A reader at one of the big pharma companies sends along this note:
. . .Over my 10 years or so of experience, I have seen a severe decline in risk tolerance at my company, and other large companies as well. When we put a project forward, we are told that either: (a) There are too many unknowns, the target is not well established, and therefore the risk in putting forward the large sums of money required for development are too high; or (b) There are too many other players in the market already and we would never be able to capture enough market share to justify the investment required to go forward. The band considered acceptable in the risk/benefit spectrum has become so narrow that it is like threading a needle with your feet.
I believe that this risk aversion is due to the escalating cost of developing new drugs. Big Pharma has invested such a tremendous amount of money into the infrastructure they deemed necessary to increase project turnaround time that any drug that hoes forward has to be seen as a guaranteed blockbuster or it is considered a failure.
Film buff that I am, I use a Big Studio Production vs. Independent Film analogy when I discuss this with people outside the profession. For example, the film Avatar cost about 300 million to make. That means that if it brings in a mere 50 million in ticket sales, it is a catastrophic failure for the studio. Paranormal Activity on the other hand cost a few tens of thousands of dollars to make. Bringing in 50 million dollars in ticket sales would exceed the filmmakers wildest dreams of avarice.
The end result is that the Big Studio has to KNOW that Avatar will bring in greater than 300 million dollars in ticket sales or it cannot take the risk. Therefore only tried and true box office magic directors like James Cameron are given the opportunity to work at that level. On the other end of the spectrum, an independent film distribution company is willing to take on a high risk project like Paranormal Activity because even a failure will not destroy the comany, and the rewards of success (even if moderate by Big Studio standards) is very high.
So, has Big Pharma doomed itself by massively inflating its drug discovery infrastructure in a misguided attempt to stregnthed its pipeline (which was clearly a failure)? Or is it the regulatory agencies that require such vast and expensive trials that are the cause of this risk aversion? Is there a solution?
Well, the Hollywood analogy has been made before, but that's because it's a pretty good one. There are a few places where it breaks down, though. Some of these are unfavorable to the drug business:
1. Copyright. It lasts a lot longer than patent rights. I think that copyright has been extended to ridiculous levels in the US, but it's always been significantly longer than patent terms. So a studio has a much longer time to makes its money back.
2. Regulatory affairs. There's no FDA approval process for a new film. You think it up, you get it shot and produced, you release it, and good luck to you. The drug industry hasn't worked that way since the 1930s.
3. Cycle time. It takes a lot longer to get a drug project through than it takes to get a movie done. And since time is most definitely money, this hurts.
4. Toxicity and liability. While it's true that a bad film might make you feel sick, it's not going to lead to anything actionable in court. Bad news on a new drug's side effects or performance most definitely will, though. And how.
5. Costs and benefits. A movie, from the consumer's standpoint, is a momentary purchase, made with a small amount of discretionary income. If it delivers, great - if not, no harm done, other than some wasted time and a bit of cash. Drugs, of course, are a much more high-stakes business, both in their pricing and in their utility. And they affect a person's health, which is about as fundamental a thing as you can mess with, and moves any transaction up into a whole new spotlight.
On the other hand, there are some problems that the studios face that we don't:
1. Limits of copyright. While copyright goes on next to forever, it's still easy to move a new film or book right up next to an existing work. Movies get ripped off much more quickly than drugs can be, and often more blatantly. That shorter cycle time cuts both ways.
2. Easier copying. You can find pirated versions of first-run movies pretty quickly - they're not always great, but there's a market. Lots of free stuff gets tossed around in digital formats, too. Drugs are much harder to truly copy, and an inferior version is much, much less attractive.
3. Fashion. An antihypertensive drug from thirty years ago doesn't wear funny-looking retro clothes or pick up a mobile phone the size of a loaf of bread. It lowers your blood pressure, same as always. There may be better ones around now, but it'll still work exactly as it did when it came on the market.
All that said, I think that the key point here is that there's no equivalent in the drug industry to indie filmmaking, which is too bad. Our fixed costs are much, much, higher due to the field we operate in - human health and the regulations around it. My question is - is there any way to bring these down? Of course, that's what everyone in the business has been asking for some time now.
Because if we can't, we're going to see even more of the behavior that my correspondent noted. Risk aversion, I might add, can be fatal to research-driven companies. Our whole business is founded on taking risks, and if the costs are pushing us to deny that, we have a huge conflict right at the center of the whole enterprise. . .
And yeah, I realize that this doesn't help too much with the "less depressing" promise I made for this week!