Giant Merck, a major growth stock for 50 years, has seen growth slow along with Pfizer and the rest of the major pharmaceutical companies. Merck has latched on to a new strategy to generate sales again, but it’s not just Merck and Pfizer that are suffering. The major pharmaceutical companies around the world are slowing down and panic is beginning to invade the executive suite.
Some of these companies now make tens of billions of dollars a year in sales. The pharmaceutical industry is the most profitable industry in the world today bar none. The returns on invested capital and profit margins are extraordinary.
President Bush and the then-Republican Congress created the Senior Prescription Drug Program in an attempt to reverse the trend of these companies. Drug manufacturers have been a major contributor to the Republican Party for more than a decade. Both Merck and Pfizer have begun downsizing their sales forces in response to the slowdown.
The problem for these companies is that they have become so large in terms of their sales bases that they have great difficulty generating new drugs on a scale that can offset the slowdown in their current drug pipeline. Also, many of these fabulous drugs currently being sold are losing patent protection, and that means a collapse in sales revenue. Once generics take over, it’s over for the original creator of the drug.
What has Merck done NOW?
Merck has created a new vaccine against cervical cancer. The American Cancer Society tells us that just over 11,000 women this year will be told by their doctors that they have this terrible disease. What’s worse is that more than 3,500 of those women will ultimately succumb to it.
Let’s put this in perspective. Some 180,000 women this year will be told they have breast cancer. Approximately 40,000 of these previously diagnosed women will eventually die of breast cancer and its complications. Eight to 10 times the number of women who die of breast cancer will die of heart disease this year. As you know, breast cancer gets all the hype compared to the other two diseases.
This new cervical cancer vaccine is a marvelous creation, and everyone at Merck who was involved in creating it should be very proud of their work. What about the executives and marketing people at Merck? Well, that’s a different story. Merck has decided to try to force the use of this vaccine on all pre-adolescent and adolescent women in the United States. They are doing everything they can in an attempt to influence every legislator they can find to mandate that this vaccine be given to children regardless of their parents’ wishes.
Merck got TEXAS on board first
Could you believe it? Merck got Texas Governor Rick Perry to sign an executive order. Such an order negates the need for the Texas legislature to get involved. This order will require all girls in Texas to receive Merck’s Gardasil vaccine at $360 for three shots of the vaccine, and yes, all three are necessary. You probably know that there is a measles and mumps vaccine that has been on the market for years. The measles vaccine costs just $43 per dose by comparison.
The way the deal works in Texas is that unless you can prove you’ve had the shots, you won’t be allowed to go to school. For now, it looks like your health insurance will pick up the bill, but of course, there are millions and millions of uninsured young people in this country. Who is going to pay for them? Apparently, a former Chief of Staff to Governor Perry is a lobbyist for Merck, which is the same as saying she works for Merck, isn’t it? It’s amazing what a couple of dollars paid to a lobbyist can accomplish.
Merck Hires Lobbyists EVERYWHERE
When Merck is against the wall, Merck knows how to respond. Merck is feeling the heat from a number of drugs going off-patent and is therefore doing everything possible to have every state consistently mandate the use of this vaccine. The states that are currently considering forcing pre-adolescent girls to take this vaccine are:
CaliforniaMaine
michigan colorado
ConnecticutMinnesota
District of Columbia Mississippi
florida new jersey
hawaii new mexico
illinois, oklahoma
IndianaSouth Carolina
Kansas Texas (FACT)
KentuckyVirginia
The question now is how many lobbyists will hire Merck and how many legislators will receive political contributions to create mandatory state programs that will result in the sale of billions of dollars of this vaccine. There is also the issue of vaccine safety.
When the clinical trials were conducted, the participants were mostly older women. Only a small minority of the participants were teenagers, but teenagers are the target market. Without much broader testing of the teen market, it may be too early to tell if there’s a problem. The vaccine is being rolled out in massive numbers in the interim.
Merck and the major drugmakers are in a state of decline. Their internal research labs can no longer create the drug stream needed to keep them at their current levels. They are also cutting drug reps by the thousands. These are the handsome men and women with master’s degrees who know more about these drugs than the doctors who prescribe them. They visit doctors incessantly, buy them lunches, give them free pads, pens, and gifts in an attempt to convince the good doctor why he should prescribe certain drugs.
Future growth appears to be in young and mid-stage biotech companies that do their research differently from Big Pharma. Biotechnology research facilities are typically located in the immediate vicinity of major university campuses that receive billions of dollars in taxpayer funding through the National Institutes of Health.
If Big Pharma is going to compete effectively against upstart biotech firms, then companies like Merck, Pfizer and the rest will have to continue cutting costs and exerting their political power in an attempt to align their goals with those of the federal government. After all, the largest users of drugs in the United States are recipients of Medicare/Medicaid, and then the Veterans Administration. It looks like the next year or two will be very interesting for traditional drug makers. Stay tuned for more.
Bye and good luck