — even more than R&D, according to a recent study. After all, a few million dollars advertising what could be a blockbuster drug could result in billions of dollars in revenue. Pharmaceutical sales in the United States are expected to reach $328 billion this year — which are largely split up between five key players, “Pfizer with a market share of 8.52% followed by Merck (6.11%), AstraZeneca (5.95%), Novartis (5.1%) and Eli Lilly (4.65%),” according to a report.
But in recent years, the government has finally begun cracking down on the companies’ marketing tactics — especially use of “off label” marketing. And the FDA is taking a closer look at products before they even hit the market. Just this morning, MedPage Today reported that the FDA denied Merck marketing approval for new birth control and glaucoma drugs — even though the birth control pill is already marketed in Europe (though it wasn’t disclosed as to why the FDA rejected Merck’s proposal).
What does this all mean? Several-billion-dollar profits far outweigh the short-term costs of litigation and pulling a drug off the market for big players like Merck. So companies are encouraged to take risks — and they will continue to do so, as long as there’s a market for prescription drugs. And in the U.S., there always will be.
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