Who’s Going to Pay for Future Drug Development? (Part 1)


In case you haven’t noticed, heart disease remains a debilitating illness for millions. Cancer, despite some recent advances, has not been cured. Drug resistant strains of bacteria are spreading across the globe. There are still no effective treatments for Parkinson’s disease, amyotrophic lateral sclerosis, muscular dystrophy, and a huge number of other illnesses.

The number of new medicines being brought to market has been declining in recent years at a time when we desperately need new treatments. A recent analysis of drugs moving through FDA trials in 2003-2010 found that the overall success rate was only about 14 percent for primary indications, and a dismal 3 percent success rate for secondary indications. The number of new drugs launched annually has fallen 44 percent since 1997, according to CMR International.

A variety of reasons have been put forth to explain this deterioration, as described below. As a nation, we should be doing all that we can to encourage innovators to find effective treatments for these diseases. Developing medications to successfully treat human diseases is an expensive enterprise, so it makes sense to ask the question: where will the new medicines come from? What financial resources are available now to biomedical researchers to fund their work, and who’s going to pay for future drug development?

A good place to start to answer these questions is to have an understanding of where our present drugs have come from. Two recent studies illustrate nicely that modern medicines originate from a variety of sources, and help explain the expanding number of partnerships between industry and academia. Robert Kneller examined every drug approved by the FDA over the past 10 years, and determined for each one whether it originated with pharmaceutical companies, from biotechs, or sprang forth from the labs of academic investigators. His analysis showed that about half of all new drugs arise from pharmaceutical companies, while the other half arise from the efforts of biotech firms and academic investigators. In a separate study, other researchers identified which medicines resulted from public sector research over the past 40 years. Their analysis identified some 153 products that were discovered or co-discovered by 75 different academic institutions. These drugs accounted for some 13 percent of all FDA approvals over that period. Having roughly quantified where our drugs come from, let’s shift our focus to how this drug discovery work gets funded. What monetary sources are available to biomedical researchers in the public and private sectors? Here’s what my informal survey found:

Pharma and Biotechs Still Lead the Charge (Funding Level: $65.3 billion in 2009)

There is no doubt that pharma and biotech companies are the major source of new drug discoveries. However, both groups find themselves under significant fiscal pressures as a result of troubles in the financial markets, recent patent expirations, and their diminishing number of drug approvals in the past decade. Why have these numbers been declining? The primary problem faced by industry is the challenge of translating basic biological discoveries (e.g. genomic sequences; RNA interference; mutated genes) into functional drugs. Although scientists have determined the causes of many diseases over the past quarter century, they haven’t figured out yet how to fix many of them. Other urgent industry concerns include pricing pressures, reimbursement issues, regulatory hurdles, generic competition, and investor expectations. Big Pharma’s response to these challenges have varied: some companies responded by either maintaining or increasing their research and development commitments (e.g. Merck), while others took the opposite approach and slashed their research dollars (e.g. Pfizer, Glaxo).

Many Big Pharma companies have been slowly transforming themselves over the past few years to be more like biotechs. They have taken note of the fact that the success rate for getting biologics (e.g. recombinant growth factors, monoclonal antibodies) approved is twice that seen with their small molecule drugs. Generic competitors of their blockbuster small molecule drugs are continuing to poke enormous … Next Page »

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Stewart Lyman is Owner and Manager of Lyman BioPharma Consulting LLC in Seattle. He provides strategic advice to clients on their research programs, collaboration management issues, as well as preclinical data reviews. Follow @

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