The Pharmaceutical Innovation Conundrum

The Wall Street Journal today ran the second of two articles about the downturn in pharmaceutical innovation. Last week's installment suggested these causes for the drought:

It has never been easy to take a drug from the lab, through animal testing and into human trials. The industry estimates only one out of every 5,000 to 10,000 candidates makes it to human trials. And many drugs that work beautifully in animals fail miserably in people. But those odds seem to have worsened in recent years, prompting debate about whether the cause is government regulation, corporate structure or an excessive scientific reliance on chemicals rather than biology.

I believe there is another explanation, which will be articulated in an essay I wrote recently that I will run on this website over the next four days.

Part I: The Pharmaceutical Innovation Conundrum

Breathless reports highlighting the latest medical breakthroughs are a staple of the media landscape, but they mask a darker reality. Pharmaceutical innovation is on the decline. Large sums poured into medical research by the private and public sectors have not produced the promised payoff. The number of important new drugs and biologics introduced into medical practice has dropped precipitously in recent years and has been on a downward trend for over a decade.

The cause of this slowdown has been the subject of much speculation and research, befitting its status as a chronic disease. Despite numerous diagnoses, the sickness still lacks an effective cure.

How bad is it? Between 1993 and 2004, drug industry expenditures on R&D increased 147 percent in inflation-adjusted dollars, from $16 billion to nearly $40 billion. U.S. government R&D over the same period, primarily from the National Institutes of Health, doubled to nearly $30 billion. Yet new drug applications submitted by pharmaceutical and biotechnology firms to the Food and Drug Administration increased just 38 percent. The number of applications for significant new drugs – those that hold out the great therapeutic promise, increased just 7 percent. And new approvals for unique therapeutic molecules or biologics, the ultimate bottom line for drug discoverers, have declined from a peak of about 40 new drugs per year in the mid-1990s to about 20 per year in this decade.

And there’s no sign of a turnaround. Through the first ten months of 2007, the Food and Drug Administration approved just 14 new molecular entities (a newly invented drug never before approved for use in humans) and just one new biologic. And only seven of those drugs were considered a significant advance over previously invented drugs, making 2007 the worst year in pharmaceutical innovation since Congress passed the Prescription Drug User Fee Act of 1992, which was designed to expedite the pace of new drug approvals.

In 2006, the Government Accountability Office sought an explanation for the declining productivity of pharmaceutical industry research and development. The agency convened a panel of scientific experts to ponder the reasons for rising inputs and declining output. Economic theory suggests that higher investment in R&D should produce higher levels of innovation. And while a mature industry might expect a declining rate of return for each additional dollar invested in new technology development, the absolute decline in research productivity by an industry considered one of the crown jewels of American high technology was simply unprecedented.

Add to this the fact that the pharmaceutical and biotechnology industries have been showered significant government support in the form of direct public investment, tax credits, reduced regulatory burdens and a laissez-faire government attitude toward the industry charging exorbitantly high prices in the largest market in the world, and the government’s auditors recognized something beyond the industry’s traditional lament – “R&D is growing more costly; it now costs (fill in the blank: first it was $500 million; then $800 million; now $1.2 billion) to develop a new drug” – was called for. It has become painfully apparent that throwing more money at the industry in the form of higher prices isn’t going to solve it lackluster performance in coming up with new and innovative therapeutics.

The government analysts highlighted some of the more significant factors, but missed the core of the dilemma. They, like many drug industry supporters, identified the issues of prices, investment, regulation, and risk – core concepts in economics – as the drivers of innovation. They placed too little emphasis on science and public health, which, in my view, have always been and remain the wellspring of medical progress.

Tomorrow: Lost in Translation

Posted by gooznews at December 11, 2007 08:33 AM