Pharmaceuticals, generics and health care

It is interesting how many misconceptions there are about the pharmaceutical industry. People seem to think that pharma are there to profit from their bad luck. I'm guessing that, since if everyone was healthy, there wouldn't be any customers, this is somewhat true. But, the drug prices have a strong logic behind them.

An innovative pharmaceutical company will spend from 500 million to about three times that amount in order to develop a drug. Early in this process they have to apply for a patent, good for 12 to 20 years. Taking into account the amount of time it takes to successfully bring the drug to the market, the company will have around a decade left to recuperate its initial investment and turn a profit before cheaper generic drugs can come out and take a big part of their market. Of course, the price of a drug increases with demand but there is a lot of cost involved with creating a drug that isn't included when people usually talk about the manufacturing cost of a particular product.

This is also why generic drugs can cost less, not because generic companies cut corners in manufacturing or that the drugs are of lesser quality. Generics are subject to the same regulations as the innovators. Because they don't have so much spending on R&D, generics can actually spend more on safety and quality than innovators. There are, of course differences. the pill might have a different shape or there might be other cosmetic changes which may appeal to some but be less ideal for others. But these are minor and, in a situation like Canada's, where there is universal health care, generics are an effective way to cut costs without any real sacrifice.

The United States are in the middle of a debate right now about whether or not they should adopt a universal health care system. No matter what then end result is, it is evident that they must find ways to save money (they are already paying too much as it is and costs are going up).

Even if it might hurt innovator companies in the short term, putting a greater emphasis of generics would be beneficial for them. In the long term, it would simply drive innovators to merge with generics, creating stronger companies. Competition would not suffer since, in theory, there would be the same amount of generic companies.

In the end, like pretty much everything in the world lately, the pharmaceutical industry is changing. Hopefully this will mean more profits for the companies while getting higher quality drugs for less money.

Leading one’s life

I was listening to the radio a few weeks ago where a comic was making fun of the idea that we, as adults, had no idea where we were going. We acted like we knew what was going and that this was really the difference between being a child and a grownup. Later, a friend of mine said that, as kids, we had a safety net that disappears as we grow older. We could make decisions but our parents were there to correct us if we were wrong. In the end, this really adds weight to the idea that most people, to some extent, are leaders: leading their own lives.

One of the biggest hardships of leadership is this lack of a safety net. You can have advisors, but in most cases you are the one taking the decisions and the risks. You also have to act like you are certain about what you are doing even if you have doubt lest people undermine your leadership. You are alone as a leader, the same way you are, to some extent, alone as an adult. Of course, there are exceptions and variations to this. Some people take fewer decisions in their lives than others while some haven't really passed the childhood stage and still let others rule their lives completely. Also, (some) couples have this twin leader structure within their unit that shows as a single entity when compared to the rest of society. The fact though, is that our society encourages each adult to act as the leader of their lives.

Multi-Level Marketing

If you stay on twitter long enough, you'll encounter a myriad of people offering you the business opportunity of a lifetime: the infamous Multi-Level Marketers.

As an idea, multi-level marketing is a smart one. You pay a person a very small amount of money to advertise your goods to their contacts. To make it more attractive you also pay the person that referred you that person and so on until you spent a certain percentage of your profit. For a company this means a pretty robust and targeted marketing campaign with a low initial investment. This would acutally be pretty interesting if the model didn't hinge on tricking the potential customer/employee. Indeed, the potential revenues are greatly exaggerated while the pitfalls are downplayed. It is even advertised as having your own business and while the law may consider you self-employed, the structure of an MLM is such that you have a boss, coworkers, etc.

Because of this bad representation, being too closely associated with MLMs can be damaging for brands. In the long term, the brand, rather than the current sale, is the real value. This is why most regular marketing campaigns not only advertise products but really focus on pushing the brand's image into the potential customer's subconscious. In the long term, this brand association will mean a much bigger sales network than what you can get with direct or multi-level marketing alone.

It is not to say that MLM is doomed to failure. There are several examples of companies succeeding but the MLM must always backed by a solid and wider marketing plan and a tight control of what the independant MLMers are doing.