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Of Drug Development in Big Pharma Chapter 01: Why there will be new drugs despite the ongoing “crisis” of drug development in Big Pharma Pharmaceutical industry in crisis & consolidation Pfizer, the largest pharmaceutical concern in the world, acquired the Ann Arbor research site in Michigan by purchasing Warner-Lambert/Parke-Davis in 2000. In 2007, Pfizer closed the site despite having just spent $2 billion to refurbish it earlier in the year. The TV news broadcasts of the time commented that the closure of this research site was motivated because “most medicines were already discovered.” Nothing could be further from the truth; this is why we believe that many more medicines will be discovered and used in the treatment of many more diseases in the future. Pfizer has made one more big acquisition since 2007, buying Wyeth for $49 billion in 2009. However, it has also closed numerous research sites as old and as prestigious as the site in Ann Arbor, which is now re-engineered by the University of Michigan as a science park. Pfizer has been perhaps rightly criticized for acquiring companies for rights to an approved product, not for the companies’ own research activities. It was not alone among the large pharmaceutical companies of the world in cutting research activities through to 2011. The major U.S. competitor Merck bought Schering-Plough for $41 billion in 2009, and also closed numerous research sites. Yet neither Pfizer nor Merck, nor any other Big Pharma companies, believe that there is no future in drug development. It is just that the industry is fumbling to find ways to accommodate the expectations of their “spoiled” stockholders, who have been used to double-digit growth and stable or increasing stock prices over the past four decades, yet neither such growth nor improving stock prices have been realized since 2008. Stock prices of major pharmaceutical companies have fallen more than the average of other industrial stocks, despite continuous payments of dividends by the companies. The investors are fully aware of the huge patent erosion on the largest earning drugs from all the major pharmaceutical companies. They also know there are no new products to replace these $3–8 billion a year earning drugs, which for some The Future of Drug Discovery. http://dx.doi.org/10.1016/B978-0-12-407180-3.00001-5 Copyright © 2013 Tamas Bartfai & Graham V Lees. All rights reserved. 12 The Future of Drug Discovery companies account for large portions, up to 40–50%, of earnings and profits, and which lost patent protection from 2009 to 2012. The industry also struggles with the effects of the 2008 economic recession. Pharmaceuticals is a very capital-intensive industry, with very long 10–12 year product development cycles, and it is in the middle of a capital-requiring merger and acquisition wave that now comes at a much higher cost than the industry has been used to. The scarcity of cheap capital for mega acquisitions of $40–50 billion and the scarcity of patience for returns on investment has changed what the industry views as a reasonable risk and as a reasonable time line. This is, however, not so easy to accept for our society as the products of this industry are required to save lives and maintain health. There is a resultant dichotomy between the continued medical needs of society and the former fantastic success of private pharmaceutical companies to bring very useful drugs to the clinic in the past 40 years. The industry’s sudden risk aversion will be featured throughout this book as a major theme that needs several innovative solutions. However, the scientific basis necessary for new therapies is being continuously developed despite the less intensive contribution and use by the industry. There is much talk about the crisis of the pharmaceutical industry that in 2009 spent $92 billion on research and development but had “only” 29 products approved. These products are not all blockbusters selling for a billion dollars or more per year and they may or may not cover the cost of their development over their remaining patent life. So the industry cut 29,000 jobs in 2009, and continued this tactic in 2010, when 26 new drugs were approved, and in 2011 when 34 drugs were approved by the Food and Drug Administration (FDA) although only five are expected by the stock market analysts to reach sales over $350 million per year. In addition, the companies initiated the buying back of their own stock options to support the stock prices. Although these stocks had suffered less than others during the beginning of the recession of 2008–2009, investors thought they were too slow to recover. Yet there can be little doubt that this essential global industry, which, despite complaints of falling profits by investors and managers, remains undeniably profitable in Why there will be new drugs 13 absolute terms. Compared to most industries such as steel, paper, food, and so forth, pharmaceutical returns are at least double, yet the other industries remain active with smaller profits. From governments’ points of view, there is an extra importance attached to developments in the pharmaceutical industry as it is one of the pillars of public health and thus of a stable society. There can be no doubt that this industry is not only going to survive but it will also produce new medicines that address diseases that we cannot yet treat, and will provide drugs that treat other diseases better than presently available drugs. In addition, it will provide drugs for diseases yet to emerge or to be diagnosed. Simply speaking, several of the following important factors for survival as well as continued growth of the industry are stably present: 1. There is a global pharmaceutical market that grows. 2. There is new science, new diagnostics and therapeutics, and new medical and information technology to provide a basis for novel developments. 3. A globalization of healthcare standards is taking place. Therefore, there will be a growing pharma industry. What it will look like, who will invest in it, who will work in it in which countries, and how the pricing of its products will be negotiated are all interesting questions for which this book provides some suggestions. Since pharma is not just any industry,10 it has to accommodate high ethical standards as human lives and human suffering are in the balance of the effects and distribution of its products. Discussions about this industry will always need to encompass ethical aspects on a global scale, along with the economic, scientific, technical, and political aspects. This book will describe what industrial, academic, clinical, and preclinical researchers all seem to believe: that we will have many powerful new drugs discovered, tested, and marketed and that we are only at the beginning of real pharmacological prevention and treatment of many diseases. 10 See also Chapter 07. 14 The Future of Drug Discovery Today we satisfactorily treat only very few diseases. “Satisfactory treatment” means that at the end of the treatment period we restore the treated patient to full health. This means not only that the symptoms of the disease are gone and the consequences of the untreated disease are fully prevented, but also that the successfully treated patient now has the same risk for becoming ill again with the same or with other diseases as if they had never had the disease. We can now achieve this restoration of “full health” only when treating bacterial infections, when the proper antibiotic is found (after identifying the infectious bacteria via increased use of diagnostics) or by the use of broad spectrum antibiotics. Some experts on the complicated and much internationally debated concept of health add to the fully curative medical approaches, such as the early removal of tumors that have not yet metastasized, as success stories of treatments that restore full health. Whether one agrees with this addition of fully successful treatment or not, the total number of fully successful drug treatments is very low compared to the number of diseases where we provide pharmaceuticals as treatment or part of treatment, and even lower compared to the number of diseases where we can diagnose the disease but can offer no treatment or only symptomatic treatment. Thus, there is a huge remaining medical need to be filled by new drugs, even in diseases where we provide pharmaceuticals as the pharmacological treatment, or part of the treatment, but this treatment is not curative. The diseases that we can diagnose but can offer only symptomatic treatment include the drug treatments of the 50 “top diseases” (top in terms of number of patients treated and/or top in terms of the income per disease that the pharmaceutical industry derives from selling drugs to treat this disease) such as hypertension, diabetes, schizophrenia, major depression, anxiety disorders, rheumatoid arthritis, HIV, and epilepsy, to mention a few. Only in a few cases do we modify, but not stop, the rate of disease progression. We do not restore health with the current drugs in these diseases. There is a disproportionate use of U.S. data in this book, and there are several reasons for this. Firstly, there is easy availability and transparency of data, even in comparison to Europe, where often the conscious Why there will be new drugs 15 (governmental) price control of drugs plays direct and indirect roles. Secondly, the U.S. market is now the largest pharmaceutical market and rarely are drugs developed that will not be introduced there. Thirdly, the U.S. research expenditures by governmental and private enterprise lead drug development, even if the share of European, Japanese, Chinese, and Indian research and development is increasing.
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