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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

In the Pipeline

« Le Dernier Cri | Main | Scrape Off Some Attitude »

December 18, 2007

Hearing Footsteps

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Posted by Derek

The next few years don’t necessarily look good for several large drug companies, just because of the patents that will be expiring. King of them all is Lipitor, of course, the world’s biggest selling drug which will then become the drug industry’s single largest lost revenue stream. But if you dig back through the newspaper archives, you’ll find the “Big Patent Expirations Looming” story showing up year after year. It’s basically true every time.

And that illustrates a point that a lot of people from outside the drug industry forget when discussing our rapacious business models, obscene profits, and so on: more than almost any other industry, we’re built on a pile of wasting assets. And not just any old nonspecific wasting assets – our valuable drugs are ticking away with a specific timetable, at which time they turn generic and most of the revenue stream goes flooosh. There might as well be a big LED clock strapped to the things, counting backwards – but unlike a bad movie, there’s no sweating hero trying to figure out whether to cut the red wire or not. Put down those needlenose pliers, Buck or Jock or whatever your heroic name is, because nothing will help.

Nothing, that is, except having some other drugs coming down the chute to replace the ones that are blowing up. Oh, I know, I know, patent evergreening and so on. I agree that it’s a problem, but that stuff doesn’t work most of the time. And when it does, you can maybe wring a year or two out of the system. But the bells toll for all our drugs in the end, and we have to deal with that fact by cranking out new stuff as fast as we can.

In recent years, that hasn’t been fast enough. I worked for a company back in the early 1990s that had a big-selling drug which was headed for the patent cliff. Everyone knew it, everyone knew when it would happen, and everyone knew what we had to do about it: get more stuff into the pipeline to replace it. The company expanded its research department and built a whole new drug discovery building complex to put us all in. To no avail. The day came, and nothing significant had been found in the intervening years. The company’s earnings hopped into a handy handbasket and went to the usual destination, the stock fell off a cliff, and all sorts of people who’d been loading up on the shares during the glory years felt all kinds of pain.

This story has been repeated several times around the industry. We all know about the declining productivity story – it was one of the first things I blogged about back in 2002. But the back side of that story is the frantic activities to try to make it go away. Some of them aren’t too glorious – cherry-flavored line extensions, patent gimmickry – but a lot of the work is serious stuff. We know that our discovery and clinical success rates are too low, and we’re pouring all kinds of money into trying to fix them. So far, the successes haven’t been anything to jump around about, but the efforts continue.

There’s an exception: the biotechs. The FDA has been trying to get its regulatory head around the issue of biogeneric equivalency, but it isn’t easy (more on this in a separate post some time). What this means is that the likes of Amgen, Biogen, Genentech Genzyme et al. have had far fewer worries about some of their products expiring on them. If the FDA can’t certify that a generic version of a protein drug is the same as the original, and can’t agree on how to even do that in the first place, then no generic will appear. There are several companies that would like to do it, but they’ve been moving more slowly than they’d like to, since the regulatory environment is so unclear. Things are moving a bit more quickly in Europe, but the pace is still glacial compared to the situation over here in the traditional small-molecule world.

And that’s not doing the biotech industry any good. I realize that this sounds perverse, especially to the people at the companies involved. What do I mean, that it’s a bad thing that their drugs rake in billions year after year? What’s not to like? Well, what’s not to like is that this kind of thing slows down the need to come up with new products and new approaches. I know that the big biotechs are spending lots of money on research, but we’ll never know what things would have been like if the dogs had been at their heels more. Organizations get lazy in all kinds of almost imperceptible ways when there’s no reason to move quickly.

Having those incentives doesn’t mean that things will work out for you, of course – see that story a couple of paragraphs above. But I think it works out better for everyone if research organizations are kept on their toes, competing with each other, and competing with those big red digital countdowns. It’s no fun, but it’s the best way.

Comments (8) + TrackBacks (0) | Category: Business and Markets | Drug Industry History | Patents and IP


COMMENTS

1. Keith Robison on December 18, 2007 12:27 PM writes...

The current regulatory uncertainty around biogenerics has another possible perverse outcome by discouraging bio-me-toos. Now, nobody seems to like me-to drugs, but competition is a good thing.

Companies have tried to launch me-to biologics but generally that was trying to get around patents -- such as Transkaryotic's attempt to horn in on the EPO market. But once patents expire, that isn't an issue. Such a me-to presumably won't be as freely substitutable as a true generic, but would still be an attractive product line.

EXCEPT, you don't want to sink all that money into your (treated as new entity) copy of some biologic, if, after you've footed the bills for lots of full clinical trials and such, the generics logjam opens up and some biogeneric company swoops in. Sure, you might be ready to join them -- if your drug passes the new rules -- but why risk all the capital?

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2. emjeff on December 18, 2007 1:06 PM writes...

I agree that the current situation does drive innovation, but the problem is, it is getting to the point that it is too expensive to innovate. A company can barely make back its initial investment as it is. Patents should not last forever, but they need to last longer than 20 years. When you develop a widget and it takes you 2 years, 20 years is fair, but if the widget takes 10-12 years and costs 1.1 billion, then 8 years of patent life is just not enough.

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3. Kay on December 18, 2007 1:27 PM writes...

I am with you 100 percent regarding institutional laziness.

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4. Craig on December 19, 2007 12:46 AM writes...

This time it's different. In the early 1990's China Inc did not exist. Money is rapidly flowing from the US to foreign markets. People live in a constant state of fear concerning their employment in these times.
Perhaps you worked at a minor company. Stop apologizing for poorly negotiated free trade agreements. Start getting angry at your politicians for giving away the farm. Wake up! Corporations are not people but inhuman monsters that only do good when threatened.

O.k not so eloquent but Buckley I'm not.

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5. petros on December 19, 2007 5:42 AM writes...

While the FDA's inertia on biogenerics has benefited the biotechs, especially Amgen, they have also beenfited from the qurkiness of theUS patent system in allowing endless cips with a full term from date of grant (no longer applicable to newere patents).

This has provided Epogen with an effective patent life of about 30 years, and curerntly appears to be enabling Amgen to block Roche's attempts to introduce a next generation EPO product in the US (1st round to Amgen in the courts). And Amgen even had Orphan Drug status for Epogen and the tax breaks that offered.


BTW in Europe multiple biosimilars of epo are now approved. Although cheaper such agents will never be massively cheaper than the original produt becuse of the COG isses.

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6. DrSnowboard on December 19, 2007 10:37 AM writes...

So with apologies to dickens, the Ghost of Christmas Future is the same as The Ghost of Christmas Past? No-one seems to be handing out free turkeys down my way. No wait, I might be wrong...

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7. Biotech Guy on January 8, 2008 4:06 PM writes...

I work at a large biotech in clinical development, and I will say that things are at least as busy here, if not more, than at Pfizer, where I worked until 2006.

Maybe the biotechs aren't threatened with death or acquisition, but everybody knows there's money on the table if you win, and the sand is falling through the hourglass on existing products. Most biotech products have fairly significant competition from other products, and biosimilars will be here sooner than everybody thinks. It's not that hard to make drugs in e. coli, and the technology for mammalian cells isn't far behind.

Permalink to Comment

8. Biotech Guy on January 8, 2008 4:07 PM writes...

I work at a large biotech in clinical development, and I will say that things are at least as busy here, if not more, than at Pfizer, where I worked until 2006.

Maybe the biotechs aren't threatened with death or acquisition, but everybody knows there's money on the table if you win, and the sand is falling through the hourglass on existing products. Most biotech products have fairly significant competition from other products, and biosimilars will be here sooner than everybody thinks. It's not that hard to make drugs in e. coli, and the technology for mammalian cells isn't far behind.

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