Pharma and other health care manufacturing sectors have been furiously trying to forecast how Obamacare and other changes in the environment, such as the consolidation of medical practices, will affect their futures. As one example, previous postings here discussed how practice consolidation under hospital-dominated, Integrated Delivery Networks (IDNs), together with the universal adoption of Electronic Medical Records (EMR) by 2015, will lead to providers and payors selecting drugs through a process of "duelling databases."
The consequence of practice consolidation and EMR will be the final nail in the coffin for pharma's megacompany-blockbuster model. Companies that can prosper with a line of small, niche products will generate top value for their investors while the megacompanies capitalized at $160 billion after shortsighted mergers won't be able to grow their earnings per share by relying on small products.
Last week's public disclosure of a whistleblower lawsuit, filed in California during 2007, now calls into question the entire scope and process of pharmaceutical marketing. In that suit a former employee of Bristol-Myers Squibb (BMS) alleges the company engaged in a mammoth kickback scheme to induce California physicians to prescribe branded BMS products. These kickbacks obliged insurers and other payors to pay more for drugs than they otherwise would have.
So what exactly were these kickbacks? The suit alleges that in addition to cash payments, the company provided physicians with "gifts" such as tickets for luxury suites at Los Angeles Lakers basketball games, balls autographed by star players, invitations to Lakers fantasy camps, and similar perquisites. On numerous occasions, according to the suit, BMS "rented suites at Staples Center and held catered events for physicians at Lakers games."