The pharmaceutical industry appears at the nexus of change for a variety of reasons. During the past decade, the industry was in a mode of consolidation as well as, witnessing the introduction of new technologies to exploit the human genome with new software applications to manage the data. Further, advances in both chemical biology and clinical trials management offered productivity enhancements. In addition, alliances with biotechnology companies and joint development or marketing agreements supplied new chemical entities to the industry’s portfolio of drugs.
Internal forces that confront the companies within the industry are: portfolio losses; competitive alternatives; high attrition; heavy investment ($850 million per successful new drug) and long cycle times (10- 15 years). Internal debates also hamper R&D advances such as, what are portfolio and investment priorities, or support for marketed drug programs versus new chemical entities. Distraction or refocus from consolidation via mergers redirected efforts and thus, stagnation resulted. Externally, regulations (ICH and FDA) guide the development and approval for new drugs, and recent safety issues now require additional data to support claims for specific drug labels or sustain current safety profiles.
The structure of a pharmaceutical company’s R&D organization may create inertia for adapting to change. Most often R&D is separated by functionality, location, decision-making processes (local and decentralized), as well as cultural divides. Research is generally consolidated within a disease area or under a target family rubric, plus supported by ancillary alliances and licenses. Research programs and projects emanate from ideas and traverse the value-added chain through the development of a new product. Thus, capturing relevant information (lab, animal, human) and accumulate for mining then codified to traverse the value chain is critical to provide future productivity gains.
The cost of developing a project escalates considerably as it enters late stage development. Typically, research approximates 40% and development 60% of an annual budget. Failure rates or attrition is very high for new product investments. As scientists accumulate data to support safety, efficacy, or exposure assumptions, predetermined criteria are proven valid or invalid. Industry data suggests that 1 in 10 projects entering the clinic will succeed and 1 in 50,000 ideas result in a product.
Organizations create internal measurements which may not support the leadership’s intent nor reflect the real value of new product development. Early in the value chain, activity and time parameters support discovery, e.g. number of patents, advances to next milestone, number of projects, new assays. Subsequently, early development organizations begin to focus on cycle time and portfolio milestones, e.g. number of projects completing study parameters on time or advances to next phase of development. Some unique enterprises measure research programs into Phase IIa where proof of principle and concept are established and thus, reflect the creativity or attrition in a portfolio based upon research efforts.
Late stage development measure study milestones as well as comparative markers to industry models (benchmarks that disaggregate work activities within a study). In addition, portfolio reviews and assessments (net present value) support prioritization and shifting of R&D budgets. R&D and Global Marketing negotiate over differences in cycle time, labeling, and the balance within a portfolio between new chemical entities and line extensions.
External factors now confront the industry and apply pressure beyond the low level of productivity experienced within this industry. In Europe, price controls and country mandates effectively reduce the R&D investment attractiveness. World Health and international Health Care Policies for LDC’s (less developed countries) and the poor are challenging the industry and international patent laws. Importation of marketed drugs may also change the paradigm in which the industry exists. In the U.S, the competitive landscape and legal constraints (anti-trust laws) inhibit the ability to share information and form collaborations. Further, as only 3 out of 10 drugs historically recover their development costs, investors consider the industry a riskier investment and have a lower level of confidence of the return on equity.
The industry has opportunities to harness knowledge and create new paradigms for R&D. For example, the introduction of genomics fostered initial knowledge about genes and their functionality. Now the industry awaits toxicogenomics, proteomics, metabolomics, pharmacogenomics, and innovative animal models. To this end, the industry must enable scientists to work across technology and information platforms and create synergistic data, models, and predictive tools. For example, mapping the genome to chemical biology families (protease, kinase, ion channel, GPCR) and understanding disease pathways are arenas for the future.
To enhance late stage development, a dramatic new design is essential. Drug safety, efficacy, and exposure will require patient population specific information. To utilize the current standards would become overwhelming and cost prohibitive. Advances in predictive tools that would withstand the scrutiny of regulatory agencies, practitioners, legislators, and the public are essential. Such an approach would enable smaller clinical trials, rapid approvals, and patient acceptance, thus reducing cost and cycle time.
Lest we think that the above would address all the issues confronting the pharmaceutical industry, another key component is leadership. Leaders would need to understand the new principles for partnership and the basis for strong collaborative efforts amongst governments, competitors, and academia. They may require a new set of skills or how to leverage existing skills in a new environment. One may suggest that the 20th century absorbed technology (hardware and software), consolidation, new organizational paradigms, the evolution of international law and international development, but this result will fail to address the 21st century’s needs.