A few years ago, there would be no question as to who would produce the next generation of medicines. The answer would certainly
be the big pharmaceutical companies. Today, the answer is not as straightforward.
John Patterson, PhD
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.
The industry as a whole is facing declining R&D productivity. Stricter regulatory requirements and increasing numbers of subjects
are driving up clinical study costs. For those medicines that do make it to market, the issue of patent expiry quickly presents
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A 20-year patent provides limited time to recoup R&D investment when one considers that 12.5 of those years are spent on development.
The average postlaunch US patent exclusivity period for new products has fallen from 12 years in 2001 to just eight years
in 2005. Many of the world's best-selling drugs face patent expiries between 2007 and 2011, and pressure continues to mount
over extensions of patent terms. However, the newest and potentially most damaging threat lies with therapeutic substitution,
or reference pricing, in which the expiry of the first-in-class drug leads to generic pricing or substitution of even differentiated
class members long before their own exclusivity or patents expire. This makes it especially important to have a first-in-class
drug or at least one that is a very fast follower or substantially differentiated from those drugs already on the market.
The competitive window for opportunities is defined by the first-in-class patent expiry, resulting in diminishing returns
for late life-cycle investment even though incremental improvements have a key part to play in the progress of therapeutics.
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
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.