In the current environment, drug development is a long, costly, and risky endeavor. It takes $1.1 billion, on average, and 12.5 years to bring a single drug from concept to commercialization. Only one in 5000 new chemical compounds ever makes it to market, and 80% of all investigational new drugs fail, leaving just 20% to fund the research and development (R&D) engine.
Drug pricing remains a constant issue, with pressure coming from increasingly aggressive generics and payers. As branded products go off-patent, price erosion gets steeper and faster. In negotiations with payers, a crucial element is often missing: effective drugs reduce overall healthcare spending. A 2002 study by the National Center for Policy Analysis found that for each $1 spent on newer pharmaceuticals, $6.17 is saved in total healthcare spending, with $4.44 coming from hospital savings.
Pharmaceutical companies are also under pressure from society to meet sometimes unreal expectations. These include delivering medicines that have been tested longer and in more ways than ever before, are 100% effective, produce no side effects, and are accessible to everyone who needs them, preferably tomorrow. Yet, research "breakthroughs" still take many years to become medicines.
Continuing unmet medical need
Set against all these hurdles is potential for fulfilling the continued unmet—and growing—medical needs of patients. People are living longer, and an aging population requires more healthcare and long-term disease management. Our fast-paced, fast-food society is proving to be increasingly unhealthy and a major factor in stress, addictions, and obesity. Changes in the environment are leading to more allergens and pollutants. Infections are becoming more common and drug-resistant.
So, who can best step up to these challenges? Drug researchers in academia, charities, or government agencies certainly are one option, as are hybrids, with public-private partnerships. With today's technology, smaller teams of scientists can work on a developing drug and small institutes can discover new medicines. But we have seen few, if any, marketed drugs coming from this sector. They have little development capability and no manufacturing or scale-up capacity. In addition, not all of these institutions have embedded quality guidelines. So even though these smaller groups could develop new medicines, there is much to be done before society could rely on them as a source for new medicines.
Biotech companies and startups could be another source of the future. They are small, flexible, and innovative. They are discovering large-molecule drugs and have made significant breakthroughs in genomic research. However, this is undermined by their limitations in funding, which leaves them little room to cope with either the cost of development or attrition and failure of compounds. They also usually lack the required development capability, geographical reach, and scale-up capabilities.
That leaves Big Pharma. Big Pharma companies have the geographical reach, market access, manufacturing standards, development capabilities, ability to withstand some failures and, quite important, a proven track record. Still, as an industry, this group can be "too large and bureaucratic," surprisingly conservative, and sometimes costly. As a group, Big Pharma is also weighed down by a tarnished image.