Genetech – A Model of the New Pharmaceutical Company

For years the Pharmaceutical Industry has been criticized for only developing medicines that have a huge market. Now, Genetech is thriving by changing the rules:

There are many reasons for this biotech bellwether's success–young patents and a prescient CEO, to name two. But Genentech's biggest advantage is its revolutionary method of developing and marketing drugs. Instead of lunging after one-size-fits-all blockbusters like Pfizer's Lipitor or Merck's Zocor–cholesterol-lowering medicines that each rack up billions of dollars in annual sales–Genentech pursues "targeted therapies," drugs aimed at relatively small subsets of patients. Such medicines are designed to fix known molecular glitches underlying diseases like cancer. The glitches usually are specific only to certain forms of the diseases, so targeted drugs tend to have limited markets. Yet targeting offers a huge plus: The drugs often produce the same kind of dramatic benefit doctors get when they identify the specific type of bacteria causing an infection and hit it with exactly the right antibiotic.

In other words, they have succeeded by finding a niche in the market that was not being addressed, and addressing it. The reason Genetech can do this is that drug development costs are plummeting. This is just another example of how a markets do things right at the right time. All those people who wanted to force Merck and Pfizer to focus their research on less popular ailments didn't understand that it was not the most efficient use of their resources at that time. As technology improves, we will see more drugs developed for niche markets like this. Isn't capitalism beautiful?