How do you stay at the top of your league?

By: John Scott
Submitted: 2008-05-15 10:32:48
Print this article | Tell a friend | For publisher |

Rating:

 

Talk to any sports team manager and you hear the same answer. Once you are at the top, everyone else is gunning for you. They want the satisfaction of beating you, to prove they are better than you. You have to play your best all the time. One slip-up and you are yesterday’s team, the has-beens.

According to reports in Drug Topics, the online magazine, Ambien was the thirteenth highest selling brand-name drug in the United States in 2006. So ignoring all the categories of antibiotics, antidepressants and so on (Ambien is the best selling hypnotic sedative used to treat insomnia), only twelve other medications sold more by volume in the US. That makes Ambien one of the most profitable medications on the market and, not surprisingly, other manufacturers would like a slice of Ambien’s pie. But, to do that, the competition has to prove their products are as good (if not better) in direct comparison trials. As Ambien might say, “Bring it on!”

Perhaps even as recently as last year, there was investment money available to develop and bring new medications to the market. Now the credit crunch is starting to bite more fiercely, that money is harder to find. Take as an example, the Neurogen Corp., a biotech company based in Connecticut. It has a medication in development intended to go head-to-head against Ambien. But that is only half the battle. To get past the Food and Drug Administration, it needs clinical data from properly designed trials. This takes time and money. So it all comes down to priorities. Which is more important: current operations or future profits?

Neurogen has just announced it is laying off forty-five of its staff and raising some $30m with private investors to focus on just four prospects. This is a dramatic strategy. Most of the staff were in research and some in administration. So, the company has decided that one of the four prospects — to treat insomnia, anxiety, restless legs syndrome (RLS) and Parkinson's disease — must succeed for the company to survive. It does not have the capital to maintain the search for future medications. Even the more general administration of the company can be allowed to degrade. The share value fell one third on the announcement, the company having lost almost $58m last year.

But the potential value of even a flea bite in Ambien’s market share would restore Neurogen to profitability. So it has to bet its shirt on its head-to-head competitor in development. If it can produce clear clinical data that it has a safe and effective product and that product is at least as good as Ambien, it will have saved itself. The results of the trial are due at the end of this year.

What price should any company pay to chase the pot of gold at the end of the commercial rainbow? Market dominance such as that enjoyed by Ambien is not necessarily a good thing. In a capitalist society, we should encourage open competition if it benefits consumers by producing excellent products at a good price. But I worry about the forty-five staff who lost their jobs. Who is to say they would not have developed a special new medication next year? Now all they have to look forward to is next month’s red reminders from the credit card companies.

I am not arguing that companies should not compete with Ambien. Competition keeps the established player on form. But I wonder who really benefits if a biotec company like Neurogen does get a good product out there. A few already rich investors get a spectacular return. There is a new product that has to maintain a high price to recover its development costs, i.e. Ambien has no price competition so consumers get no benefit — other than being able to buy Ambien and get some quality sleep, of course. Perhaps that investment money could have been better spent on something more immediately of benefit to the ordinary consumer.

Article source: Expert Articles