Myrtle's Point of View
Problems in the Pharmaceutical Pipeline (or, You Get What You Pay For)
April 20, 2011
We all know it’s coming. In 2011 alone, ten drugs with combined annual revenue of nearly $50 billion will come off patent. Between 2008 and 2015 it’s estimated that patents will expire on products that generate $218 billion in annual sales. Industry leaders, investors, and members of the media are talking about the problem, but it’s not clear that any of the talk is leading to remedial action. There are problems in the biopharmaceutical pipeline, and the health of the industry depends on finding both near- and long-term solutions for improving innovative capacity and productivity.
As we’ve discussed before “The Perfect Storm”, the biopharmaceutical industry is facing a “perfect storm” of pipeline attrition, patent expirations, pricing pressure, and profitability stresses. Despite substantial R&D investments the number of NDAs and BLAs has been declining. Significantly, the majority of the new medical entities currently in the big pharma pipeline have been sourced externally, rather than through internal R&D efforts. In fact, in-house pharma discoveries represent a declining proportion of industry sales. With cutbacks in R&D staff, infrastructure, and programs, it’s probably no surprise that companies are questioning whether their in-house science is as strong as what’s available at other, usually earlier-stage organizations that are focused on and committed to cutting-edge R&D. Consequently, many companies are experiencing the reverse of “not invented here” syndrome, and are looking externally for their next great product opportunity.
For the past decade, the biopharmaceutical industry’s “conventional wisdom” has held that there are efficiencies to having big pharma focus on late-stage development and commercialization while leveraging the discovery and early R&D capabilities of biotechnology companies and academic organizations to identify new pipeline opportunities. However, the majority of the drugs discussed in a recent FierceBiotech article on the top 10 Phase III failures of 2010 were initially developed outside of the companies that were trying to commercialize them. This reality suggests that innovation is not necessarily “out there.” Given that the grass is really not that much greener in other labs, perhaps it’s time for big pharma companies to start planting seeds in their own organizations and investing the time and money necessary to nurture truly innovative R&D capabilities.
For too long, big pharmaceutical companies have been trying to fill their early-stage pipelines on the cheap, and in this industry, cheap is truly expensive in the long run. Companies would be better served by making strategic in-house in a few important areas:
Conducting more rigorous early-stage drug characterization, which may reduce the risk of costly late-stage failures.
Putting additional financial, scientific and infrastructure resources into more expansive pharmacodynamics (PD) studies may help to identify potential side effects earlier in the development process.
Reconsidering the value and purpose of Phase I trials such that they are designed with more stringent safety endpoints and robust PD assessments that are more likely to detect safety signals well in advance of the “go” decisions that advance these molecules into expensive Phase II and Phase III trials.
In the biopharmaceutical industry, as in many other arenas, you get what you pay for. Innovation is rarely inexpensive, but I believe we can avoid the practices that ultimately make it more costly than it needs to be. Pressure to rebuild pipelines and effectively manage P&Ls cannot take precedence over the need for effective investment in disciplined early-stage research and drug characterization.