Summary of “Johnson & Johnson Again Buoyed by Pharmaceuticals"
"Firm raises low end of its earnings guidance.” By Anne Steele from The Wall Street Journal October 18, 2016 8:45 a.m. ET
Johnson and Johnson’s revenue has increased in the last quarter and the large pharmaceutical company expects to have a stronger year with projections of $72.2 billion (Steele). Johnson and Johnson attributes this success to the performance of their line of pharmaceutical drugs, and they have several more coming out soon that are supposed to increase revenue of several billion dollars. While this increase in revenue looks promising for the pharmaceutical giant, they are going to face competition from smaller companies launching similar drugs and have had hard times with a strong dollar because about half of their sales are overseas (Steele).
Although the company has been profitable recently, their other divisions are on a downward trend- including consumer health products and medical device.
Large pharmaceutical companies like J&J are in for tough times because they are facing smaller biotech firms that are coming out with innovative products, and these companies are always looking at ways to compete in the same market as the “big pharma” companies. I worked as a contractor for Quintiles on assignment for Takeda (a large Japanese pharmaceutical company), and I saw first hand how a company believed they could circumvent (or seemingly ignore) a patent we had on a drug and they launched it and tried to disrupt the market and take prescriptions away from us. Despite the threat of litigation, they went forward with their plans.
Not only are “big pharma” companies losing market share to smaller competitors, but they are losing the battle with managed care (insurance companies) which require prior authorizations and step edits, which are both ways to force a patient to try cheaper alternatives) before they’ll cover certain branded medications. As a result, the pharmaceutical industry has become much more of a battleground and the price of drugs that are protected by intellectual property will most likely continue to rise so these companies can make up for the profits they are losing out on those that are underperforming. The collateral damage is the high cost of drugs to patients, the inevitable increase in insurance premiums to pay for these drugs, and continued layoffs of pharmaceutical sales representatives. Eventually, this business model must change or society will continue to lose utility on multiple fronts.