1 New drugs are new. To develop a drug from a newly discovered molecule for a hitherto untreated condition is exploring terra incognita. Creating a new drug can mean developing a new biological concept, a new manufacturing process, and a new way of measuring a clinical response. What worked last time may be irrelevant for a new therapy.
2 Men are not mice. Drug discovery usually starts in the laboratory, progresses to animal models, and ends in human trials. But, as an example, the arthritis created by injecting mice with collagen is not really rheumatoid arthritis. Translating what scientists observe in mice to what will actually happen in humans is difficult - and often disappointing.
3 People vary. Laboratory experiments pay great attention to uniformity and control. But the testing of new drugs in humans confronts the defining characteristic of people – their heterogeneity. Beyond differences in sex, age, ethnicity, and drug metabolism, disease itself varies according to severity, preexisting conditions, and the influence of other medications. A drug effect observed in the laboratory is often overwhelmed by the variability of real, living humans.
4 Nature is conservative. The approval rate for new drugs that make it to clinical trials is around 20%, suggesting that something is working actively against new compounds. Human bodies expel foreign molecules, drugs included.
5 Manufacturing drugs is expensive. A new drug needs to be manufactured by new methods, often in a new plant that must pass inspection by regulatory authorities. The investment in such manufacturing facilities and processes must be made years before regulatory approval. Only the drugs most likely to succeed will ever justify this risky investment.
6 Ars longa, vita brevis. Most drugs take around ten years to develop. Human attention is weak over such a long period; markets change, companies run out of cash, and things go wrong.
7 Almost no one knows how to develop drugs. A project may take ten years or more; few people stay in one job for more than about three years. For all these reasons, few researchers have seen the development from beginning to end. There is no academic discipline that prepares people for careers in drug development. Everyone learns as they go. And no one shares what they have learned outside the company.
8 There are no shortcuts. Many assume that opaque regulatory requirements are the main reason it takes so long and costs so much to develop a drug. Not so. Agencies explain clearly what they want to know about toxicology, efficacy, safety, and standards for new drugs. But it simply takes time to accumulate the requisite knowledge about a novel substance.
9 It doesn’t get any easier. As science develops better, more-effective therapeutics, the bar gets higher for the next generation of drugs. When one drug becomes a standard, its successor will likely take longer to develop and cost more.
10 There are no revolutions. Now, as ever, progress in drug discovery is incremental. Understanding the molecular basis of disease will allow the development of specific and more-predictable treatments. Better information systems will help to order the immense amount of data now generated in the laboratory. But neither genomics nor bioinformatics will magically transform drug discovery.
Contributed by Barry Sherman and Philip Ross. Originally published by them in The Acumen Journal of Sciences, Volume I and reprinted with their permission.
Sunday, March 23, 2008
Thursday, March 20, 2008
The Failure of Industrialized Research (Part 3)
Drug discovery is unpredictable and unmanageable. So why do large pharmaceutical companies spend so much money on it?
The glimmerings of the approach were visible in the development of captopril. Squibb’s chemists made systematic alterations in organic molecules that were then tested for activity against a targeted enzyme. A new route was added in the 80’s, when the nascent techniques of recombinant DNA allowed a protein of interest to be traced to its gene, the gene inserted into a cell, the cell bred in the billions, and the protein extracted. Among the first proteins so manufactured was human insulin, a predictable success given that the role of insulin in treating diabetes was already understood.
The drug industry expected its biologists to discover, in short order, a host of protein therapeutics, ushering in an era of discovery based on biology, rather than chemistry. Indeed, several blockbuster protein drugs were produced, almost all conforming to the model of human insulin: scientists knew ahead of time that the drugs would work, if only the protein could be made economically. But for each success, there were a great number of costly failures.
The 90’s saw an immense increase in spending on industrialized research in chemical approaches. Generally, new technologies employed robotic systems to process large numbers of drug candidates in a blind search for a desired biological activity. Combinatorial chemistry starts with a molecule of interest, then adds to it randomly to form a burgeoning family of molecules. The technique formed the basis of biotech startups, like Darwin Molecular (now Chiroscience R&D), AXYS Pharmaceuticals (since acquired by the Celera Genomics Group), and Affymax. To manage the plethora of resulting molecules, other firms used technologies pioneered in Silicon Valley to build expertise in high-throughput screening.
Also in the 90’s, robotics was combined with the polymerase chain reaction, an established technique that quickly and reliably copies selected sections of DNA, to create machines capable of mass-sequencing genes. This effort produced a wealth of raw data that promises to yield new drug targets for both biological and chemical approaches. A number of companies besides Celera, including Millennium Pharmaceuticals and Human Genome Sciences, are mining data for new targets, hoping either to develop drugs themselves or sell the information to pharmaceutical firms.
More advanced drug discovery tools appear every year. Proteomics companies like CuraGen, Myriad Genetics, and ProteoMetrics were founded to categorize the blizzard of proteins synthesized in human cells, a far greater challenge than transcribing the human genome. Functional genomics, another buzz phrase, has been seized upon as the “the next big thing” by companies like Affymetrix, Celera, and Human Genome Sciences, all of which are trying to link raw genetic data to their precise physiological function in the cell. To accelerate, and thus cheapen, the multifarious chemical analyses, other startups hope to integrate them all into “labs on a chip,” in which tiny, etched channels pipe droplets of reagents from one reaction chamber to another. Still more high-tech is “virtual screening,” the plan to replace actual laboratories – even those reduced to a chip – with computer simulations.
It is impossible to measure the success of these technologies against the sums spent on them. Private investment in genomics alone came to $1 billion in 1996 and $2 billion in 1997, rising in multiples every year thereafter until the bubble burst in 2000. It is not unreasonable to conclude that for genomics alone, some $15 billion in funds were raised. Meanwhile, proponents of industrialized research cannot yet point to astounding drug discoveries their ideas have engendered.
The failure of industrialized research to produce blockbuster results for pharmaceutical companies suggests several conclusions. The billions of dollars spent in pursuit of innovator molecules has (largely) been wasted or will be rewarded over a much longer time frame than desired. Drug discovery is neither predictable nor inherently manageable. Serendipity remains the most obvious explanation for the majority of new discoveries.
At university laboratories, where serendipity is understood, creativity is valued, and researchers are not subject to corporate management. Moreover, these labs are more numerous than industrial labs, and remain the most productive source of genuinely new ideas. Small, single-minded biotechnology firms are best suited to the early development of NMEs and biologics. As these firms become larger and more successful, they become turgid, less able to develop new ideas. And pharmaceutical companies are the organizations that can most effectively validate new research, shepherd novel drugs through the later stages of development, manage their regulation, and commercialize and market new therapeutics. To that end – and in the hope of a lucky break in discovery – it is reasonable for them to invest in large staffs of researchers.
But the scale and unrestrained growth of the pharmaceutical industry’s investment in research is irrational. Such investment will not produce the wealth of new drugs for which the industry longs. The unclogging of the drug pipeline will come from intelligent investment in biotech firms and academia. To prescribe how much money large pharmaceutical companies should spend on R&D would be a speculative exercise at best. However, if the real function of pharmaceutical R&D is not discovery, but rather the validation, development, and reformulation of existing molecules, then much of what is currently spent on discovery would be better spent on licensing, venture investment, and acquisitions – as well as in development itself.
Pharmaceutical companies will always have discovery research labs. They will never exactly resemble high-technology businesses (where networking companies like Cisco Systems effectively outsource all of their science to startups and universities), but they will look more like high-tech firms than the ossified institutions they are now.
Part 3 of 3.
Contributed by Barry Sherman and Philip Ross. Originally published by them in The Acumen Journal of Sciences, Volume I and reprinted with their permission.
The glimmerings of the approach were visible in the development of captopril. Squibb’s chemists made systematic alterations in organic molecules that were then tested for activity against a targeted enzyme. A new route was added in the 80’s, when the nascent techniques of recombinant DNA allowed a protein of interest to be traced to its gene, the gene inserted into a cell, the cell bred in the billions, and the protein extracted. Among the first proteins so manufactured was human insulin, a predictable success given that the role of insulin in treating diabetes was already understood.
The drug industry expected its biologists to discover, in short order, a host of protein therapeutics, ushering in an era of discovery based on biology, rather than chemistry. Indeed, several blockbuster protein drugs were produced, almost all conforming to the model of human insulin: scientists knew ahead of time that the drugs would work, if only the protein could be made economically. But for each success, there were a great number of costly failures.
The 90’s saw an immense increase in spending on industrialized research in chemical approaches. Generally, new technologies employed robotic systems to process large numbers of drug candidates in a blind search for a desired biological activity. Combinatorial chemistry starts with a molecule of interest, then adds to it randomly to form a burgeoning family of molecules. The technique formed the basis of biotech startups, like Darwin Molecular (now Chiroscience R&D), AXYS Pharmaceuticals (since acquired by the Celera Genomics Group), and Affymax. To manage the plethora of resulting molecules, other firms used technologies pioneered in Silicon Valley to build expertise in high-throughput screening.
Also in the 90’s, robotics was combined with the polymerase chain reaction, an established technique that quickly and reliably copies selected sections of DNA, to create machines capable of mass-sequencing genes. This effort produced a wealth of raw data that promises to yield new drug targets for both biological and chemical approaches. A number of companies besides Celera, including Millennium Pharmaceuticals and Human Genome Sciences, are mining data for new targets, hoping either to develop drugs themselves or sell the information to pharmaceutical firms.
More advanced drug discovery tools appear every year. Proteomics companies like CuraGen, Myriad Genetics, and ProteoMetrics were founded to categorize the blizzard of proteins synthesized in human cells, a far greater challenge than transcribing the human genome. Functional genomics, another buzz phrase, has been seized upon as the “the next big thing” by companies like Affymetrix, Celera, and Human Genome Sciences, all of which are trying to link raw genetic data to their precise physiological function in the cell. To accelerate, and thus cheapen, the multifarious chemical analyses, other startups hope to integrate them all into “labs on a chip,” in which tiny, etched channels pipe droplets of reagents from one reaction chamber to another. Still more high-tech is “virtual screening,” the plan to replace actual laboratories – even those reduced to a chip – with computer simulations.
It is impossible to measure the success of these technologies against the sums spent on them. Private investment in genomics alone came to $1 billion in 1996 and $2 billion in 1997, rising in multiples every year thereafter until the bubble burst in 2000. It is not unreasonable to conclude that for genomics alone, some $15 billion in funds were raised. Meanwhile, proponents of industrialized research cannot yet point to astounding drug discoveries their ideas have engendered.
The failure of industrialized research to produce blockbuster results for pharmaceutical companies suggests several conclusions. The billions of dollars spent in pursuit of innovator molecules has (largely) been wasted or will be rewarded over a much longer time frame than desired. Drug discovery is neither predictable nor inherently manageable. Serendipity remains the most obvious explanation for the majority of new discoveries.
At university laboratories, where serendipity is understood, creativity is valued, and researchers are not subject to corporate management. Moreover, these labs are more numerous than industrial labs, and remain the most productive source of genuinely new ideas. Small, single-minded biotechnology firms are best suited to the early development of NMEs and biologics. As these firms become larger and more successful, they become turgid, less able to develop new ideas. And pharmaceutical companies are the organizations that can most effectively validate new research, shepherd novel drugs through the later stages of development, manage their regulation, and commercialize and market new therapeutics. To that end – and in the hope of a lucky break in discovery – it is reasonable for them to invest in large staffs of researchers.
But the scale and unrestrained growth of the pharmaceutical industry’s investment in research is irrational. Such investment will not produce the wealth of new drugs for which the industry longs. The unclogging of the drug pipeline will come from intelligent investment in biotech firms and academia. To prescribe how much money large pharmaceutical companies should spend on R&D would be a speculative exercise at best. However, if the real function of pharmaceutical R&D is not discovery, but rather the validation, development, and reformulation of existing molecules, then much of what is currently spent on discovery would be better spent on licensing, venture investment, and acquisitions – as well as in development itself.
Pharmaceutical companies will always have discovery research labs. They will never exactly resemble high-technology businesses (where networking companies like Cisco Systems effectively outsource all of their science to startups and universities), but they will look more like high-tech firms than the ossified institutions they are now.
Part 3 of 3.
Contributed by Barry Sherman and Philip Ross. Originally published by them in The Acumen Journal of Sciences, Volume I and reprinted with their permission.
Sunday, March 16, 2008
The Failure of Industrialized Research (Part 2)
Drug discovery is unpredictable and unmanageable. So why do large pharmaceutical companies spend so much money on it?
Screening was begun early in the 20th century by such pioneers as the German microbiologist Paul Ehrlich. Having learned that a compound of arsenic killed the microbe responsible for sleeping sickness, Ehrlich sought a related compound that would also not poison the patient. He tried some 900 compounds in mice, to little avail. Then his colleague Sahachiro Hata tested one on the microbe that causes syphilis. This compound killed the microbe, but not the experimental animals. A year later, in 1910, Ehrlich released salvarsan, the first synthesized drug to cure a disease.
How the drug worked played no role in its discovery. Why a compound killed germs without harming patients overmuch; what the microbes for two quite different diseases had in common – these puzzles went unexplained. The breakthrough – the idea that arsenic could kill germs – came from inspired observation; applying that discovery entailed laborious screening. No one dreamed that inspiration could be made routine or that works of genius could be produced on a corporate schedule.
Screening was begun early in the 20th century by such pioneers as the German microbiologist Paul Ehrlich. Having learned that a compound of arsenic killed the microbe responsible for sleeping sickness, Ehrlich sought a related compound that would also not poison the patient. He tried some 900 compounds in mice, to little avail. Then his colleague Sahachiro Hata tested one on the microbe that causes syphilis. This compound killed the microbe, but not the experimental animals. A year later, in 1910, Ehrlich released salvarsan, the first synthesized drug to cure a disease.
How the drug worked played no role in its discovery. Why a compound killed germs without harming patients overmuch; what the microbes for two quite different diseases had in common – these puzzles went unexplained. The breakthrough – the idea that arsenic could kill germs – came from inspired observation; applying that discovery entailed laborious screening. No one dreamed that inspiration could be made routine or that works of genius could be produced on a corporate schedule.
Around the time salvarsan hit the market, European scientists were inferring a relationship between diabetes and the pancreas. After a decade of fruitless efforts, the Canadian physician Frederick Banting had the critical insight: if a pancreas is ground up, its digestive secretions destroy its diabetes-moderating secretions. Banting and his colleague Charles Best found a way to isolate the latter and successfully treated diabetes in dogs. Soon afterward, in 9122, they gave the world insulin – the first treatment for diabetes. No step in this process would have lent itself to industrialization; if we had to discover insulin and other hormones all over again, we might very well have followed similar paths.
Beginning in the 70’s, as knowledge of the molecular basis of disease increased, the pharmaceutical industry began to hope for steady discoveries based on a different model. Instead of searching for a compound that would simply, say, lower blood pressure in model organisms, pharmacologists could target specific enzymes, like the angiotensin 2 converting enzyme (ACE). In fact, the first such ACE inhibitor was discovered as the result of just such a request, by scientists at Squibb in 1977.
But even the roots of this discovery lie in serendipity. A doctor noticed that deaths from snakebite in the banana plantations of Brazil involved catastrophic declines in blood pressure. Researchers in London isolated the causative peptides and the search for the drug was taken up by two chemists at Squibb, David Cushman and Miguel Ondetti, who synthesized one and showed that injections of it lowered blood pressure. Squibb saw no market for an injectable antihypertensive and shelved the project. Then, in 1974, research in a related enzyme system – again, by academics – showed how molecules small enough to be effective if taken orally might do the job, and the Squibb team developed captopril. It gained FDA approval in 1981, starting an avalanche of development at other companies that has led to more than ACE inhibitors.
The saga of captopril shows the pharmaceutical industry at its very best, developing a drug that was at once a success for science, for patients, and for a company’s bottom line. Yet it hardly promised the industry what it yearned for: a regular supply of bankable discoveries. Since then, the bar has risen: demand for new ideas has increased as the number of important diseases lacking a treatment has dwindled.
The traditional, itinerant investigator, as in the Ehrlich example; the hypothesis-driven project, as in the insulin story; or applied research, as in case of ACE inhibitors – all relied on luck and brilliance to find new drugs. In its search for an alternative to these methods, the industry fell in love with a new approach to research that promised to minimize serendipity and maximize predictability: the industrialization of scientific research.
Part 2 of 3. Part 3 to follow shortly.
Contributed by Barry Sherman and Philip Ross. Originally published by them in The Acumen Journal of Sciences, Volume I and reprinted with their permission.
Beginning in the 70’s, as knowledge of the molecular basis of disease increased, the pharmaceutical industry began to hope for steady discoveries based on a different model. Instead of searching for a compound that would simply, say, lower blood pressure in model organisms, pharmacologists could target specific enzymes, like the angiotensin 2 converting enzyme (ACE). In fact, the first such ACE inhibitor was discovered as the result of just such a request, by scientists at Squibb in 1977.
But even the roots of this discovery lie in serendipity. A doctor noticed that deaths from snakebite in the banana plantations of Brazil involved catastrophic declines in blood pressure. Researchers in London isolated the causative peptides and the search for the drug was taken up by two chemists at Squibb, David Cushman and Miguel Ondetti, who synthesized one and showed that injections of it lowered blood pressure. Squibb saw no market for an injectable antihypertensive and shelved the project. Then, in 1974, research in a related enzyme system – again, by academics – showed how molecules small enough to be effective if taken orally might do the job, and the Squibb team developed captopril. It gained FDA approval in 1981, starting an avalanche of development at other companies that has led to more than ACE inhibitors.
The saga of captopril shows the pharmaceutical industry at its very best, developing a drug that was at once a success for science, for patients, and for a company’s bottom line. Yet it hardly promised the industry what it yearned for: a regular supply of bankable discoveries. Since then, the bar has risen: demand for new ideas has increased as the number of important diseases lacking a treatment has dwindled.
The traditional, itinerant investigator, as in the Ehrlich example; the hypothesis-driven project, as in the insulin story; or applied research, as in case of ACE inhibitors – all relied on luck and brilliance to find new drugs. In its search for an alternative to these methods, the industry fell in love with a new approach to research that promised to minimize serendipity and maximize predictability: the industrialization of scientific research.
Part 2 of 3. Part 3 to follow shortly.
Contributed by Barry Sherman and Philip Ross. Originally published by them in The Acumen Journal of Sciences, Volume I and reprinted with their permission.
Thursday, March 13, 2008
The Failure of Industrialized Research (Part 1)
Drug discovery is unpredictable and unmanageable. So why do large pharmaceutical companies spend so much money on it?
Observing the pharmaceutical industry from a prudent distance, one might wonder at its apparent confidence in it ability to discover new drugs. Pharmaceutical companies maintain great staffs of scientists and spend increased sums of money on technologies meant to increase the chance discovering new medicines. Their research-and-development budgets surpass that of the National Institutes of Health. And this investment is only growing: global expenditures on R&D has doubled over the past 11 years, from $22.2 billion in 1991 to $44.5 billion in 2001. If the investment by pharmaceutical companies continues to grow at this pace, R&D spending could reach $57 billion in 2006. [1]
But closer inspection reveals a contradiction: in most cases, these large corporations purchase seminal drug ideas from smaller, entrepreneurial biotechnology companies and university research laboratories. In 2001, the 14 major pharmaceutical companies were responsible for discovering merely 26% of the 32 biologics and new molecular entities (NMEs, defined by the Food and Drug Administration as active therapeutic ingredients that have never been marketed in the United States), while being responsible for 65% of global R&D spending. Biotech and academic labs produced the remainder. [2] Furthermore, the productivity of pharmaceutical companies is decreasing: the number of medicines in the early stages of development (preclinical and clinical Phase I and II) dropped by more than 20% from 1999 to 2001. [3]
Finally, consider this: most of the NMEs that big pharmaceutical companies do develop are not focused on new targets; they do not create entirely new medicines or open up new markets. Of the 32 FDA-approved medicines that came to market in 2001, only 5 were novel therapeutics or were directed against new targets. [4] None have their roots in large pharmaceutical companies (see “FDA Novel Therapeutics or New Targets, 2001,” page 49).
A critical assessment of these products reveals that many are me-too drugs, that is, they are structurally similar to and affect the same targets as drugs already on the market. What pharmaceutical companies call NMEs ver often aren’t new at all: of the 13 new drug applications (NDAs) approved thus far by the FDA in 2003, 8 are reformulations or combinations of drugs that have already been approved. [5] Xanax, in a new extended-release formula, makes the list. Another, Cardizem, was first approved in 1999. [6]
“A company with a research budget of $4 billion should be turning out five new drugs a year, and they’re not,” says Charles Grudzinskas, an industry consultant and professor of pharmacology at Georgetown University Medical Center.
What, then, do those armies of corporate scientists do? Do pharmaceutical companies accumulate them as tokens of prestige? Or is this merely a fossilized behavior that once made economic sense?
For large pharmaceutical companies, the issue is, predictably, a sensitive one. Most of the senior executives we contacted for this essay declined to be quoted on the record. But one put it this way: “Oh, we do it for a variety of reasons. Because revenues permit it; research is only a fraction of out total budget. Because it only takes one success to win big; it’s a venture mentality. Because consolidation is inevitable, and bigger looks better. And finally, because management has a vested interest in wasting money. Our stock price is supported by the appearance of large-scale research and a full drug pipeline.”
The executive was, perhaps, being excessively cynical. His reasons, while partly true, are subsidiary: the best explanation of why pharmaceutical companies invest in early-stage discovery is that they have their reasons (even if, as will be discussed later in this essay, the scale of their investment is irrational). According to UBS Warburg, only 20% to 25% of the R&D spending by pharmaceutical companies is for drug discovery itself; the great majority is spent on development. Research is thus a sunk cost of being in the drug busniness: since the best, most innovative ideas are purchased from others, big companies need scientists to validate outside discoveries and to develop those discoveries once they have been purchased. Industry-based scientists analyze drug candidates for toxicity and other risks in cell cultures, animals, and people. Finally, they optimize molecules and create variations on known themes. In other words, pharmaceutical companies need experts to validate potential acquisitions and for drug development; therefore, they must invest in both.
Increasingly, the secret ecology of the big pharmaceutical industry is to outsource drug discovery. In 2000, 55% of big pharmaceutical companies’ approved products were “in-licensed,” in the jargon of the trade. In 2002, this fell to 36%, and increased mergers and acquisitions suggest a growing reliance on external discoveries: deals and alliances for preclinical and discovery products increased by 85% between 2000 and 2002. [7]
Consider the case study of Bristol-Myers Squibb and ImClone. After spending $14 billion in current dollars on research over the course of a decade, Bristol-Myers Squibb felt it necessary to spend another $2 billion to acquire the rights to Erbitux, the anticancer drug candidate from ImClone (see “imClone Systems,” page 26). Amgen, whose first two blockbuster drugs trace back to before the company’s founding, has spent $1 billion a year – 25% of its sales – on research, yet it, too, has gone to outside sources, notably spending $9.6 billion to acquire Immunex and, and, with it, the arthritis drug Enbrel. Even Human Genome Sciences, which has defined itself by its powers in drug discovery, has resorted to outsourcing, paying $120 million to acquire Principia, mainly for its long-acting growth hormone technology.
How did this happen? By now, the industry had expected to be feasting on the fruits of a revolution in fundamental research technology. Genomics and proteomics were to have produced vast quantities of molecular targets in the body (and in the organisms that infect it). Combinatorial chemistry was to have made a blizzard of arrows, some of which would surely hit those targets. High-throughput screening was to have shot those arrows at myriad targets to see which ones stuck. The resulting plethora of new ideas was forecast to be almost more than the development side of the industry would be able to exploit. But for all their sophistication and promise, these tools have as yet contributed few new product ideas.
Traditionally, companies have made substantial investments for research by their own scientists into the types of drugs they already market. Several other approaches to drug discovery have been tried. Some companies have even freed their scientists to do pure research, without corporate interference, at entities like the Merck Genome Research Institute, the Bristol-Myers Squibb Pharmaceutical Research Institute, the Pfizer Technology Discover Center, and DNAX, which was purchased by Schering-Plough to carry out basic research in immunology. Some companies have outsourced their research by sponsoring academic research in return for first dibs on the commercial rights to any discoveries. As far back as 1980, Germany’s Hoechst entered into such an agreement with Massachusetts General Hospital (but got little out of it).
None of these strategies, individually or in combination, has provided the predictable flow of promising new therapeutics that the industry requires to maintain its profitability. Disenchantment with the unpredictability and unmanageability of a discovery model driven by investigators’ curiosity and instinct has propelled the movement toward an industrialized model of research with large-scale screening as its foundation.
Part 1 of 3. Part 2 to follow shortly.
Contributed by Barry Sherman and Philip Ross. Originally published by them in The Acumen Journal of Sciences, Volume I and reprinted with their permission.
_______________________________________________
1 Centre for Medicines Research International Pharmaceutical R&D Expenditure and Sales 2001: Pharmaceutical Investment and Output Survey 2001: Data Report I.
2 Ibid.
3 Ibid.
4 Zambrowicz, B., A.T. Sands (2003) Knockouts model the 100 best-selling drugs – will they model the next 100? Nature Reviews: Drug Discovery 2(1) 38-51.
5 FDA (2003) New Drug Approvals for Calendar Year 2003, www.fda.gov/cder/rdmt/ndaapso3cy.htm#top.
6 FDA/Center for Drug Evaluation and Research. Reports to the Nation 1993 – 2001 and Drug Topic Archives New Drug Approvals 1995 – 2001.
7 Burrill & Company (2003) Biotech 2003: The 17th Annual Report on the Industry.
Observing the pharmaceutical industry from a prudent distance, one might wonder at its apparent confidence in it ability to discover new drugs. Pharmaceutical companies maintain great staffs of scientists and spend increased sums of money on technologies meant to increase the chance discovering new medicines. Their research-and-development budgets surpass that of the National Institutes of Health. And this investment is only growing: global expenditures on R&D has doubled over the past 11 years, from $22.2 billion in 1991 to $44.5 billion in 2001. If the investment by pharmaceutical companies continues to grow at this pace, R&D spending could reach $57 billion in 2006. [1]
But closer inspection reveals a contradiction: in most cases, these large corporations purchase seminal drug ideas from smaller, entrepreneurial biotechnology companies and university research laboratories. In 2001, the 14 major pharmaceutical companies were responsible for discovering merely 26% of the 32 biologics and new molecular entities (NMEs, defined by the Food and Drug Administration as active therapeutic ingredients that have never been marketed in the United States), while being responsible for 65% of global R&D spending. Biotech and academic labs produced the remainder. [2] Furthermore, the productivity of pharmaceutical companies is decreasing: the number of medicines in the early stages of development (preclinical and clinical Phase I and II) dropped by more than 20% from 1999 to 2001. [3]
Finally, consider this: most of the NMEs that big pharmaceutical companies do develop are not focused on new targets; they do not create entirely new medicines or open up new markets. Of the 32 FDA-approved medicines that came to market in 2001, only 5 were novel therapeutics or were directed against new targets. [4] None have their roots in large pharmaceutical companies (see “FDA Novel Therapeutics or New Targets, 2001,” page 49).
A critical assessment of these products reveals that many are me-too drugs, that is, they are structurally similar to and affect the same targets as drugs already on the market. What pharmaceutical companies call NMEs ver often aren’t new at all: of the 13 new drug applications (NDAs) approved thus far by the FDA in 2003, 8 are reformulations or combinations of drugs that have already been approved. [5] Xanax, in a new extended-release formula, makes the list. Another, Cardizem, was first approved in 1999. [6]
“A company with a research budget of $4 billion should be turning out five new drugs a year, and they’re not,” says Charles Grudzinskas, an industry consultant and professor of pharmacology at Georgetown University Medical Center.
What, then, do those armies of corporate scientists do? Do pharmaceutical companies accumulate them as tokens of prestige? Or is this merely a fossilized behavior that once made economic sense?
For large pharmaceutical companies, the issue is, predictably, a sensitive one. Most of the senior executives we contacted for this essay declined to be quoted on the record. But one put it this way: “Oh, we do it for a variety of reasons. Because revenues permit it; research is only a fraction of out total budget. Because it only takes one success to win big; it’s a venture mentality. Because consolidation is inevitable, and bigger looks better. And finally, because management has a vested interest in wasting money. Our stock price is supported by the appearance of large-scale research and a full drug pipeline.”
The executive was, perhaps, being excessively cynical. His reasons, while partly true, are subsidiary: the best explanation of why pharmaceutical companies invest in early-stage discovery is that they have their reasons (even if, as will be discussed later in this essay, the scale of their investment is irrational). According to UBS Warburg, only 20% to 25% of the R&D spending by pharmaceutical companies is for drug discovery itself; the great majority is spent on development. Research is thus a sunk cost of being in the drug busniness: since the best, most innovative ideas are purchased from others, big companies need scientists to validate outside discoveries and to develop those discoveries once they have been purchased. Industry-based scientists analyze drug candidates for toxicity and other risks in cell cultures, animals, and people. Finally, they optimize molecules and create variations on known themes. In other words, pharmaceutical companies need experts to validate potential acquisitions and for drug development; therefore, they must invest in both.
Increasingly, the secret ecology of the big pharmaceutical industry is to outsource drug discovery. In 2000, 55% of big pharmaceutical companies’ approved products were “in-licensed,” in the jargon of the trade. In 2002, this fell to 36%, and increased mergers and acquisitions suggest a growing reliance on external discoveries: deals and alliances for preclinical and discovery products increased by 85% between 2000 and 2002. [7]
Consider the case study of Bristol-Myers Squibb and ImClone. After spending $14 billion in current dollars on research over the course of a decade, Bristol-Myers Squibb felt it necessary to spend another $2 billion to acquire the rights to Erbitux, the anticancer drug candidate from ImClone (see “imClone Systems,” page 26). Amgen, whose first two blockbuster drugs trace back to before the company’s founding, has spent $1 billion a year – 25% of its sales – on research, yet it, too, has gone to outside sources, notably spending $9.6 billion to acquire Immunex and, and, with it, the arthritis drug Enbrel. Even Human Genome Sciences, which has defined itself by its powers in drug discovery, has resorted to outsourcing, paying $120 million to acquire Principia, mainly for its long-acting growth hormone technology.
How did this happen? By now, the industry had expected to be feasting on the fruits of a revolution in fundamental research technology. Genomics and proteomics were to have produced vast quantities of molecular targets in the body (and in the organisms that infect it). Combinatorial chemistry was to have made a blizzard of arrows, some of which would surely hit those targets. High-throughput screening was to have shot those arrows at myriad targets to see which ones stuck. The resulting plethora of new ideas was forecast to be almost more than the development side of the industry would be able to exploit. But for all their sophistication and promise, these tools have as yet contributed few new product ideas.
Traditionally, companies have made substantial investments for research by their own scientists into the types of drugs they already market. Several other approaches to drug discovery have been tried. Some companies have even freed their scientists to do pure research, without corporate interference, at entities like the Merck Genome Research Institute, the Bristol-Myers Squibb Pharmaceutical Research Institute, the Pfizer Technology Discover Center, and DNAX, which was purchased by Schering-Plough to carry out basic research in immunology. Some companies have outsourced their research by sponsoring academic research in return for first dibs on the commercial rights to any discoveries. As far back as 1980, Germany’s Hoechst entered into such an agreement with Massachusetts General Hospital (but got little out of it).
None of these strategies, individually or in combination, has provided the predictable flow of promising new therapeutics that the industry requires to maintain its profitability. Disenchantment with the unpredictability and unmanageability of a discovery model driven by investigators’ curiosity and instinct has propelled the movement toward an industrialized model of research with large-scale screening as its foundation.
Part 1 of 3. Part 2 to follow shortly.
Contributed by Barry Sherman and Philip Ross. Originally published by them in The Acumen Journal of Sciences, Volume I and reprinted with their permission.
_______________________________________________
1 Centre for Medicines Research International Pharmaceutical R&D Expenditure and Sales 2001: Pharmaceutical Investment and Output Survey 2001: Data Report I.
2 Ibid.
3 Ibid.
4 Zambrowicz, B., A.T. Sands (2003) Knockouts model the 100 best-selling drugs – will they model the next 100? Nature Reviews: Drug Discovery 2(1) 38-51.
5 FDA (2003) New Drug Approvals for Calendar Year 2003, www.fda.gov/cder/rdmt/ndaapso3cy.htm#top.
6 FDA/Center for Drug Evaluation and Research. Reports to the Nation 1993 – 2001 and Drug Topic Archives New Drug Approvals 1995 – 2001.
7 Burrill & Company (2003) Biotech 2003: The 17th Annual Report on the Industry.
Saturday, March 1, 2008
A BONANZA FOR PHARMACEUTICAL INDUSTRY
A BONANZA FOR PHARMACEUTICAL INDUSTRY BASED ON A
NOVEL APPROACH TO HEALTHCARE IN NEW YORK CITY
If the Pharmaceutical Industry's life blood is demand generation, prescription compliance and a robust pipeline, two of the (former) three are being pumped up by a novel program in New York City. As discussed in The New York Times on February 26, 2008, Page B3 (http://www.nytimes.com/2008/02/26/nyregion/26health.html?em&ex=1204174800&en=f310ed051efabd9a&ei=5087%0A#, ) Mayor Michael Bloomberg announced that after a 2 year development effort and more than $60 million of public funding that the city was ready to equip any or all doctors with computer software (from eClinicalWorks) that can track patients records in order to provide better patient care. They project 1,000,000 patients on this system by year end!
I can only imagine what a bonanza this could be for the Pharmaceutical Industry! Assuming the system is successful and it is likely to be successful (this is my optimism at work as public funded systems projects are rarely viable on initial rollout and the complexity of the various stakeholders only exacerbates the problem) , the potential benefits for the patient and supplier are enormous There could be tightly integrated and compliance monitoring capability easily added so that it would be easy to inform/remind patients about their scripts; on line adjudication could be another step away and electronic script writing fused together to make for a far more effective and efficient health care delivery system.
The value to the industry suggests to me that the business, commercial and market development organization should start understanding and promptly backing such a system on a nationwide basis. Mayor Bloomberg suggests that “This can do for health what the Bloomberg terminal did for finance” (and by the way made the mayor a multi-billionaire). If he is even partially correct, the payback for all is monumental.
What do you think??
Send comments to larryrothmansblog@gmail.com
Contributed by: Lawrence J. Rothman, PhD
NOVEL APPROACH TO HEALTHCARE IN NEW YORK CITY
If the Pharmaceutical Industry's life blood is demand generation, prescription compliance and a robust pipeline, two of the (former) three are being pumped up by a novel program in New York City. As discussed in The New York Times on February 26, 2008, Page B3 (http://www.nytimes.com/2008/02/26/nyregion/26health.html?em&ex=1204174800&en=f310ed051efabd9a&ei=5087%0A#, ) Mayor Michael Bloomberg announced that after a 2 year development effort and more than $60 million of public funding that the city was ready to equip any or all doctors with computer software (from eClinicalWorks) that can track patients records in order to provide better patient care. They project 1,000,000 patients on this system by year end!
I can only imagine what a bonanza this could be for the Pharmaceutical Industry! Assuming the system is successful and it is likely to be successful (this is my optimism at work as public funded systems projects are rarely viable on initial rollout and the complexity of the various stakeholders only exacerbates the problem) , the potential benefits for the patient and supplier are enormous There could be tightly integrated and compliance monitoring capability easily added so that it would be easy to inform/remind patients about their scripts; on line adjudication could be another step away and electronic script writing fused together to make for a far more effective and efficient health care delivery system.
The value to the industry suggests to me that the business, commercial and market development organization should start understanding and promptly backing such a system on a nationwide basis. Mayor Bloomberg suggests that “This can do for health what the Bloomberg terminal did for finance” (and by the way made the mayor a multi-billionaire). If he is even partially correct, the payback for all is monumental.
What do you think??
Send comments to larryrothmansblog@gmail.com
Contributed by: Lawrence J. Rothman, PhD
Friday, February 29, 2008
WHY BIG PHARMA CAN'T DISCOVER DRUGS - PART 3
“If you want to launch big ships, you have to go where the water is deep”- anonymous
I wrote earlier about how the costs and risks associated with drug discovery and development in a Big Pharma PRI are measured against the remote prospect that any individual NCE might attain “Blockbuster” levels of sales and profitability. The issues involved with an assessment such as this are quite complex.
First, the drug has to cure a disease and do it more safely than has ever been required before. Second, if the disease all ready has alternative therapies, the new drug has to treat it more efficaciously than the old ones. Third, if it’s more expensive, a case must be made to the reimbursing agencies that there is enough clinical benefit to the patient, and perhaps to society, so that they are willing to pay for it. I suppose it’s beside the point for me to highlight that in circumstances where neither the major beneficiary of the new drug, the patient, nor the individual who makes the decision that the drug should be prescribed and therefore has a major intellectual and emotional commitment to the decision, the physician, are the ones who pay for it. That makes these circumstances quite different from how things work in the rest of the world. Troublingly, the one who does, the insurer, has the greatest stake in not doing so willingly. All of this is probably superfluous at this point, but these therapeutic and reimbursement decisions are typically maddeningly complex.
The market assessment is an all-together different proposition. Just to scratch the surface - how many cases a year; is the disease curable or will it be treated for life; what will be the remaining patent life of the molecule if and when the drug is ultimately approved; can that be extended through formulation changes, additional new claims and what about the rest of the world? All of these must be considered in light of the fact that each new drug candidate carries a financial burden of it’s own, but also that of it’s failed predecessors – as well as the massive on-going costs of scientists, physicians and managers whose salaries and overhead are attributable as much to their forbearers as to them, whether new drugs ever emerge from their efforts, or not.
The whole process consists of trying to know the unknowable. Piling suppositions on top of projections and speculations and then multiplying them by shaky assumptions. In short, using any and every conceivable means to try to take some of the risk out of what is inherently an unknowable set of future outcomes in an undeniably risky business.
But suppose you don’t get paid to manage risk. What if you get paid to identify and measure risk; to bring every imaginable tripwire and booby-trap into the open; to insure that there are no surprises down the road. How then to reach the decision, ever, that any individual new compound be christened to undertake such a perilous and expensive passage. The peril and expense encompassing, of course, personal career risk as well as the actual project.
The reality of this situation is there is no penalty for terminating a promising project. In fact, in today’s climate almost nothing is more appreciated by management than an “early kill” neatly executed before the costs and risks get appreciable. A skilled Marketing manager can find more good reasons for a new drug to fail than you can possibly imagine if there is no penalty for not going forward and, on balance, no reward for endorsing the enormous risks of even the most promising drug candidate.
Little wonder then that so few compounds get far enough along in early development to produce a field of late stage drug candidates broad and diverse enough to improve the overall prospects and yield. Without the willingness to enthusiastically embrace risk and reap the harvest of some unexpected results, there can be little expectation of any upside surprise through the discovery of something that is genuinely new.
I wrote earlier about how the costs and risks associated with drug discovery and development in a Big Pharma PRI are measured against the remote prospect that any individual NCE might attain “Blockbuster” levels of sales and profitability. The issues involved with an assessment such as this are quite complex.
First, the drug has to cure a disease and do it more safely than has ever been required before. Second, if the disease all ready has alternative therapies, the new drug has to treat it more efficaciously than the old ones. Third, if it’s more expensive, a case must be made to the reimbursing agencies that there is enough clinical benefit to the patient, and perhaps to society, so that they are willing to pay for it. I suppose it’s beside the point for me to highlight that in circumstances where neither the major beneficiary of the new drug, the patient, nor the individual who makes the decision that the drug should be prescribed and therefore has a major intellectual and emotional commitment to the decision, the physician, are the ones who pay for it. That makes these circumstances quite different from how things work in the rest of the world. Troublingly, the one who does, the insurer, has the greatest stake in not doing so willingly. All of this is probably superfluous at this point, but these therapeutic and reimbursement decisions are typically maddeningly complex.
The market assessment is an all-together different proposition. Just to scratch the surface - how many cases a year; is the disease curable or will it be treated for life; what will be the remaining patent life of the molecule if and when the drug is ultimately approved; can that be extended through formulation changes, additional new claims and what about the rest of the world? All of these must be considered in light of the fact that each new drug candidate carries a financial burden of it’s own, but also that of it’s failed predecessors – as well as the massive on-going costs of scientists, physicians and managers whose salaries and overhead are attributable as much to their forbearers as to them, whether new drugs ever emerge from their efforts, or not.
The whole process consists of trying to know the unknowable. Piling suppositions on top of projections and speculations and then multiplying them by shaky assumptions. In short, using any and every conceivable means to try to take some of the risk out of what is inherently an unknowable set of future outcomes in an undeniably risky business.
But suppose you don’t get paid to manage risk. What if you get paid to identify and measure risk; to bring every imaginable tripwire and booby-trap into the open; to insure that there are no surprises down the road. How then to reach the decision, ever, that any individual new compound be christened to undertake such a perilous and expensive passage. The peril and expense encompassing, of course, personal career risk as well as the actual project.
The reality of this situation is there is no penalty for terminating a promising project. In fact, in today’s climate almost nothing is more appreciated by management than an “early kill” neatly executed before the costs and risks get appreciable. A skilled Marketing manager can find more good reasons for a new drug to fail than you can possibly imagine if there is no penalty for not going forward and, on balance, no reward for endorsing the enormous risks of even the most promising drug candidate.
Little wonder then that so few compounds get far enough along in early development to produce a field of late stage drug candidates broad and diverse enough to improve the overall prospects and yield. Without the willingness to enthusiastically embrace risk and reap the harvest of some unexpected results, there can be little expectation of any upside surprise through the discovery of something that is genuinely new.
Tuesday, February 26, 2008
Globalization: How might the coming US election affect the trend towards offshoring?
Lately, I’ve been blogging a lot about the U.S. Presidential election and its impact on Big Pharma. I’d like to continue this thread for a while and today blog about the election’s possible effects on one of Big Pharma’s most important strategies in trying to remain competitive – offshoring.
Interestingly, none of the big three candidates remaining, Obama, Clinton, and McCain, have taken a strong position here. I’m using their websites and what I’ve read and heard on other media and nothing has leapt out at me. Obama talks of new jobs in green industries. Clinton takes the traditional liberal Democratic tack of big government infrastructure projects. McCain, no surprises here, takes the Reagan approach of lower taxes and a hands off policy by government. Honestly, this is bigger than just the pharmaceutical industry.
The recent trends to offshore back office services, information technology, research and development, and clinical trials have been helping Big Pharma maintain profitability while its revenue growth is stagnating. With little likelihood of government interference, these trends should continue. Of course, this is only a short term fix. Sooner or later, there will no further costs to wring out of operations. Then there are the risks associated with offshoring. The recent incident in China where a factory contaminated healthcare products intended for the United States highlights the risks here. I suspect that somewhere in the U.S. drug industry someone is doing an analysis of the labor costs saved versus the increased quality assurance, public relations, legal and litigation costs arising from going overseas.
With all the problems that Big Pharma has been going through and all that are pending (please see our other blogs for more on this), government non-interference in offshoring is probably a good thing from their narrow perspective. I believe that this will only allow Big Pharma to continue to be distracted by moving operations offshore and become entangled in these activities. It’s only a band-aid, not a long term fix. Daniel Silverstein’s latest blog entry (see in archives below) talks about large PRI’s that are getting too big and are forgetting, or are unable, to remember what they were originally chartered to do.
So, it is business as usual for Big Pharma, at least as far as offshoring is concerned. We may be returning to this topic in the future if they can’t get their quality assurance under control.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Interestingly, none of the big three candidates remaining, Obama, Clinton, and McCain, have taken a strong position here. I’m using their websites and what I’ve read and heard on other media and nothing has leapt out at me. Obama talks of new jobs in green industries. Clinton takes the traditional liberal Democratic tack of big government infrastructure projects. McCain, no surprises here, takes the Reagan approach of lower taxes and a hands off policy by government. Honestly, this is bigger than just the pharmaceutical industry.
The recent trends to offshore back office services, information technology, research and development, and clinical trials have been helping Big Pharma maintain profitability while its revenue growth is stagnating. With little likelihood of government interference, these trends should continue. Of course, this is only a short term fix. Sooner or later, there will no further costs to wring out of operations. Then there are the risks associated with offshoring. The recent incident in China where a factory contaminated healthcare products intended for the United States highlights the risks here. I suspect that somewhere in the U.S. drug industry someone is doing an analysis of the labor costs saved versus the increased quality assurance, public relations, legal and litigation costs arising from going overseas.
With all the problems that Big Pharma has been going through and all that are pending (please see our other blogs for more on this), government non-interference in offshoring is probably a good thing from their narrow perspective. I believe that this will only allow Big Pharma to continue to be distracted by moving operations offshore and become entangled in these activities. It’s only a band-aid, not a long term fix. Daniel Silverstein’s latest blog entry (see in archives below) talks about large PRI’s that are getting too big and are forgetting, or are unable, to remember what they were originally chartered to do.
So, it is business as usual for Big Pharma, at least as far as offshoring is concerned. We may be returning to this topic in the future if they can’t get their quality assurance under control.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Thursday, February 21, 2008
WHY BIG PHARMA CAN’T DISCOVER DRUGS – PART 2
WHY BIG PHARMA CAN’T DISCOVER DRUGS – PART 2
by Daniel A. Silverstein
“You are what your numbers say you are” - Bill Parcels
Very large (5,000 to 10,000+ employee) PRIs are not reliable engines of discovery for new drugs. They are, in fact, extraordinarily productive at other things – particularly repeatable processes associated with aNDAs, sNDAs and the on-going maintenance of established drugs and their franchises. For activities like these, where there is a generally accepted way of doing things – one that is repeatable, and can be optimized – the management techniques and expertise of these kinds or organizations can get the job done quickly and reliably.
It is in the other arena – of breakthrough insights, creativity and originality, that the PRI fails to deliver reliable results; as if such can be “reliably” delivered by any entity known to man. In point of fact, scientific accomplishments such as these tend to be widely and randomly distributed throughout the scientific community. However, while no one knows exactly where the next really meaningful discovery may come from, chances are it will more likely emanate from an academic institution or a development stage Bio/Pharma company lab, than that of Big Pharma.
I commented generally in an earlier post that the absolute size, the extent of management controls and costs of doing business in these very large PRIs was in some measure responsible for this lack of creative output. More specifically however, I observe that never in the history of man have organizations of such size and monolithic character been put to the task of “discovering things.” Rather, discovery as a process, has taken place in more companionable, propitious surroundings populated mostly by newly minted Ph.D.s and Post Docs working in small groups.
Further, I ask you to recall that most great discoveries are made by scientists around the age of 30, who, interestingly enough, go on to careers based on never discovering anything else again. Moreover, there is support for the idea that the state of knowledge in all scientific fields changes so quickly that scientists 3 years past their Ph.D. are drifting out of touch with leading edge thinking, and those 10 years out from the academic training are suited only for work as doorstops, or in reality, as Managers of Discovery in Big Pharma.
This situation is exacerbated by the failure of Big Pharma to effectively establish equal pay, glory and stature for those who want to, or ought to, be kept on the scientific track. The result of this failure is evidenced by the endless desire of all those youngsters, profoundly trained in science, who can’t wait to rise to the position of Group Leader or Section Manager, stop discovering things and start managing people. They abandon their scientific heritage more quickly and more foolishly than a 40-year-old virgin in a house of ill repute.
So if Big Pharma Labs are best at process optimization and smaller labs excel at the kinds of thinking that leads to breakthrough discoveries, what to do?
One school of thought suggests that the PRI model ought to be changed and that the “R” needs to be conducted in a different setting from the “D”. Specifically, it should be both recognized and acknowledged that massive organizations are best for work characterized by processes that can be optimized; and that establishing numerous smaller, semi-autonomous labs, constantly refreshed by streams of new Post Docs on temporary assignment and nurtured by a revolving cast of academic thought leaders might be more likely places where something might actually get discovered, providing that the right incentives are put in place.
In support of the notion of getting the incentives right, I point out that except for the prospect of continuing employment, there are no appropriate rewards offered for the discovery of an important new drug. If you have a really great idea and work for a Big Pharma, you sign the patent over for a buck. If you do your work independently, get if financed on your own and make it a reality, the next 10 generations of your family will live with complete financial independence. No real basis of comparison, is there?
by Daniel A. Silverstein
“You are what your numbers say you are” - Bill Parcels
Very large (5,000 to 10,000+ employee) PRIs are not reliable engines of discovery for new drugs. They are, in fact, extraordinarily productive at other things – particularly repeatable processes associated with aNDAs, sNDAs and the on-going maintenance of established drugs and their franchises. For activities like these, where there is a generally accepted way of doing things – one that is repeatable, and can be optimized – the management techniques and expertise of these kinds or organizations can get the job done quickly and reliably.
It is in the other arena – of breakthrough insights, creativity and originality, that the PRI fails to deliver reliable results; as if such can be “reliably” delivered by any entity known to man. In point of fact, scientific accomplishments such as these tend to be widely and randomly distributed throughout the scientific community. However, while no one knows exactly where the next really meaningful discovery may come from, chances are it will more likely emanate from an academic institution or a development stage Bio/Pharma company lab, than that of Big Pharma.
I commented generally in an earlier post that the absolute size, the extent of management controls and costs of doing business in these very large PRIs was in some measure responsible for this lack of creative output. More specifically however, I observe that never in the history of man have organizations of such size and monolithic character been put to the task of “discovering things.” Rather, discovery as a process, has taken place in more companionable, propitious surroundings populated mostly by newly minted Ph.D.s and Post Docs working in small groups.
Further, I ask you to recall that most great discoveries are made by scientists around the age of 30, who, interestingly enough, go on to careers based on never discovering anything else again. Moreover, there is support for the idea that the state of knowledge in all scientific fields changes so quickly that scientists 3 years past their Ph.D. are drifting out of touch with leading edge thinking, and those 10 years out from the academic training are suited only for work as doorstops, or in reality, as Managers of Discovery in Big Pharma.
This situation is exacerbated by the failure of Big Pharma to effectively establish equal pay, glory and stature for those who want to, or ought to, be kept on the scientific track. The result of this failure is evidenced by the endless desire of all those youngsters, profoundly trained in science, who can’t wait to rise to the position of Group Leader or Section Manager, stop discovering things and start managing people. They abandon their scientific heritage more quickly and more foolishly than a 40-year-old virgin in a house of ill repute.
So if Big Pharma Labs are best at process optimization and smaller labs excel at the kinds of thinking that leads to breakthrough discoveries, what to do?
One school of thought suggests that the PRI model ought to be changed and that the “R” needs to be conducted in a different setting from the “D”. Specifically, it should be both recognized and acknowledged that massive organizations are best for work characterized by processes that can be optimized; and that establishing numerous smaller, semi-autonomous labs, constantly refreshed by streams of new Post Docs on temporary assignment and nurtured by a revolving cast of academic thought leaders might be more likely places where something might actually get discovered, providing that the right incentives are put in place.
In support of the notion of getting the incentives right, I point out that except for the prospect of continuing employment, there are no appropriate rewards offered for the discovery of an important new drug. If you have a really great idea and work for a Big Pharma, you sign the patent over for a buck. If you do your work independently, get if financed on your own and make it a reality, the next 10 generations of your family will live with complete financial independence. No real basis of comparison, is there?
Tuesday, February 19, 2008
Healthcare: Query from a Reader from India
This week, one of our readers, Kumar Shankar Roy of Chennai, India, replied to my blog about winners and losers in Big Pharma asking if Big Pharma’s difficulties would be an opportunity for generics. He also wanted to know if Clinton or Obama would do anything about extending help in innovation given the bad shape of the drug pipelines.
Larry and I talked about this and here’s what we think. First, let’s talk about the generics. Short term, Big Pharma’s problems will help the generics. Longer term, we’re not so sure. If Big Pharma’s pipeline really slows down there’s going to be nothing to copy, right? Larry’s view is that there will likely be an equilibrium point whereby R&D would likely be focused on fewer higher payout/profit drugs with less likelihood for as many "me too" products. There are still many diseases with large populations that can benefit from focused research:
· elder related illnesses,
· cancer in its many forms,
· mental illness and
· numerous life style issues.
Patients will benefit and the companies that successfully address them will do very well. So, the Big Pharma companies with the R&D capabilities to address these areas stand the best chance of surviving. Larry also believes that there are some other forces at play that will impact demand:
· Will payers prevail and only look at costs (as opposed to pharmaco-economics)?
· Can "we" afford medicines at current price points?
· Will regulatory issues gum up the whole thing, etc.?
· What about biogenerics?
Going back to Kumar’s first question, we see temporary advantage to the generics. Big Pharma if it avoids the pitfalls outlined above and can focus on the new opportunities would survive but be a very different industry.
Kumar’s second question about whether or not Clinton and Obama would do anything about extending help in innovation given the bad shape of the drug pipelines is in a different vein. I haven’t seen much, if anything, from either candidate indicating an interest in helping Big Pharma especially when it comes to helping protect their patents. Their strident advocacy of generics won’t be encouraging drug companies to make big bets on future drugs. I don’t expect Big Pharma to get any relief from Clinton or Obama. (Or, even McCain for that matter. Please see my earlier blog for more on that.)
Larry and I would like to thank Kumar for writing to us, telling us his thoughts on the blog, and asking questions. We hope that he finds our replies helpful and look forward to corresponding with him again in the future.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Larry and I talked about this and here’s what we think. First, let’s talk about the generics. Short term, Big Pharma’s problems will help the generics. Longer term, we’re not so sure. If Big Pharma’s pipeline really slows down there’s going to be nothing to copy, right? Larry’s view is that there will likely be an equilibrium point whereby R&D would likely be focused on fewer higher payout/profit drugs with less likelihood for as many "me too" products. There are still many diseases with large populations that can benefit from focused research:
· elder related illnesses,
· cancer in its many forms,
· mental illness and
· numerous life style issues.
Patients will benefit and the companies that successfully address them will do very well. So, the Big Pharma companies with the R&D capabilities to address these areas stand the best chance of surviving. Larry also believes that there are some other forces at play that will impact demand:
· Will payers prevail and only look at costs (as opposed to pharmaco-economics)?
· Can "we" afford medicines at current price points?
· Will regulatory issues gum up the whole thing, etc.?
· What about biogenerics?
Going back to Kumar’s first question, we see temporary advantage to the generics. Big Pharma if it avoids the pitfalls outlined above and can focus on the new opportunities would survive but be a very different industry.
Kumar’s second question about whether or not Clinton and Obama would do anything about extending help in innovation given the bad shape of the drug pipelines is in a different vein. I haven’t seen much, if anything, from either candidate indicating an interest in helping Big Pharma especially when it comes to helping protect their patents. Their strident advocacy of generics won’t be encouraging drug companies to make big bets on future drugs. I don’t expect Big Pharma to get any relief from Clinton or Obama. (Or, even McCain for that matter. Please see my earlier blog for more on that.)
Larry and I would like to thank Kumar for writing to us, telling us his thoughts on the blog, and asking questions. We hope that he finds our replies helpful and look forward to corresponding with him again in the future.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Saturday, February 16, 2008
WHY BIG PHARMA CAN’T DISCOVER DRUGS
They can only make Anti-bodies to NCE’s
Did you ever wonder why the large PRI’s do so poorly at discovering new drugs? How a group of 10,000+ highly trained and dedicated scientists, working with what the rest of the world would regard as unlimited budgets, the very latest in equipment and technology and access to the best thinking by leading academic researchers can do so poorly at discovering new therapeutic agents? Isn’t it funny that collectively, this enormous pool of Ph.D.s, M.D.s and even a few MD/PhDs, can’t discover the odd new drug? It seems statistically improbable that so many resources could be employed in such a rigorous and targeted fashion and produce so little to show for all that effort.
It’s become so well accepted that practically no one in Big Pharma ever discovers a drug that we don’t even think it strange to meet people in the course of our work who’ve spent their entire 20 or 30-year career toiling diligently in a PRI Lab and have never been involved with an Approved New Drug. Most in fact, consider themselves lucky and productive if they’ve played a part in getting a NCE into man, even if it failed in early testing. Stranger still, this plays out in an environment of supposed desperation on the part of Big Pharma to find replacements for drugs coming off patent protection.
An examination of the logic underlying this situation would be amusing if the results, for shareholders and patients alike, weren’t so tragic. The whole concept of trying to relate the disparate elements of unmet medical needs and the current state of the art of pharmaceutical research and development with extraordinarily speculative projections of final market size resembles a process in which so many filters are employed in refining the final product that almost nothing ever gets through.
If it’s not obvious by now to those making decisions about how to pick out the projects with Blockbuster potential that choosing the right one has about the same odds as catching lightning in a bottle, it should be. Doing it once is no guarantee that you can do it again – perhaps, in fact, the obverse is more likely.
I have a theory about all of this futility, which may shed some light on what is really going on. First, the absolute size and complexity of these organizations is so vast as to require highly sophisticated and elaborate management procedures to keep track of exactly what is going on. At the individual level, compliance with both the day-to-day reporting requirements, justification of projects and the periodic planning cycle consumes time, energy and resources that would be better spent on science. On the management level, the cost of infrastructure, control systems, real estate and staffing places an enormous cost burden that each drug candidate must bear, whether successful or not.
Second, the Blockbuster hurdle is too high a standard against which to measure the potential worth and value of every new product candidate. The conundrum though, is that the high cost structure of developing drugs in the typical Big Pharma setting requires that kind of financial outcome before full support is forthcoming. Since unreliable filters are set in place to assist in these judgments, not near enough candidates are launched on the perilous journey of development for an adequate number to survive the trip. I offer this comment by way of opining that predictions of final market potential cannot, by their very methodology, take cognizance of serendipitous medical insights that only occur when a drug is broadly used by physicians. Additional indications, more efficacious dosing levels, new regimens all represent value building opportunities that can be difficult to foresee.
Third, the portfolios of undeveloped compounds residing on the books of every Big Pharma represent valuable intellectual property that the owners are both reluctant, if not downright fearful, to see commercialized. The reasons for this are obvious – nobody is strongly incentivized to do deals; if, God forbid, one of these sleeping beauties turns into an actual blockbuster in the hands of another, the shame and humiliation would be matched only by the swiftness of termination of the offending deal maker; in Big Pharma not making decisions is often as well rewarded as making them (without the attendant risk).
At one time Big Pharma’s drug development machinery was considered the gold standard for the management of this costly and complex process. Today, the media’s skepticism about the objectivity of the development process, the growing demands that the results of every clinical trial be in the public domain and the cost structure of new drug development ($1 billion per NDA) suggest that we are well past the tipping point for changing out a model that doesn’t work any longer for something new, faster and cheaper.
Did you ever wonder why the large PRI’s do so poorly at discovering new drugs? How a group of 10,000+ highly trained and dedicated scientists, working with what the rest of the world would regard as unlimited budgets, the very latest in equipment and technology and access to the best thinking by leading academic researchers can do so poorly at discovering new therapeutic agents? Isn’t it funny that collectively, this enormous pool of Ph.D.s, M.D.s and even a few MD/PhDs, can’t discover the odd new drug? It seems statistically improbable that so many resources could be employed in such a rigorous and targeted fashion and produce so little to show for all that effort.
It’s become so well accepted that practically no one in Big Pharma ever discovers a drug that we don’t even think it strange to meet people in the course of our work who’ve spent their entire 20 or 30-year career toiling diligently in a PRI Lab and have never been involved with an Approved New Drug. Most in fact, consider themselves lucky and productive if they’ve played a part in getting a NCE into man, even if it failed in early testing. Stranger still, this plays out in an environment of supposed desperation on the part of Big Pharma to find replacements for drugs coming off patent protection.
An examination of the logic underlying this situation would be amusing if the results, for shareholders and patients alike, weren’t so tragic. The whole concept of trying to relate the disparate elements of unmet medical needs and the current state of the art of pharmaceutical research and development with extraordinarily speculative projections of final market size resembles a process in which so many filters are employed in refining the final product that almost nothing ever gets through.
If it’s not obvious by now to those making decisions about how to pick out the projects with Blockbuster potential that choosing the right one has about the same odds as catching lightning in a bottle, it should be. Doing it once is no guarantee that you can do it again – perhaps, in fact, the obverse is more likely.
I have a theory about all of this futility, which may shed some light on what is really going on. First, the absolute size and complexity of these organizations is so vast as to require highly sophisticated and elaborate management procedures to keep track of exactly what is going on. At the individual level, compliance with both the day-to-day reporting requirements, justification of projects and the periodic planning cycle consumes time, energy and resources that would be better spent on science. On the management level, the cost of infrastructure, control systems, real estate and staffing places an enormous cost burden that each drug candidate must bear, whether successful or not.
Second, the Blockbuster hurdle is too high a standard against which to measure the potential worth and value of every new product candidate. The conundrum though, is that the high cost structure of developing drugs in the typical Big Pharma setting requires that kind of financial outcome before full support is forthcoming. Since unreliable filters are set in place to assist in these judgments, not near enough candidates are launched on the perilous journey of development for an adequate number to survive the trip. I offer this comment by way of opining that predictions of final market potential cannot, by their very methodology, take cognizance of serendipitous medical insights that only occur when a drug is broadly used by physicians. Additional indications, more efficacious dosing levels, new regimens all represent value building opportunities that can be difficult to foresee.
Third, the portfolios of undeveloped compounds residing on the books of every Big Pharma represent valuable intellectual property that the owners are both reluctant, if not downright fearful, to see commercialized. The reasons for this are obvious – nobody is strongly incentivized to do deals; if, God forbid, one of these sleeping beauties turns into an actual blockbuster in the hands of another, the shame and humiliation would be matched only by the swiftness of termination of the offending deal maker; in Big Pharma not making decisions is often as well rewarded as making them (without the attendant risk).
At one time Big Pharma’s drug development machinery was considered the gold standard for the management of this costly and complex process. Today, the media’s skepticism about the objectivity of the development process, the growing demands that the results of every clinical trial be in the public domain and the cost structure of new drug development ($1 billion per NDA) suggest that we are well past the tipping point for changing out a model that doesn’t work any longer for something new, faster and cheaper.
Contributed by Daniel A. Silverstein
Wednesday, February 13, 2008
Healthcare: Who Would Be Worse for Big Pharma, Obama, Clinton, or McCain?
Guy has been blogging for a while now about the upcoming Presidential election’s impact on Big Pharma. He didn’t seem to have much good news. All this got me thinking. Who would be worse for Big Pharma, Obama, Clinton, or McCain? It’s an interesting question. Here’s my thinking.
What is very clear is that all three leading candidates have the pharmaceutical industry in their cross hairs. So, we may be faced with a "best of the worst" scenario.
Let’s begin with the Democrats. First, Barack Obama. He’s relatively new to the national political scene but he comes from the liberal, big government tradition of the Democratic party and as Guy pointed out, Obama has some very specific proposals for what he would do to Big Pharma. His plan to have the U.S. government negotiate with drug companies over pricing that would eliminate $30 billion in revenues alone (nominally a 5-10% revenue reduction should this plan be adopted). The reimportation of drugs is high on his agenda, another revenue reduction to the industry of 5-10%). He also has plans to extend healthcare coverage to all Americans, perhaps a nominal increase in demand to the industry, the majority of this demand likely going towards generics. His campaign's summary on pharmaceuticals is: "Obama will work to increase the use of generic drugs in Medicare, Medicaid, and FEHBP and prohibit big name drug companies from keeping generics out of markets." Definitely, not someone who is looking to be a friend of Big Pharma.
Next, let’s talk about Hillary Clinton. Long an advocate of universal healthcare and government oversight of the healthcare industry. There is nothing in her program that would alleviate any of Big Pharma’s concerns. Further, she is an accomplished politician and has mastered the intricacies of Washington’s convoluted politics. In her "Americas Health Choices Plan", she states: "Insurance and Drug Companies: insurance companies will end discrimination based on pre-existing conditions or expectations of illness and ensure high value for every premium dollar; while drug companies will offer fair prices and accurate information". Depending on what "fair prices" mean, the impact on the industry can be substantive to say the least.
Finally, John McCain. As Guy has pointed out, this Republican isn’t turning out to be a pro-business friend of Big Pharma. On cornerstone of his plan on healthcare states: "Foster the development of routes for safe, cheaper generic versions of drugs and biologic pharmaceuticals. Develop safety protocols that permit re-importation to keep competition vigorous." His program almost sounds like a Democratic broadside. Many elderly, retired people are his supporters. Not too many friends of Big Pharma there.
So, let me return to my original question, who would be worse for Big Pharma? While it seems a bit like a Hobson's choice, I think that it would be Barack Obama. But, first, let me explain why it’s neither Clinton nor McCain.
Clinton brings much experience and intelligence with her should she be elected. However, she also brings a history of acrimony and controversy. If the Democrats don’t achieve significant increases in both Houses of the Congress then she may not be able to achieve the consensus necessary to drive what will be a very contentious program. Clinton despite her very real political skills may not be able to break free of her past.
John McCain, if elected, would probably work towards some of his programs but without Republican party support probably wouldn’t enact legislation as comprehensive and far reaching as his competitors would. However, if the Democrats achieve substantial gains in the Congress they might be able to initiate legislation comparable to Obama’s and Clinton’s and with a “fellow traveler” in the White House make it happen. However, I think that’s a bit of a stretch.
Now, Obama. I believe that he would be the worst choice for Big Pharma for several reasons. First, he has no baggage and is perceived as an agent for positive change. Second, he expresses a willingness to reach across the aisle and compromise. Finally, his programs appear to be more realistic, reflecting the reality of the American economic system. The country wants change, fresh positive change, and he seems to be able to answer that need. If Obama wins the election then Guy may be right with his prediction of a decade long slump for Big Pharma.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Lawrence Rothman, PhD.
What is very clear is that all three leading candidates have the pharmaceutical industry in their cross hairs. So, we may be faced with a "best of the worst" scenario.
Let’s begin with the Democrats. First, Barack Obama. He’s relatively new to the national political scene but he comes from the liberal, big government tradition of the Democratic party and as Guy pointed out, Obama has some very specific proposals for what he would do to Big Pharma. His plan to have the U.S. government negotiate with drug companies over pricing that would eliminate $30 billion in revenues alone (nominally a 5-10% revenue reduction should this plan be adopted). The reimportation of drugs is high on his agenda, another revenue reduction to the industry of 5-10%). He also has plans to extend healthcare coverage to all Americans, perhaps a nominal increase in demand to the industry, the majority of this demand likely going towards generics. His campaign's summary on pharmaceuticals is: "Obama will work to increase the use of generic drugs in Medicare, Medicaid, and FEHBP and prohibit big name drug companies from keeping generics out of markets." Definitely, not someone who is looking to be a friend of Big Pharma.
Next, let’s talk about Hillary Clinton. Long an advocate of universal healthcare and government oversight of the healthcare industry. There is nothing in her program that would alleviate any of Big Pharma’s concerns. Further, she is an accomplished politician and has mastered the intricacies of Washington’s convoluted politics. In her "Americas Health Choices Plan", she states: "Insurance and Drug Companies: insurance companies will end discrimination based on pre-existing conditions or expectations of illness and ensure high value for every premium dollar; while drug companies will offer fair prices and accurate information". Depending on what "fair prices" mean, the impact on the industry can be substantive to say the least.
Finally, John McCain. As Guy has pointed out, this Republican isn’t turning out to be a pro-business friend of Big Pharma. On cornerstone of his plan on healthcare states: "Foster the development of routes for safe, cheaper generic versions of drugs and biologic pharmaceuticals. Develop safety protocols that permit re-importation to keep competition vigorous." His program almost sounds like a Democratic broadside. Many elderly, retired people are his supporters. Not too many friends of Big Pharma there.
So, let me return to my original question, who would be worse for Big Pharma? While it seems a bit like a Hobson's choice, I think that it would be Barack Obama. But, first, let me explain why it’s neither Clinton nor McCain.
Clinton brings much experience and intelligence with her should she be elected. However, she also brings a history of acrimony and controversy. If the Democrats don’t achieve significant increases in both Houses of the Congress then she may not be able to achieve the consensus necessary to drive what will be a very contentious program. Clinton despite her very real political skills may not be able to break free of her past.
John McCain, if elected, would probably work towards some of his programs but without Republican party support probably wouldn’t enact legislation as comprehensive and far reaching as his competitors would. However, if the Democrats achieve substantial gains in the Congress they might be able to initiate legislation comparable to Obama’s and Clinton’s and with a “fellow traveler” in the White House make it happen. However, I think that’s a bit of a stretch.
Now, Obama. I believe that he would be the worst choice for Big Pharma for several reasons. First, he has no baggage and is perceived as an agent for positive change. Second, he expresses a willingness to reach across the aisle and compromise. Finally, his programs appear to be more realistic, reflecting the reality of the American economic system. The country wants change, fresh positive change, and he seems to be able to answer that need. If Obama wins the election then Guy may be right with his prediction of a decade long slump for Big Pharma.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Lawrence Rothman, PhD.
Sunday, February 10, 2008
Healthcare: Would Big Pharma Be Any Better Off with McCain?
Originally, I had planned to blog here about whether Romney or McCain would be better for Big Pharma. Unfortunately, Mitt withdrew before I had a chance to prepare it. In fact, my last blog about Obama and Clinton still assumed that the Republicans still had no frontrunner. Even with the instantaneous nature of this blog it’s difficult stay abreast of everything that’s happening.
But, let me return to today’s topic, would Big Pharma be any better off with McCain? Unfortunately, for Big Pharma, the answer is no. Let me take two quotes from Senator McCain’s website (http://www.johnmccain.com/healthcare/ ). First, he said in a speech, “Pharmaceutical companies must worry less about squeezing additional profits from old medicines by copying the last successful drug and insisting on additional patent protections and focus more on new and innovative medicine.” Now that would put a real crimp in most large pharmaceuticals’ business models. The recent drug company raids in Europe conducted by the European Union probably were based on a similar theory. In the same speech, McCain continues, “Drugs are an important part of medicine, of course, and are often quite expensive. Here in Iowa the Attorney General is suing seventy-eight drug companies accusing them of inflating drug costs paid by Iowa taxpayers through the Medicaid system. Problems with costs are created when market forces are replaced by government regulated prices. If drug costs reflects value, fine. But if there are ways to bring greater competition to our drug markets by safe re-importation of drugs, by faster introduction of generic drugs, or by any other means we should do so. If I'm elected President, we will.” OK, now this is the guy who claims to be the conservative candidate for President. And, just in case, he hasn’t been clear enough about it, a recent Business Week article quoted McCain describing himself among the “great enemies of the pharmaceutical companies in Washington.” Additionally, McCain is a proponent of permitting Medicare to negotiate for discounted prices with drug companies. The Wall Street Journal has pointed out that retirees are major contributors to McCain’s coffers. Cheaper drug prices are clearly very important to them.
This is another reason why Big Pharma is in for some tough sledding for the next decade. The party normally associated with being pro-business is doing nothing for Big Pharma. The country’s concerns with healthcare seem to be driving towards a consensus that’s crossing party lines. That consensus will shake Big Pharma to its very core.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
But, let me return to today’s topic, would Big Pharma be any better off with McCain? Unfortunately, for Big Pharma, the answer is no. Let me take two quotes from Senator McCain’s website (http://www.johnmccain.com/healthcare/ ). First, he said in a speech, “Pharmaceutical companies must worry less about squeezing additional profits from old medicines by copying the last successful drug and insisting on additional patent protections and focus more on new and innovative medicine.” Now that would put a real crimp in most large pharmaceuticals’ business models. The recent drug company raids in Europe conducted by the European Union probably were based on a similar theory. In the same speech, McCain continues, “Drugs are an important part of medicine, of course, and are often quite expensive. Here in Iowa the Attorney General is suing seventy-eight drug companies accusing them of inflating drug costs paid by Iowa taxpayers through the Medicaid system. Problems with costs are created when market forces are replaced by government regulated prices. If drug costs reflects value, fine. But if there are ways to bring greater competition to our drug markets by safe re-importation of drugs, by faster introduction of generic drugs, or by any other means we should do so. If I'm elected President, we will.” OK, now this is the guy who claims to be the conservative candidate for President. And, just in case, he hasn’t been clear enough about it, a recent Business Week article quoted McCain describing himself among the “great enemies of the pharmaceutical companies in Washington.” Additionally, McCain is a proponent of permitting Medicare to negotiate for discounted prices with drug companies. The Wall Street Journal has pointed out that retirees are major contributors to McCain’s coffers. Cheaper drug prices are clearly very important to them.
This is another reason why Big Pharma is in for some tough sledding for the next decade. The party normally associated with being pro-business is doing nothing for Big Pharma. The country’s concerns with healthcare seem to be driving towards a consensus that’s crossing party lines. That consensus will shake Big Pharma to its very core.
Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
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