Part IV: The Innovation Conundrum

The Challenges Ahead

Today, there are two great scientific challenges facing medical science.

In the advanced industrial world, the biggest challenge is discovering cures for the diseases that affect aging bodies like Alzheimer’s, cancer, Parkinson’s, diabetes, and crippling arthritis. In many of these fields, science hasn’t matured to the point where effective intervention is possible. There’s no guarantee that it ever will.

Because I wrote a book debunking industry’s claims about the cost of new drug development, I often get asked, “So, how much do you think it costs to develop a new drug?” I often begin my response this way: “Let’s start by calculating how much it costs to develop an effective Alzheimer’s drug.”

The answer to that hypothetical is an infinite amount of money. Why? Since there are no effective drugs for treating Alzheimer’s, to presume a cost based on historic calculations of drug development costs in other fields is to presume that scientists will succeed some day, which may not happen. After all, in the four decades since President Richard Nixon declared war on cancer, the government spent nearly $100 billion in current dollars (and the private sector additional billions more). Yet physicians still don’t have an effective treatment for many of the 200-plus forms of that disease.

The wild frontier of medical research today is personalized medicine. Much of the hope surrounding stem cell therapies is based on the idea that cells containing personal DNA and grown for a specific purpose are less likely to be rejected by the body. Cancer tumor analysis – breast cancer may be a half dozen different diseases – has created the new field of targeted drugs. And the fact that some drugs’ side effects only effect certain people is allowing scientists to think about evaluating individual genetic make-up so physicians can target medicines to those who will only experience their benefits, and not their risks.

But to the extent any of these personalized medicine strategies succeed, it will erode the drug industry’s blockbuster marketing model, based as it is on selling common cures to tens of millions of people. For the industry to maintain current levels of sales and profits based on targeted therapeutics will require unprecedented price levels on every breakthrough. It’s an untenable economic model in aging societies necessarily concerned about health care cost containment.

The second great challenge facing medical science today is meeting the medical needs in areas of the world where the patients have very little money. Where there is no money, there is no market, and hence does not attract investment by the global pharmaceutical industry. Malaria, leishmaniasis, Chagas disease, hookworm, drug-resistant tuberculosis, diarrheal diseases – the list of infectious diseases devastating the developing world is long, and the science to develop cutting edge therapeutics for treating them is at the pharmaceutical industry’s fingertips. But its resources are rarely deployed in that direction because there is no potential financial payoff. The latest combination pill for treating chloroquine-resistant malaria must be sold at 10 cents a dose or it will not reach the people who need it the most. The drug industry simply will not invest significant sums in that arena for that paltry return.

The same dynamic is at work in first world markets where there is also demand for medical innovation. The U.S. is now experiencing a major outbreak of drug-resistant bacteria, primarily in its hospitals where two million patients are infected each year, resulting in about 90,000 deaths, according to the Centers for Disease Control and Prevention. More than 70 percent of the bacteria responsible for these hospital-acquired infections are resistant to at least one antibiotic. Yet, according to a database available on the Pharmaceutical Research and Manufacturers Association website, there are just 20 anti-bacterials in development. That is far less than the 77 drugs and vaccines in development for HIV/AIDS, for instance, even though bacterial infections are a comparable public health threat with similar levels of mortality.

The disproportional effort cannot be explained by the relative size of the markets. Sales of HIV/AIDS medications worldwide in 2006 were about $5 billion, while antibiotic sales totaled over $30 billion by one estimate, with more than $8 billion in the U.S. alone. It also can't be explained by the difficulty of the task. While developing new antibiotics isn't necessarily easy, it is a well worn path where new classes of potential molecules have recently emerged. It is reasonable to assume that a sustained research effort could result in numerous new and useful antibiotics.

So what explains the relatively paltry effort? Once again, it is a failure of the market to respond to social need. The bulk of the antibiotic sales are generics and work perfectly well for their intended use. If a company brings a new antibiotic to market, it will not be able to use traditional marketing techniques to push older, cheaper rivals aside. Physicians and hospitals will hold the new drugs in reserve for the most resistant cases, thus limiting sales. Again, the dynamics of the market -- not science -- is holding back innovation.

We must add a third major factor retarding the pace at which the pharmaceutical industry brings new drugs to market. To cope with rising health care costs, payers are increasingly unwilling to pay for new drugs that do not represent a significant medical advance over previous, proven therapies available at generic prices. This is most pronounced in Europe and Japan, where national health care systems have institutions in place like England’s National Institute for Health and Clinical Effectiveness to make these determinations. But even in the U.S., where drug industry lobbyists have been successful in fending off drug price negotiations or bulk purchasing by Medicare, comparative effectiveness search and cost-effectiveness analysis are making headway among sophisticated purchasers and prescribers.

Unfortunately, there is no evidence as yet that this payer push-back is forcing the industry to refocus its research efforts on more medically significant products. Between 1989 and 2000, 58 percent of the 361 new molecular entities (NMEs) approved by the FDA were considered “standard” for review purposes, that is, they did not represent a significant advance over existing therapies. And in the first ten months of 2007, when the FDA approved just 14 NMEs, eight were considered standard – almost the exact same percentage as the earlier era.

But as drug firms survey the political landscape, the prospect of greater efforts at cost control is having an impact on their projections for the future. Several major drug firms have recently announced layoffs of research staff while streamlining their operations. They are also stepping up their purchases of new drug candidates from biotechnology firms, or buying those firms outright, as a way to bolster their lagging R&D pipelines. While the output of these efforts is not guaranteed to have more significance, it suggests that the frequently-utilized strategies of me-too drug development (substituting enantiomers for racemates; developing the six or seventh molecular entity in a class; developing an entirely new class of drugs for a well-treated condition – all of which are usually done by in-house R&D departments intimately familiar with the earlier versions of those molecules or treatments for those conditions) may play a lesser role for industry R&D in the future.

For several decades, industry has insisted that the high cost of pharmaceuticals is the price that must be paid to spur innovation. What patients and practicing physicians got in return was some significant new therapeutics that did indeed substitute for other, more costly health care interventions like operations or long hospital stays. But it was accompanied by a lot of waste in the form of me-too drugs, excessive marketing, and a health care research system that pursues incremental change in well-established markets rather than the truly innovative.

What is needed now are reforms that will create disincentives for wasteful research, reward what's medically useful, and allow the delivery of these therapeutics to everyone who needs them at prices they can afford. The policy world is filled with ideas about how to build such a system: requiring comparative effectiveness studies on all new and old drugs; prizes for breakthroughs; separating R&D from manufacturing, marketing and sales; patent pooling.

There's no guarantee of success in taking this path, either for industry or policymakers, since the low-hanging fruit of the medicinal revolution is still picked. But it should help hold down health care costs in the short run, and reassure patients and those who pay the health care bills that the portion of their health care dollar going to industry-funded research hasn't been wasted.

And it might even help the drug industry’s CEOs relearn the lesson articulated by George Merck Jr. more than a half century ago. “We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered that, the larger they have been.”

Posted by gooznews at December 14, 2007 07:11 AM