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Drug Firms Urged to Take New Approach

by Michael McCoy
July 5, 2004 | A version of this story appeared in Volume 82, Issue 27

A just-released report from Ernst & Young depicts a pharmaceutical industry caught between a public unhappy with high drug prices and an investment community unsatisfied with weak earnings and a lackluster new-product pipeline.

The report is the professional services firm's second annual look at the global pharmaceutical industry. It seeks to provide a range of perspectives from E&Y analysts, academics, government officials, and drug industry leaders.

Blake Devitt, E&Y's senior pharmaceutical practice leader, warns that U.S. consumers and policymakers are becoming unwilling to accept the drug-price disparity between the U.S. and other developed countries. The gap, caused mainly by differences in public pricing policies, is precipitating calls for legislative action and prompting consumers and local governments to turn to Canada for imported drugs.

"Rather than merely continuing to oppose price control and reimportation initiatives at the certain risk of consumer backlash," Devitt writes, the industry must take the lead in addressing the situation. He says it must address geographic price discrepancies head-on while communicating more effectively to reestablish its credibility in the health care arena.

Kathy Smith, an E&Y pharmaceutical practice leader, asks whether industry executives are doing enough to address the regulatory compliance issues that their companies face. "Many pharmaceutical leaders still find it difficult to equate risk management and compliance with the importance of developing a new blockbuster therapy," Smith writes.


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