Did you read his post about the patent cliff?

The majority of blockbuster drugs are about to go off of patent protection. This is where the majority (if not all) of the profit in the industry comes from, as well as a huge chunk of the rests of their costs.

It's an interesting time in the industry but the patent cliff is real and the industry is going to change quite a bit more in the next few years.

The model is absolutely unsustainable - there isn't enough blockbusters in the pipeline to replace the current, not by a very long shot. And we know what is in in the pipeline because remember it takes 7-11 years to bring a candidate from preclinical through FDA approval, so we have a very good idea of what's coming out (and what's not).

Why would we want to sustain the current model again? What's to say that whatever new model crops up in its place won't be better?

I can't really think of any industry that had their business model collapse that didn't come out of it better than they had been.

Individual players, technologies and processes may disappear, but it's not like demand will, and so long as there is demand, there is a potential market.

I agree, but the risk is this: the current model produces the majority of the world's NME's (new molecular entities, or truly new drugs that aren't just old drug + ibuprofen and a new name). We can sit here and talk about what's wrong with the system, but it ignores that this is the most successful system in the history of medicine for producing truly effective pharmaceuticals.

But ultimately I agree, we may be in for a rough transitory period as far as drug research goes, but what arises from the ashes will likely be a far leaner and more effective beast. It's not like scientists care who is paying the bills.

Does the current model produce the majority of the world's NMEs or does the current model simply bring them to market. From another comment on this topic, it sounds as though most novel research happens not in the labs of companies like Glaxo-Welcome or Pfizer, but in university research labs for a couple of million dollars.

If this is the case, I imagine that any disruptions will occur at the C-suite level mostly, paving the way for entirely new ways of looking at the problem of bringing a new drug to market.

This is a common misconception. While the basic research that underpins the biological theory might happen in academic labs, turning basic research into an actual medicine that will a) work and b) not blow up your liver in the process is exclusively the province of drug companies currently. In fact, medicinal chemists (the people that actally figure out how to make the compound and scale up the manufacturing) are almost exclusively found in industrial drug development companies. They don't exist in any appreciable numbers In academia. They are analogous to the rocket scientists at NASA who worked on the moon missions that everyone worries can't be replaced because they have such specialized experiential knowledge.

Every once in a while an academic research lab will spin off a biotech to develop a new compound, but in general this is not how things have been done in the past. There is a current trend to in-license things from academia to lower the companies' exposure to early R&D risk. This ignores the fact that early research costs pale in comparison to the later clinical trials where most potential drugs go to die. Cancer is particularly bad with something like a 98% failure rate. In-licensing from academia isn't going to buy you much comfort when the thing doesn't work in a phase III clinical trial.

Like the GP post says, things are changing for big pharma, just as they are for MS. There's no way to keep up these prices, and the corresponding R&D costs, when (and not if, because it will happen) healthcare gets nationalized and you have one government representative with the monopsonistic power to really drive prices down.