When a drug company starts off a new project, a lot of things go into the decision. Most of them are scientific decisions, but a big one that isn't is the projected market size. It's a business, and if you keep developing things that don't earn out their costs (and plenty more), you won't be part of the business for long.
These market numbers aren't the most reliable in the world - Pfizer, for example, appears to have been surprised by how well Viagra did, and Bayer and Lilly were likewise surprised that their follow-ups didn't repeat. For a more recent example, try Pfizer's Exubera. Its potential as a big winner was already much eroded by the time it finally made it to market, but surely it's selling even below their worst projections.
But underserved markets give you something you can depend on. A safe, effective anti-obesity drug would clearly reap billions - not that I'm expecting to see one. An effective HDL-raising therapy would do the same in the cardiovascular market (but hold on tight if you're trying to develop one of those, too). And CNS is full of opportunities, like Alzheimer's. Mind you, those opportunities are there because people keep trying and failing to do much for the diseases, but there's definitely a fortune waiting for the first thing that does.
As you can see, the risk-reward curve is pretty similar to what you see in finance. If you want the big returns, you have to take the big risks. "Big risk" is a relative term around here, though, since even the plainest of vanilla rip-off me-toos can implode on you, taking all its costs with it. But in general, it's the same no-free-lunch graph as everywhere else in the world.
There are some exceptions, but the problem (as always) is that it's usually impossible to see them coming. Lipitor is the first example that comes to mind - Warner-Lambert just about killed it because it was going to be the umpteenth statin, and they didn't think its market share would justify the development costs. (I should have mentioned that one back in the first paragraph, when I was talking about shaky market projections!) It was only after the drug got well into the clinic that its potential began to show itself, just as Exubera was far along before its deficiencies became clear.
On a macro level, one of the big problems is the disconnect between underserved markets and underserved populations. Tropical diseases like malaria are an instant example. An effective antimalarial would be taken by huge numbers of people, but many of them still couldn't begin to afford the cheapest pharmaceuticals in the world, which is a real dilemma. (Of course, there's also the possibility that the sudden introduction of such a drug might help precipitate a Malthusian crisis in countries with traditionally high death rates, but better to deal with that than have the current situation, I'd say).
There are several methods that have been tried to bring things in line. The Orphan Drug Act is an example from inside the US (making diseases with smaller numbers of patients more financially attractive), and there's perennial talk of something similar for tropical diseases through prizes and other incentives. A different world would do things still differently, but we don't, to the best of my ability to see, live in one.
1. Curious Wavefunction on September 10, 2007 6:55 AM writes...
What are the benefits of atorvastatin over lovastatin? Both of them seem to provide very similar effects, but the difference in cost is considerable.
Permalink to Comment2. milkshake on September 10, 2007 7:44 AM writes...
Lipitor has a quite complicated metabolism, with couple of active metabolites that account for 2/3 of the actual activity.
Nowadays most companies would drop such a candidate in preclinical stage simply because identifying, characterizing and following such active metabolites adds to the development cost and it can also result in unpredictable drug-drug interactions. Yet Lipitor does not have these (except for the grapefruit juice problem)
Permalink to Comment3. Curious Wavefunction on September 10, 2007 8:30 AM writes...
Thanks for the info. I did some digging and in Foye's medicinal chemistry book (2002 ed.), saw that atorva has a better t1/2 and bioavailability than lova. The complicating metabolites could possibly contribute to these I guess.
Permalink to Comment4. Still Scared of Dinosaurs on September 10, 2007 9:34 AM writes...
There are so many problems with the pre-approval projections of market size that you’d need a week of posts just to get started, but even worse are the add-on scenarios of probably market share that accompany them. The hand waving gets so intense that you expect some of these turkeys to fly, at least until the actual sales numbers come in. Yet, when all the assumptions are glossed over and the math is done, it seems like every estimate is $1B a year in sales. What they don’t tell you is that the 95% confidence intervals for profits are between an $800M loss and a $10B gain with a decidedly right-skewed distribution.
Permalink to Comment5. Eric M on September 10, 2007 10:18 AM writes...
The real problem is post approval. On patent level timescales, billion dollar drugs are discrete, not continuous. Plowing all of your profits back into research, expecting to repeat your success is a recipe for a painful lesson in statistical mechanics. Good luck finding a manager willing to send out blockbuster profits as dividends.
Permalink to Comment6. RKN on September 10, 2007 3:44 PM writes...
What are the benefits of atorvastatin over lovastatin?
Not sure about ator-, but lova- is pretty impotent relative to the modern statins, being it was (I think) one of the first statins approved. I was on lova- for a brief time before switching to simva- (Zocor). The improvement in terms of LDL drop was marked, nearly 50 mg/dL, IIRC. All other factors constant, more or less.
Permalink to Comment7. malcolm on September 11, 2007 12:33 AM writes...
An even better example is Ramipril-just another ACE inhibitor-predictably a minor addition to a well established group. Also one of the most unstable and difficult to formulate. The consderable advantages over many of the others in the group could never be predicted because they only became apparent during statistically significant comparative studies which could never be deduced from early preapproval work
Permalink to Comment8. Grubbs the cat on September 11, 2007 6:10 AM writes...
With respect to the last paragraph I think a number of companies have already reacted that there is a big image incentive by engaging in neglected diseases. At least my own company opened a research institute a few years back focussing on TB, malaria, Dengue and the like.
Permalink to CommentI am convinced that keeping the social pressure up and reminding the industry on their responsibility will (maybe sometimes slowly) move the big battleships on the right course...