How the pharmaceutical business model has changed

Philippe Abecassis () and Nathalie Coutinet ()
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Nathalie Coutinet: Centre d'Economie de l'Université de Paris Nord (CEPN)

CEPN Policy Brief, 2014, vol. 4, 1-4

Abstract: The business model developed by the major pharmaceuticals after the Second World War is coming to the end of its life. This model is based on the development of "blockbusters": flagship products like Prozac or Viagra , protected by patents and with global turnover of more than a billion dollars. In following this model, firms are supposed to fund the research and development of new drugs while at the same time making substantial profits. To remain viable, the blockbuster model depends on four pillars: The protection of innovation by patents on drugs, enabling firms to benefit from a position of monopoly - Constant innovation, to regularly renew the stock of blockbusters that provide firms with their profits - Aggressive sales techniques to sell the maximum quantity of blockbuster drugs whilst they are protected by patent - A benevolent attitude on the part of the drug regulatory bodies. The failure of just one of these pillars would undermine the whole industry. It is therefore understandable that to prevent any such failure, the pharmaceutical firms have long done everything in their power to secure this model.

Keywords: Pharmaceuticals; Medicines; Innovation (search for similar items in EconPapers)
JEL-codes: L00 L65 (search for similar items in EconPapers)
Date: 2014
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