The pharmaceutical industry has at least one thing in common with the movie and book-publishing industries—companies in all three industries live or die based on the success of one or two blockbusters every year or two. In the pharmaceutical industry, a blockbuster is a drug that can fetch $1 billion or more in annual revenue, such as Pfizer’s Viagra®, SmithKline’s Tagamet®, Glaxo’s Zantac®, Syntex’s Naprosyn®, and Bristol-Meyers’ Capoten®.When a new drug looks like it has a good chance of making it through the regulatory gauntlet, the pharmaceutical firm that developed the drug typically pours tens to hundreds of millions of dollars into a marketing and education campaign that crescendoes with the launch of the drug. The goal is to make as much profit from the drug as possible before the patent on the drug expires and competition from generics dilute profits. According to the Pharmaceutical Research and Manufactures of America’s (PhRMA), Pharmaceutical Industry Profile 2002, patent protection for a newly released drug expires, on average, 11 to 12 years after the release of a drug.Pharmaceutical firms survive with the blockbuster model of doing business, by filling the regulatory pipeline with new drugs, by finding new indications for drugs already on the market, by developing new formulations of proven blockbuster drugs, and through a variety of legal and regulatory maneuvers. Another popular way to acquire a continuous stream of revenue from a blockbuster drug is for the pharmaceutical firm to merge with a pharmaceutical company with an existing blockbuster drug in its pipeline. This method of tapping into a significant revenue stream is so popular that a pharmaceutical firm that hasn’t been acquired or that isn’t acquiring another firm is the exception rather than the rule. Because of their massive economic impact on local and regional economies, most mergers of the pharmaceutical titans warranted front-page coverage in the popular press, as well as the attention of the various antitrust regulatory agencies.
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