Case Study: Merck And The Pharmaceutical Industry

My research this week focuses on the case study Merck and the pharmaceutical industry, (De Wit, & Meyer, 2010). In the past, the pharmaceutical industry was an investors dream providing profits even in a volatile market, however this dominance was not overlooked. The government along with health insurance companies stepped in to control the growing costs of prescription drugs by buying in bulk, thus reducing individual costs, (De Wit, & Meyer, 2010). The competition is also playing a key part in reducing costs by producing similar drugs at reduced prices, (De Wit, & Meyer, 2010). At one time, a patent would keep the competition at bay, but with the production of similar drugs and patents soon expiring the generic drug companies became very …show more content…
The patent process was initially very effective in holding off the competition, but as time progressed the competition became clever in methods of getting around the patent by producing similar drugs that would follow that fine line of infringement, (De Wit, & Meyer, 2010). Another problem facing these big companies was once the patent expires the generic companies would move in swiftly absorbing all the profits leaving the original manufacturer out to dry, (De Wit, & Meyer, 2010). This is obviously a very competitive cut throat industry. According to the author, several of this big manufactures will soon be faced with expired patents, therefore opening the flood gates to competition, (De Wit, & Meyer, 2010). There is a patent extension process that can buy these manufactures additional time, however this can be a lengthy process and very few are actually granted an extension, (De Wit, & Meyer, 2010). The development process for new drugs is a time consuming endeavor, usually taking up to seven years to introduce one new drug to the market, (De Wit, & Meyer, 2010). The amount of money invested can easily exceed the one billion mark, (De Wit, & Meyer, 2010). To add to the lengthy and costly process the pharmaceutical companies are also faced with strict regulations enforced by the Food and Drug Administration (FDA), (De Wit, & Meyer, 2010). In order to survive this brutal …show more content…
Eventually, Merck decided to venture in this direction with biotech firms, spending only 5% of their research expenditures for outsourcing development, (De Wit, & Meyer, 2010). According to the author, outsourcing is on the rise, with a future projection of 80% of research and development being conducted by biotech firms, (De Wit, & Meyer, 2010). Merck on the other hand is somewhat resilient to the notion of outsourcing research and development on a grand scale. Their outlook is to remain self-sufficient, keeping their research and development in house with very little outside involvement, (De Wit, & Meyer, 2010). The idea that Merck is struggling with is that without the talent in house to recognize marketable products sound decision regarding biotech firm investments are questionable, (De Wit, & Meyer,