What are they going to do then? The only thing they really can, slash costs. It seems unlikely the all the slashing is going to come out of everything except R&D.
We're ultimately going to have to deal with the fact that as a society we've chosen to make it extremely expensive to bring new drugs to market. Basically, our extremely high standards are/were sustainable only because we also gave them patent protection. It is going to be economically infeasible to have both extremely high standards for new drugs, then refuse to protect them for long enough to recoup their costs. There is no law of economics that says a thing must be produced; raise the cost above what can be recovered and what happens is that it won't be produced.
(And don't even think of trying to sell me on it being a net money saver. It won't be after the special interest groups are done with it.)
I'd suggest it's much cheaper to look into how we could reduce the regulations making it so expensive, rather than throw government money at a problem of the government's creation. At the point where we are seriously talking about the entire edifice collapsing one must take seriously the question whether the costs of our regulatory regime have managed to exceed the benefits. Right now we have a terribly irrational balance between those who are hurt taking insufficiently vetted drugs vs. those who are hurt by not having drugs available for years that turn out safe. The former are visible and the latter invisible, but they are still real. A classic recipe for irrationality.
That part's pretty easy. Reduce the guarantees we require demonstrating the safety and effectiveness of new drugs.
We also took in hundreds of billions less than we would have if not for the avoidable economic implosion and earlier ill-advised tax cuts.
It seems to me that this is a large part of the problem and perverts the incentives in the industry not to produce what people need but what they can sell.
There has got to be a more efficient way for doctors to discover what drugs are useful to the patients they treat.
Heck, look at the tech startup industry. Very few if any of us learn about new startups from traveling salespeople. We learn about them from websites like Hacker News, TechCrunch, TechMeme, etc.
Do we have doctor bloggers that make an effort to learn about new drugs and discover what is and isn't worthwhile?
I would imagine that the very reliance on salespeople actually makes it harder to bring good, useful drugs to market because the industry generates its own noise for doctors that they themselves need to cut through.
Every pharma salesperson I've ever known has been for all intents and purposes indistinguishable from viagra spam emails in my inbox, except for they have a pulse and "pay" for readership through expensive dinners and other niceties.
The entire drug information dissemination machine is broken.
It's plenty corrupt when you look at the big fishes, just not as much as the pharmatical industry (yet).
The majority of blockbuster drugs are about to go off of patent protection. This is where the majority (if not all) of the profit in the industry comes from, as well as a huge chunk of the rests of their costs.
It's an interesting time in the industry but the patent cliff is real and the industry is going to change quite a bit more in the next few years.
The model is absolutely unsustainable - there isn't enough blockbusters in the pipeline to replace the current, not by a very long shot. And we know what is in in the pipeline because remember it takes 7-11 years to bring a candidate from preclinical through FDA approval, so we have a very good idea of what's coming out (and what's not).
I can't really think of any industry that had their business model collapse that didn't come out of it better than they had been.
Individual players, technologies and processes may disappear, but it's not like demand will, and so long as there is demand, there is a potential market.
But ultimately I agree, we may be in for a rough transitory period as far as drug research goes, but what arises from the ashes will likely be a far leaner and more effective beast. It's not like scientists care who is paying the bills.
If this is the case, I imagine that any disruptions will occur at the C-suite level mostly, paving the way for entirely new ways of looking at the problem of bringing a new drug to market.
Every once in a while an academic research lab will spin off a biotech to develop a new compound, but in general this is not how things have been done in the past. There is a current trend to in-license things from academia to lower the companies' exposure to early R&D risk. This ignores the fact that early research costs pale in comparison to the later clinical trials where most potential drugs go to die. Cancer is particularly bad with something like a 98% failure rate. In-licensing from academia isn't going to buy you much comfort when the thing doesn't work in a phase III clinical trial.
Tell you what. When these companies stop being the most profitable in America, or even just when their EPS starts declining, I'll believe you.