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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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November 4, 2010

Where Drugs Come From: The Numbers

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Posted by Derek

We can now answer the question: "Where do new drugs come from?". Well, we can answer it for the period from 1998 on, at any rate. A new paper in Nature Reviews Drug Discovery takes on all 252 drugs approved by the FDA from then through 2007, and traces each of them back to their origins. What's more, each drug is evaluated by how much unmet medical need it was addressed to and how scientifically innovative it was. Clearly, there's going to be room for some argument in any study of this sort, but I'm very glad to have it, nonetheless. Credit where credit's due: who's been discovering the most drugs, and who's been discovering the best ones?

First, the raw numbers. In the 1997-2005 period, the 252 drugs break down as follows. Note that some drugs have been split up, with partial credit being assigned to more than one category. Overall, we have:

58% from pharmaceutical companies.
18% from biotech companies..
16% from universities, transferred to biotech.
8% from universities, transferred to pharma.

That sounds about right to me. And finally, I have some hard numbers to point to when I next run into someone who tries to tell me that all drugs are found with NIH grants, and that drug companies hardly do any research. (I know that this sounds like the most ridiculous strawman, but believe me, there are people - who regard themselves as intelligent and informed - who believe this passionately, in nearly those exact words). But fear not, this isn't going to be a relentless pharma-is-great post, because it's certainly not a pharma-is-great paper. Read on. . .

Now to the qualitative rankings. The author used FDA priority reviews as a proxy for unmet medical need, but the scientific innovation rating was done basically by hand, evaluating both a drug's mechanism of action and how much its structure differed from what had come before. Just under half (123) of the drugs during this period were in for priority review, and of those, we have:

46% from pharmaceutical companies.
30% from biotech companies.
23% from universities (transferred to either biotech or pharma).

That shows the biotech- and university-derived drugs outperforming when you look at things this way, which again seems about right to me. Note that this means that the majority of biotech submissions are priority reviews, and the majority of pharma drugs aren't. And now to innovation - 118 of the drugs during this period were considered to have scientific novelty (46%), and of those:

44% were from pharmaceutical companies.
25% were from biotech companies, and
31% were from universities (transferred to either biotech or pharma).

The university-derived drugs clearly outperform in this category. What this also means is that 65% of the pharma-derived drugs get classed as "not innovative", and that's worth another post all its own. Now, not all the university-derived drugs showed up as novel, either - but when you look closer, it turns out that the majority of the novel stuff from universities gets taken up by biotech companies rather than by pharma.

So why does this happen? This paper doesn't put it one word, but I will: money. It turns out that the novel therapies are disproportionately orphan drugs (which makes sense), and although there are a few orphan-drug blockbusters, most of them have lower sales. And indeed, the university-to-pharma drugs tend to have much higher sales than the university-to-biotech ones. The bigger drug companies are (as you'd expect) evaluating compounds on the basis of their commercial potential, which means what they can add to their existing portfolio. On the other hand, if you have no portfolio (or have only a small one) than any commercial prospect is worth a look. One hundred million dollars a year in revenue would be welcome news for a small company's first drug to market, whereas Pfizer wouldn't even notice it.

So (in my opinion) it's not that the big companies are averse to novel therapies. You can see them taking whacks at new mechanisms and unmet needs, but they tend to do it in the large-market indications - which I think may well be more likely to fail. That's due to two effects: if there are existing therapies in a therapeutic area, they probably represent the low-hanging fruit, biologically speaking, making later approaches harder (and giving them a higher bar to clear. And if there's no decent therapy at all in some big field, that probably means that none of the obvious approaches have worked at all, and that it's just a flat-out hard place to make progress. In the first category, I'm thinking of HDL-raising ideas in cardiovascular and PPAR alpha-gamma ligands for diabetes. In the second, there are CB1 antagonists for obesity and gamma-secretase inhibitors in Alzheimer's (and there are plenty more examples in each class). These would all have done new things in big markets, and they've all gone down in expensive flames. Small companies have certainly taken their cuts at these things, too, but they're disproportionately represented in smaller indications.

There's more interesting stuff in this paper, particularly on what regions of the world produce drugs and why. I'll blog about again, but this is plenty to discuss for now. The take-home so far? The great majority of drugs come from industry, but the industry is not homogeneous. Different companies are looking for different things, and the smaller ones are, other things being equal, more likely to push the envelope. More to come. . .

Comments (34) + TrackBacks (0) | Category: Academia (vs. Industry) | Business and Markets | Drug Development | Drug Industry History | Who Discovers and Why


COMMENTS

1. partial agonist on November 4, 2010 9:16 AM writes...

There is a somewhat similar discussion in the book "Drug Truths: Dispelling the Myths About Pharma R&D" By John L LaMattina, former global R&D head of Pfizer. About a fourth of the book is on the relative importance of academic research, NIH funding, and R&D innovation in the industry and in the public sector.

Lamattina is a openly a bit of a cheerleader for big pharma in his book, so it will be good to digest this article and see how the data and arguments stack up.

The innovation angle is easy to understand. In academia (where I am now) a grant promoting an untried idea is a good thing, if the methodology to explore it is deemed sound. Dollars to be made don't get in the way so quickly, if at all. In big pharma (where I used to be) most things that gained traction had to have some market analysis behind it and some outside validation of the target (i.e. Company X is working on this, so we should too!).

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2. Project Savior on November 4, 2010 9:33 AM writes...

Thank you for posting this.
I had tried to find these numbers before but got drowned out by the noise on the subject.

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3. Jason on November 4, 2010 9:47 AM writes...

Dr. Lowe,

Hopefully a simple question - does 100% of university research get funded by the NIH?

Thanks

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4. Wavefunction on November 4, 2010 9:51 AM writes...

This is all true, expect for the trivial but still noteworthy fact that a lot of industrial drugs are also ultimately based on science mainly developed in universities. For instance, where were PPAR, HMG-CoA reductase and angiotensin-converting enzyme discovered? So there's still a very good argument for supporting basic academic science.

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5. CMCguy on November 4, 2010 9:55 AM writes...

It is nice to get some actual numbers to support "common knowledge" of those in touch with drug development because the "all drugs come from NIH" seems to be the prominent view of media and public based on reading/interactions the past 10-15 years. I doubt this will change people like Angell and her ilk (who position/writings was motivation for Lamattina book) but IMO it also shows that collaboration of academia and industry is an effective (and necessary) mechanism to drugs, especially novel or as suggested small market targets.

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6. Donough on November 4, 2010 10:09 AM writes...

I guess non novel drugs are existing drugs that have new indications research for them? If so is it a worry that there is a higher proportion of these or does that also sound right.

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7. Chemjobber on November 4, 2010 10:47 AM writes...

With the caveat that I'm sometimes loathe to trust numbers that support my position, this is nice data to have in one's head.

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8. Cloud on November 4, 2010 10:49 AM writes...

@Jason- not by a long shot. There are other government sources (e.g., NSF, and the defense department, via DARPA- yes they fund stuff in the bio realm, although it tends to be "out there" sort of things). Pharma companies have done various sorts of deals with academic institutions, too. The Scripps Research Institute comes to mind as a place that has made heavy use of that funding model. Disease advocacy groups (e.g., the American Cancer Society) fund some work. Random rich folks fund some things.

I'm sure I'm missing some sources. I couldn't tell you percentages, but those data are probably out there somewhere.

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9. Anonymous on November 4, 2010 10:54 AM writes...

It would be interesting if we could compare the number of researchers working in industry versus academia. I would imagine the true numbers are not known. With so many "research sites", academia would far outnumber pharma.

With no pressure to actually make money to pay for their own salary, academics have more luxury to explore novel areas.

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10. Virgil on November 4, 2010 11:25 AM writes...

@#3 Jason. Simple answer, no.

Long answer... When Universities get funding from NIH, it comes with "indirect costs" (to pay for administration, lighting, AC, building maintenance etc.) The indirect cost rate runs anywhere 50-90% depending on the University, and is pretty hard to change - it gets reviewed by independent panels. So for example, when I get a $1m grant, the University gets an extra $530k (in my case) to pay for all the fluff.

The problem is, many granting agencies do not pay "full indirects". American Heart Association only pays 10%. Most industry sponsored clinical trials pay 20%. A lot of charities and foundations pay nothing at all. So, when faculty get these grants, they're bringing in dollars to do research, but those dollars do not bring in enough indirects to support all the background stuff.

Typically, the indirect cost recovery rate for most Universities is in the 75% range, meaning that they bring in enough indirects to support about 75% of the total cost of doing research. If all research grants paid full indirects (i.e. everything was NIH funded) this would not be a problem. One of the biggest budget problems facing a lot of Universities today, is how to make up that gap of 25%. The old fashioned way was to use the endowment (now shot to bits by the recession), to skim money off the profit from the adjacent hospital, as is the case at most University Medical Centers (now shot to pieces by medicare/medicaid reimbursement rates, and coming healthcare reform), or to rely on other revenue streams (medical student fees, licensing and patents, charitable donations).

The cynical way to look at this is "for every research dollar we bring in, we have to find an extra 25c from somewhere to cover the real costs, so research actually costs us money". As you may guess, such a message does not sit well with the faculty at many Universities. Nevertheless, the old business model wherein research is a profitable enterprise at Universities, is simply no longer sustainable. Only those Universities with very big endowments, are surviving the current financial crunch without big cost cutting measures (typically, firing administrative staff and cutting back on support - goodbye core facilities, etc.)

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11. Bob Goldberg on November 4, 2010 11:25 AM writes...

Terrific!

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12. Anonymous on November 4, 2010 11:32 AM writes...

@#9 Anon... "With no pressure to actually make money to pay for their own salary, academics have more luxury to explore novel areas"

What rock are you living under? Seriously? Ever heard of covering salary on grants? Most Universities demand at least 50%, and typically push for >80% in order to avoid dumping administrative burden on a particular individual. I have seen several senior faculty have their research programs decimated due to losing NIH funding, getting dumped with a bunch of teaching, and then not having enough time (due to all the teaching) to ever get back into research again.


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13. Aspirin on November 4, 2010 12:02 PM writes...

@8 Cloud: -via DARPA- yes they fund stuff in the bio realm, although it tends to be "out there" sort of things

Not always. The project I am working on is funded by DARPA and involves engineering antibodies to improve their selectivity and binding affinity. It's useful for both basic science and possibly defense (antibodies against anthrax etc.)

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14. Lacerta Bio on November 4, 2010 12:15 PM writes...

Great analysis, Derek. Thank you.

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15. Anonymous on November 4, 2010 12:18 PM writes...

One more cut of the data, please.

Where do traditional organic small molecules, particularly orally-dosed drugs, come from vs. IV-dosed macromolecule drugs like proteins? Which type of molecule dominates the innovative category on a percentage basis?

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16. Sundowner on November 4, 2010 1:36 PM writes...

An extremely interesting post. Common knowledge, yes, but many times common knowledge is false, so it is nice to see that this common knowledge is true.

That research and new drugs in pharmas is driven by economic results has been known from a long time ago. All the drug discovery projects where my company is called for doing chemistry start with a Wish List where marketing is heavily involved.

I remember attending a panel in the BIO San Diego with an officer of a Big Pharma telling that 'we prefer to license-in drugs which are at least in Phase II, and if they are in Phase III, even better'. Yeah, and if you can send them the blisters with the pills, even better !!

But that figures will change for sure in the next years. IMO, the time of blockbusters is over. Time to start doing risky things and partnering with biotechs.

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17. Anonymous on November 4, 2010 2:03 PM writes...

@12 from #9

Garnering funding from the NIH is not the same as selling a product on an open market. It is receiving taxpayer dollars, which you rightly admit that 50% just goes back into the institution. I realize it takes work. Can you imagine a professor having to teach? How absurd.

The luxury of using Uncle Sam's money allows for the exploration of novel areas. With so many researchers in academia, eventually a few of them with pan out.

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18. Rob on November 4, 2010 2:28 PM writes...

Great post. Fascinating. However, from recent partnering conferences, my take is that this is changing - Big Pharma are taking the the route of least resistance - meaning, niche indications, with smaller commercial infrastructure, less resistance at the payer / regulatory level.

Rob

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19. CMCguy on November 4, 2010 2:34 PM writes...

#4 Wavefunction while certainly is true drugs from industry have roots in science coming from academia to extrapolate that as some do to "all drugs come form NIH" is misrepresentation. Such a view totally blurrs what it take to turn a scientific discovery (usually multiple ones) in to an actual drug. Most companies do not direct mas much resources to basic research because in present day it is easy to build off vast and new public knowledge, and interestingly typically end up with competition for first drugs spawned because of this.

I think consistently supporting academia is fundamentally vital even if not directed toward drugs/other applications, especially in ways that allow researchers to take more innovative risks. In some ways I see current NIH process as inhibitory in forcing incrementalization rather than promoter for seeking larger steps forward.

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20. anthony nicholls on November 4, 2010 2:58 PM writes...

But surely the real surprise here is that the fraction of academic-derived drugs is essentially the same for the 'unmet need' category- 24% of the total and 23% of the 'unmet'. How is that even remotely possible if universities are the ones out to 'cure the world'? Yes, biotech are more active in this area- mostly because they can't outcompete large pharma in 'big-game' hunting- they have to work at the margins. Simple economic theory would suggest that is how things would be. But I find the lack of application of academia to unmet needs really shocking.

Secondly, your analysis is without statistical backing. for instance, you don't know if the fact that pharma has 58% of new drugs and only 44% were novel is significant without, for instance, a chi-squared test. I suspect, given the small sample size, that the difference are far from obvious. In fact, it looks to me that a case could be made that pharma drugs aren't novel merely because they work in the 'met-needs' area, not the 'unmet-needs', i.e. aren't drugs more likely to be novel in the more unexplored areas? I'm pretty sure the break-down 46:30:23 for unmet needs is statistically the same 44;:25:31 breakdown for 'innovative", given the sample size is ~ 100.

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21. Anthony on November 4, 2010 3:00 PM writes...

As I commented over at Megan McArdle's blog, regarding "unmet medical needs": That shows the biotech- and university-derived drugs outperforming when you look at things this way, which again seems about right to me.

Actually, no. It shows that biotech-derived drugs outperform. The university share is trivially smaller than the university share of overall new drugs, at about a quarter. The university share only increases when it comes to "scientific novelty", which is to be expected, as the more basic research required to create scientifically novel drugs is where university research would be expected to outperform. As it is, finding that fewer than one-third of scientifically-novel drugs started in university research labs tells me that they don't have that much of an advantage over commercial labs.

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22. CR on November 4, 2010 7:28 PM writes...

@#9, "With no pressure to actually make money to pay for their own salary, academics have more luxury to explore novel areas."

@#17, "Garnering funding from the NIH is not the same as selling a product on an open market. It is receiving taxpayer dollars, which you rightly admit that 50% just goes back into the institution. I realize it takes work. Can you imagine a professor having to teach? How absurd."

First, you are not actually asserting that getting a grant is as easy as "receiving taxpayer dollars" as if there is a line in the IRS tax code for academic research, or we just go knock on the NIH's door when we need money are you? You realize it is ultra competitive with pay lines decreasing each year.

Second, how many scientists working in pharma actually work on a project that "makes money"? Very (and I mean, very) few. Most scientists - I used to be one - work on a number of projects that never see that light of day in a clinical trial, let alone actually on the market making money. A good quality medicinal chemist could (in an ideal world, of course - or the world of 1990) have a quality career without ever making any sort of real impact on the company's bottom line. Even today, those kept on aren't necessarily those bringing quality compounds to the market. I don't want to make this into an industry vs. academia post, but working in the pharma industry is much easier than trying to survive in the academic world and there is absolutely no comparison.

@#20 - Anthony Nichols. "But surely the real surprise here is that the fraction of academic-derived drugs is essentially the same for the 'unmet need' category- 24% of the total and 23% of the 'unmet'. How is that even remotely possible if universities are the ones out to 'cure the world'?"

I understand your sarcasm, but the real question is how many 'unmet medical' advances were discovered in academia only to be ignored by pharma (the still only real avenue toward a drug on the market)? I don't think it should come as a surprise that the number is split equally, pharma will pick up what will make it money. As stated by Dr. Lowe, if it isn't going to make hundreds of millions to billions most pharma are uninterested.

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23. DV Henkel-Wallace on November 4, 2010 8:17 PM writes...

Derek, did the paper have national breakdowns? How many drugs start in the US, how many don't?

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24. ty on November 5, 2010 9:54 AM writes...

There is some truth to the "all drugs come from NIH grants", even though it is a gross overstatement and oversimplification. In the end, virtually all commercial drugs and therapies are built on critical basic research in a "standing on the shoulders of giants" manner. And isn't most basic research done by academics?

However like most things, the truth lies in between and there is way too much work involved in drug discovery and development to just attribute it to one body. I would credit academics along with industry, investors, doctors, and patients with every important drug.

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25. Mike G on November 5, 2010 10:48 AM writes...

The holy grail in this analysis is drugs that are both (1) assigned priority review and (2) scientifically novel. Scientific novelty in and of itself is not a worthwhile goal unless the novel compound is also superior in terms of medical efficacy and safety -- that is, unless it has also been assigned priority review. The 118 drugs that met the criteria of scientific novelty are a subset of the full sample of 252 drugs. Did the Nature article shed light on what percent of the novel drugs were assigned priority review, and how this played out among the three sectors?

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26. Mike P on November 6, 2010 6:13 PM writes...

A common perception at Vertex seems to be that the author spends more time at work on this blog than actually doing basic research.

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27. willis on November 6, 2010 6:52 PM writes...

I don't understand the point of this article. Is it to establish that big drug companies are greedy ripoff artists exploiting the innocent masses? Fine, but surely you and your commenters can do more than just whine. Start your own big drug companies and undersell your competitors. Just drive them out of business. Don't worry about high R&D costs, those are just a myth, per your own research. You all can still get rich and teach the dirty capitalists the moral superiority of running a compassion-driven business.

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28. Mike on November 6, 2010 7:49 PM writes...

One element you don't take into account is product liability. Big Pharma= deep pockets= class action lawsuits. Just turn on your tv and hear the weepy lady say "...was your unborn child harmed by Paxil??"

I think Big Pharma is adverse to novel therapies because they have a lot more to lose if there are unexpected side effects down the line. They're just responding to the rewards and punishments that make up their financial universe.

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29. Over50 on November 6, 2010 9:28 PM writes...

"This paper doesn't put it one word, but I will: money. It turns out that the novel therapies are disproportionately orphan drugs (which makes sense), and although there are a few orphan-drug blockbusters, most of them have lower sales. And indeed, the university-to-pharma drugs tend to have much higher sales than the university-to-biotech ones. The bigger drug companies are (as you'd expect) evaluating compounds on the basis of their commercial potential, which means what they can add to their existing portfolio. On the other hand, if you have no portfolio (or have only a small one) than any commercial prospect is worth a look. One hundred million dollars a year in revenue would be welcome news for a small company's first drug to market, whereas Pfizer wouldn't even notice it."

You have this a little backwards, yes this is due to the ultimate market, but it has even more to do with how much money you have up front to risk. A University will prefer a deal with larger up front payments and, often, associated large sponsored research agreements, and big pharma can afford to bid more than a bio start-up; further, the university can be more confident big pharma will have the resources to complete development. Bio start-ups would love to get the products with bigger commercial payoffs but can't outbid big pharma. Nothing evil about it; just a fact of economic life.

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30. DA Munroe on November 7, 2010 3:12 AM writes...

Regardless of whether universities "outperform" in terms of innovative discoveries, the simple raw numbers show that pharma is producing the most new drugs, the most drugs that meet an unmet need, and the most innovative discoveries, in absolute terms.
In fact it's likely, as some have pointed out, pharma's efficiency is underestimated by these stats because of all the hidden funding for university research, including salaries, volunteer (grad) labor, and so on.

"And isn't most basic research done by academics?"

Not according to this data.

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31. Mark N. on November 7, 2010 5:51 AM writes...

Isn't the proportion of drugs that come from universities, and the proportion that come from taxpayer-funded research, not actually measuring the same thing? The NIH gives grants to biotech firms as well.

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32. gregory on November 7, 2010 9:55 AM writes...

A more telling account would be determine how many of those few drugs a year are something other than me-too drugs and do not have their origins from some other group.

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33. Kevin on November 7, 2010 10:03 AM writes...

It would be interesting to also know how many $ are spent on research by all of the govt/universities, biotechs, and drug companies.

I suspect pharma will deliver the most bang for the buck.

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34. Andrew de Andrade on November 7, 2010 12:33 PM writes...

I've never disputed that more drug *treatments* come from Pharma companies, but what I question is how many if any *cures* come from drug companies.

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