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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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June 28, 2011

Drug R&D Spending Now Down (But Look at the History)

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Posted by Derek

I hate to be such a shining beacon of happiness today, but this news can't very well be ignored, can it? For the first time ever, total drug R&D spending seems to have declined:

The global drug industry cut its research spending for the first time ever in 2010, after decades of relentless increases, and the pace of decline looks set to quicken this year.

Overall expenditure on discovering and developing new medicines amounted to an estimated $68 billion last year, down nearly 3 percent on the $70 billion spent in both 2008 and 2009, according to Thomson Reuters data released on Monday.

The fall reflects a growing disillusionment with poor returns on pharmaceutical R&D. Disappointing research productivity is arguably the biggest single factor behind the declining valuations of the sector over the past decade.

This is not good - although, to be sure, we've had plenty of warning that this day would be coming. But looking at it from another perspective, you might wonder what's taken so long. Matthew Herper has a piece up highlighting the chart below, from the Boston Consulting Group. It plots new drugs versus R&D spending in constant dollars, and if you're wondering what the Good Old Days looked like, here they are. Or were:
R%26D%20constant%20dollar%20graph.png
What's most intriguing to me about this graph is the way it seems to validate the "low-hanging fruit" argument. This looks like the course of an industry that has, from the very beginning of its modern era, been finding it steadily, relentlessly harder to mine the ore that it runs on. But that analogy leaves out another key factor that makes that line go down: good drugs don't go away. They just go generic, and get cheaper than ever. You can also interpret this graph as showing the gradual buildup of cheap, effective generics for a number of major conditions (cardiovascular, in particular).

There's one other factor that ties in with those thoughts - the therapeutic areas that we've been able to address. Look at that spike in the 1990s, labeled PDUFA and HIV. Part of that jump is, as a colleague theorized with me just this morning, the fact that a completely new disease appeared. And it was one that, in the end, we could do something about - as opposed to, say, Alzheimer's. So if you want to be completely evil about it, then the Huey Lewis model of fixing pharma has it wrong: we don't need a new drug. We need a new disease. Or several.

Well, that's clearly not the way to look at it. I don't actually think that we need to add to the list of human ailments; it's long enough already. But given all the factors listed (and the ever-tightening regulatory/safety environment, on top of them), another colleague of mine looked at this chart and asked if we ever could have expected it to look any different. Could that line go anywhere else but down? The promise of things like the genomics frenzy was, I think, that it would turn things around (and that hope still lives on in the heart of Francis Collins), even though some people argue that it did the reverse.

Comments (60) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History


COMMENTS

1. Rick on June 28, 2011 11:11 AM writes...

Below is a repost of what I added to Matt's blog. The policy implications of the two different observations are different. "SCB" refers to the Sanford C Bernstein report from which the graph above was taken.

A few years ago, I published a similar analysis of new drug discovery productivity in a report for the Project Management Institute’s Pharmaceutical Specific Interest Group Newsletter (December 2008), correcting for the time lag between discovery of a drug (the time during which the R&D was being done) and launch (after which all the R&D money had been spent). The conclusion was the same for drug discovery after the mid-19980s: an exponential decay curve with a slope indicating we were discovering approximately 1 fewer new drugs per year.

However, the reports differ in the behavior of the graph prior to 1980. The SCB analysis indicates that there was a steady decline going all the way back to the beginning of the modern pharmaceutical industry, parallel to what we see today (albeit with a higher quotient), whereas my analysis found that the trend was essentially random prior to 1980, giving a zero-low slope line (almost zero decline) centering on roughly 12 new drugs per billion dollars R&D annually, adjusted to Y2K dollars using CPI. Adjustment using the higher biomedical price index yields 9-10 new drugs per billion dollars. Another analysis, published by the US GAO in 2006, found something akin to the latter result.

The difference between the two depictions has important strategic and policy implications, particularly as it relates to finding and analyzing root causes. The SCB report indicates that what we see today is part of a trend that’s been going on since the dawn of the modern pharmaceutical industry, so we might want to study factors inherent in drug discovery. My analysis and the US GAO report suggest that the productivity of the industry is biphasic (steady up until 1980s and exponentially declining thereafter), suggesting that something(s) happened midway in the history of the industry (1940s to today) that negatively influenced new drug discovery productivity.

I hope that the SCB report is only the beginning of a more careful analysis of historical trends in drug discovery productivity, not the last word. Settling for the conclusion “that’s just the way it’s always been”, doesn’t offer much hope.

Permalink to Comment

2. Rick on June 28, 2011 11:21 AM writes...

FYI, according to the FDA and a 2006 US GAO report on drug discovery productivity, that spike in 1996, which you mentioned and the report partly attributes to new HIV treatments, was actually entirely explained by cleaning up a backlog of approvals due to PDUFA. In essence, it was a change in the rules, not a one-disease-one-year break in the decline of new drug discovery that yielded the spike.

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3. Frank Adrian on June 28, 2011 12:43 PM writes...

It's not just pharmacological R&D. It's happening in computers, in physics, in materials science...

The issue is that we're reaching the limits of our abilities to control the world once again. Silicon chips are reaching limits in their heat dissipation, physics experiments become ever more expensive and pushing into realms that we have no way to influence, the main thing that genomics has taught us is that biochemical pathways really aren't suited for simple control, etc. Nanotech might push things forward a bit more, but it's still more a lab curiosity than a technology.

The only good thing coming out of this is that one still gets to call Ray Kurzweil a nut... How's that singularity coming, Ray?

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4. Mike W on June 28, 2011 12:48 PM writes...

5, or 10, or 15 drugs per billion dollars? If EVERY ONE of our programs were successful, we couldn't come close to that today.

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5. bbooooooya on June 28, 2011 1:12 PM writes...

No, this graph must be incorrect. According to an article in the Wall Street Journal ("Human Element: Drug Industry's Big Push Into Technology Falls Short; Testing Machines Were Built To Streamline Research -- But May Be Stifling It; Officials See Payoff After 2010", Peter Landers. Wall Street Journal. (Eastern edition). New York, N.Y.: Feb 24, 2004. pg. A.1).

According to a Martin Mackay (a VP at PFE, I'll bet he's done great things): "Martin Mackay, a senior vice president at Pfizer's research labs, said recent data show a higher percentage of compounds at Pfizer are making it through each stage of testing, suggesting that the effort to improve the technology is working. "The proof of the pudding will be in 10 years' time," he said. "We're very confident.""

To be fair, this type of scale back in spending after no real benefit (for a, dated but still relevant, example: http://www.economist.com/node/2477075?Story_ID=2477075), is not surprising.

Partly, as mentioned, easiest diseases have drugs (though cancer remains a scourge) and partly investors will only shovel so much money into projects with no return before taking their capital elsewhere.

One can blame bad management (or lazy workers or those durned foreigners), but it could just be decline of a mature industry. To be fair, when I worked in biotech I saw lots of bench-level chemists jumping to combi chem as though it were manna from heaven. It wasn't.


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6. TJMC on June 28, 2011 1:31 PM writes...

Nice graph, but it apparently misses out one of the key confounders of such analyses. That is, the use of NME as "New Molecular Entity" approved (in this case adding in all the non-innovative follow-on drugs that are extremely similar in structure.) I instead call this "nme", for the reasons below.

"nme's" are different from what I and others before me have called "New Medical Entities", intending to describe the first in a novel drug family.

Why is this important? Well, the innovator that finds a new target, develops a NME (Medical) therapeutic, and gets is approved, is truly innovative and hopefully reaps the benefits of all that thinking and work. Other firms watching the innovator may improve on the NME incrementally, and hopefully benefit in proportion to the value the improved outcomes.

I would as Rick mentions, welcome having BCG improve the analysis to focus on real innovation vs. Y2K monies over the time period. I have been looking at the effects of mergers, operational excellence transforms and strategic shifts on NME productivity. Hopefully looking forward instead of continually backward. Do we really think that how R&D was done 20, even 10 years ago is what we do or need now? What we need now are indicators of what is working and creating the innovation and productivity our reality demands now. (see http://www.randdreturns.com/in-progress-nmes-vs-mergers/ )

Retrospectives do not paint a better picture than the above chart, but the eternal optimist in me follows Faust's core principle; (sic) "Those that keep striving are not damned, but will see redemption". Perhaps this drop in R&D spending is instead a auger of improved productivity that will appear later (maybe after the 5-9 year R&D development cycle)? One can hope...

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7. Rick on June 28, 2011 1:46 PM writes...

You're comment about chemists jumping to combichem could be applied to similar jumps to other hot new technologies. In addition to jumping TO things of unproven (even today for some of them), they alsp jumped AWAY FROM techniques that still worked, but were declared prematurely dead by bad management and merchants of newtech.

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8. Mike Hamilton on June 28, 2011 1:50 PM writes...

Derek,

I think your analysis is missing an important factor: regulatory pressures.

Could you imagine in the 1970's that a drug that is a combination of two approved drugs (I'm thinking Contrave/Qnexa here) would have been rejected by the FDA on safety concerns?

I don't disagree with your assessment that new drugs have to compete with existing generics, but I don't think you can ignore the incredible hurdles that the FDA has setup for new drug approval. These are hurdles that were never faced 20+ years ago.

Mike

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9. Chemjobber on June 28, 2011 2:17 PM writes...

Excellent 80's rock reference, btw.

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10. TJMC on June 28, 2011 2:18 PM writes...

After my last comment, I was curious to get up from the details and look down from the 50,000 foot level (like BCG was doing), but at NME's (and not "nme's") Surprising to me was that there might be an inflection moving in the positive direction in NME/$B spent. However, I realized it could also be an artifact from not applying "lag".

I like to lag such analyses so that the output of NME reflects the spending of 5-7 years before approval. Unfortunately, my data for firms' R&D spending prior to 2000 is a bit spotty. Happy to post results but would really prefer to use a uniform spend in R&D from some "reputable" source, IF READERS CAN POINT TO ONE. Something like what BCG used to go back to ~ 1992-4 would work.

Finally, my data winnows out the NME's from the follow-ons, seeing perhaps a differing pattern appearing. Possibly the truly innovative R&D metrics are hidden by that "chaff". In other words, over the past decade, the FDA became loath to approve marginally better drugs with lesser use/safety profiles. So part of the reduction of "nme's" in the past decade could be caused by that bias (which in the past would allow for a larger proportion of such follow-ons.)

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11. TJMC on June 28, 2011 2:25 PM writes...

My post # 9 makes more sense if my prior post was shown. In short, BCG and the chart describe "New Molecular Entities" approved. Less useful - especially in this decade.

I use the lower case "nme" for these instead of "New Medical Entities" ("NME's for real) that focus on first in a chemical class or family that is novel for a disease target. These innovators (hopefully) reap far more value than the "nme" follow-ons (which do serve a purpose if efficacy/safety is truly improved.)

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12. And D on June 28, 2011 2:28 PM writes...

Some analysis of why new drugs fail to make it to the market compared to the 1970s/1980s might be useful - are we really seeing more failures for "regulatory" reasons, or are there other factors which dominate?

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13. bbooooooya on June 28, 2011 3:00 PM writes...

"Could you imagine in the 1970's that a drug that is a combination of two approved drugs (I'm thinking Contrave/Qnexa here)"

Was not in dd 70s so don't know, but I hope (Contrave for sure) would have been viewed as a BS application hail mary by a bunch of execs wanting to perpetuate their salaries for a few more years even back then.

Nothing is stopping MDs from prescribing these combinations currently for weight loss.

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14. J. Peterson on June 28, 2011 3:12 PM writes...

...We don't need a new drug. We need a new disease.

Wow. That's the scariest thing I've read in a blog for a long time. What's to stop an evil drug company from secretly releasing some sort of pathogen that only their patented cure effectively treats?

If nothing else, you've got the plotline for a great sci-fi thriller.

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15. TJMC on June 28, 2011 3:15 PM writes...

bbooooya #13:

I agree that some of those combinations are a "hail mary pass" from the minds of some marketing executives. However, if there is rigor in the clinical trials in efficacy and safety to get such approvals, then that is better for society.

We have far too many drug-drug interactions that cannot be discerned from standard postapproval monitoring. Especially with longer term effects on heart tissue, etc. that require specified expensive testing.

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16. NoDrugsNoJobs on June 28, 2011 3:27 PM writes...

Geez, and I thought the declining productivity was due to direct to consumer marketing and Vioxx, what a shock that other factors might be at work!

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17. NoDrugsNoJobs on June 28, 2011 3:29 PM writes...

Geez, and I thought the declining productivity was due to direct to consumer marketing and Vioxx, what a shock that other factors might be at work!

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18. bbooooooya on June 28, 2011 3:31 PM writes...

"Could you imagine in the 1970's that a drug that is a combination of two approved drugs (I'm thinking Contrave/Qnexa here)"

Was not in dd 70s so don't know, but I hope (Contrave for sure) would have been viewed as a BS application hail mary by a bunch of execs wanting to perpetuate their salaries for a few more years even back then.

Nothing is stopping MDs from prescribing these combinations currently for weight loss.

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19. Anonymous on June 28, 2011 3:34 PM writes...

I don't particularly agree with the term "disappointing research productivity". Most people in the labs are working their asses off and producing as fast as they can.
Sooo, if it's not the researchers...

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20. You're Pfizered on June 28, 2011 3:49 PM writes...

I don't particularly agree with the term "disappointing research productivity". Most people in the labs are working their asses off and producing as fast as they can.

Yes, the terminology used to describe the difficulty of finding suitable drug-like compounds is incredibly irritating. It sure makes it sound as if pharma researchers are sitting around collecting paychecks and not working very hard. Given the current environment, diminished staffing due to layoffs and mounting pressures to do more with less so you can keep your job, it's nowhere near the truth.

What we do is some of the most difficult work there is, and yet all we ever hear about is 'lack of productivity' as if we're satisfied with failing most of the time. Very frustrating.

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21. Matthew Herper on June 28, 2011 5:12 PM writes...

@19 -- Nobody's disappointed in the bench scientists, or at least, I'm not. I think the bench scientists are often heroic.

But the productivity is disappointing. How should I say it?

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22. hibob on June 28, 2011 5:20 PM writes...

Does anyone have anything like a chart of compounds tested vs NMEs approved for the past few decades?

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23. Rick on June 28, 2011 5:53 PM writes...

hibob (#22), I created a chart like that a few years ago, using data from the Society for Biomolecular Screening (which is named something else now), but I can't find it now (probably lost a couple of computer crashes ago). Suffice it to say that if you think the decline in NMEs per billion dollars spent per year is depressing, looking at the number of NMEs per billions of compounds screened per year might drive one to suicide.

But I'll do you one better, you can create lots of charts, based on publicly available data, looking at new drugs discovered per new XYZ per year (e.g. per genome sequenced, per crystal structure solved, per computational chemistry software package...) - I kind of made it a neurotic hobby the past few years - and they generally point to the same stunningly counterintuitive conclusion: the harder we try or the more we spend, the worse we get at discovering new drugs. That's right, output correlates INVERSELY with effort/money! It seems bizarre unless you consider one of two options: the problems are just that refractile to solutions or the efforts are misdirected.

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24. Rick on June 28, 2011 5:59 PM writes...

TJMC (#s 6, 10, 11) You are spot on that it makes a big difference how you define the numerator in the formula (NMEs, nmes, novel drugs). In the analysis I mentioned in my post #1, the focus was on truly novel molecules, based on a published analysis of the IDDB by a medicinal chemist, not the FDA's terminology. I think that's one reason why I saw the number of novel drugs discovered per year per billion dollars was actually relatively stable between the late 1950s and the mid-1980s at around 12 drugs per billion per year, whereas the chart in this blog suggests a steady decline. It's an important distinction if you're really interested in analyzing innovation.

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25. Curious Wavefunction on June 28, 2011 6:09 PM writes...

-We don't need a new drug. We need a new disease. Or several.

I am sure that with the rise of antibiotic-resistant bugs and the neglect of basic antibacterial drug discovery, our wishes will unfortunately soon be fulfilled.

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26. bbooooooya on June 28, 2011 7:22 PM writes...

"We don't need a new drug. We need a new disease. Or several"

Restless leg syndrome (RLS)

Erectile Dysfunction (ED)

Gastroesphogial reflux disease (GERD)

Low Testosterone (Low-T)

Attention deficit hyperactivity disorder (ADHD)

Dysphoric Social Attention Consumption Deficit Anxiety Disorder (DSACDAD)

The marketing guys have been pretty productive, actually.....

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27. Anonymous on June 28, 2011 7:49 PM writes...

is outsourcing to China/India a big factor?

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28. drug_hunter on June 28, 2011 8:47 PM writes...

Guys, guys, c'mon, its just (a) generics raise the bar -- new drugs have to keep getting better and (b) tougher regulatory & payer environment. We're not getting more stupid; our jobs are tougher now. Yes, mergers and other idiocy makes life (much) tougher; but IMHO even Paul Janssen would be struggling in the current climate.

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29. TJMC on June 28, 2011 9:40 PM writes...

Rick - Your post #23 cites publicly available data. Can you point to a reliable one for overall R&D spending for past 15-20 years? As I mentioned in #10, looking at truly innovative NME's may actually show a upturn in NME/$B - starting near the 2008 date of your last analysis. I mostly look at individual company yearly reports to try and parse out the marketing spends that "hide" in R&D budgets. - Terry

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30. Anonymous on June 28, 2011 10:53 PM writes...

@21 How should you say it? How about not with the framing of the business community? I get the distinct impression that reporters and columnists are not talking to the people who actually work in the labs. I'm not sure why that is.
For the past 15 years or so, the business and consultant class have been getting it disastrously wrong. Oddly enough, beating up on research does not improve morale nor does it appear to be improving productivity.
OTOH, I doubt that you're going to hear from people who are still in the trenches. They're all scared to death that they're next. And yes, they're stressed out and overworked beyond belief.

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31. CMCguy on June 28, 2011 11:14 PM writes...

#21 Matt Herper how about New Age PC Spin "less success in overcoming huge obstacles to introduction of a medicinal products"? Majority of Science/Research is about dealing with failure so if view only as "numbers" as has been tendency it can be disappointing where the rare successes get lost.

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32. Hibob on June 29, 2011 12:21 AM writes...

@Rick #23: Thanks Rick - that's what I would expect to see for all of the data series that start to explain why the dollars per NME plot is so dismal: molecules screened per NME, clinical trial patient years per NME, researcher man hours per NME, etc. The science didn't get stupider - the problems got harder. Do you have any suggestions for data sources?

@ Matt #21: How to say it: "Our scientists are more productive and have keener insight now than ever before. They can now say "Oh No. That's not gonna work at all" hundreds of times more often per year than they could in the past. " Also, Agile-Lean-Taylorization improvements have put the lyophilizer 23 feet closer to the balance,

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33. processchemist on June 29, 2011 1:20 AM writes...

"IMHO even Paul Janssen would be struggling in the current climate"

In the current climate aspirin wouldn't have been developed.
I suspect that the current model trashes early many compounds of potential interest (CACO-2, in vitro herg and so on).
In a project where we was involved a whole class of compounds demonstrated some cardiac tox issues in vitro. But cardiac tox in vivo (dog) demonstrated a safe profile... In other contexts the class would have been dropped, but our customer had an old school approach (in vivo SAR and so on). The candidate is currently in Phase II.

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34. gg on June 29, 2011 2:02 AM writes...

What happens when you plot revenues($)/research($) vs time? I suspect drugs are earning a lot more now (even inflation adjusted) than they were in the past, and this quantity might approximate a level line on the chart.

That doesn't take anything away from what others have said. And I'll just add: you actually need a different definition of research productivity besides FDA approvals of NMEs. In our current system, there are powerful forces whose lobbyists are battling daily to see that their interests are addressed by the federal government. Drug companies want more drugs approved, under lax terms, so that they can sell more. Insurance companies (and public payers) want fewer new drugs approved, so they don't have to pay for them. The result of this epic battle is a system in which the FDA will never approve more than 20-30 NMEs per year. That's the compromise, the number that reflects the current balance of power. The current game plan from the drug companies is to push as many of these approvals as possible over to biologics, because the effective commercial lifetime is greater than for small-molecules.

By the nature of the process, only a handful of the NMEs will be innovative. The most innovative drug candidates might not even make it into the clinic.

I'll add one more thing: if we could ever come up with a drug that actually saved the system money, I'm not sure the incentives are aligned to push this to the top of the list and over the top to an approval. Think of a hypothetical drug that did not extend life but that postponed the onset of Alzheimer's by 2 or 3 years, thus saving 2-3 years of very expensive nursing home care. Society would stand to benefit greatly, but the nursing home lobby might find it convenient to oppose it.

Conspiracy theory? No. you don't need a conspiracy to explain our medical system. You just have to follow the money, and understand that one man's costs are another man's revenues.

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35. DrSnowboard on June 29, 2011 2:37 AM writes...

"We don't need a new drug. We need a new disease. Or several"

Pandemic influenza
NDM-1 mechanism resistant pathogens
MRSA, c.diff, VRE

Hospitals will be a place you go to throw the dice again. Careful what you wish for.

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36. Burned out on June 29, 2011 5:59 AM writes...

@35
"We don't need a new drug. We need a new disease. Or several"

Pandemic influenza
NDM-1 mechanism resistant pathogens
MRSA, c.diff, VRE

Hospitals will be a place you go to throw the dice again. Careful what you wish for.

I completely agree. Another way to put it.."Bad bugs, no drugs, no chemists, no kidding."

GSK, after a much internal hyping of their commitment to antibacterials, recently slashed internal headcount in chemistry by 50%! It seems that externalizing research is the strategy of the day.

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37. MIMD on June 29, 2011 7:10 AM writes...

Speaking of shining beacons of happiness:

Instead of pharma R&D spending, the healthcare industry (both pharma and the 'provider' side) is diverting hundreds of billions of dollars to computer systems that are supposed to "revolutionize healthcare."

Here's an example of revolutionary roadkill.

Permalink to Comment

38. bbooooooya on June 29, 2011 7:13 AM writes...

"And I'll just add: you actually need a different definition of research productivity besides FDA approvals of NMEs."

There is a much simpler measure. Three letters, E P S (both current and expected).

Nothing else counts for a company making drugs.

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39. TJMC on June 29, 2011 9:58 AM writes...

#38 bboooya -

I agree that EPS is critical. However that reflects recent or hindsight measures. I am looking for other metrics that might indicate FUTURE success and earnings (and survival of the industry or select firms.)

Trends of approved New Medical Entities reflect innovation and not future earnings. GOOD NEWS: THESE ARE ACTUALLY TRENDING UP PER $B SPENT SINCE 2006. Whether that will improve earnings depends on other drivers - volume and margins. These factors (and others) will ultimately will create tomorrow's EPS. That might affect share prices sooner than consensus (yes, I also watch Cramer sometimes.)

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40. notmedchem on June 29, 2011 9:59 AM writes...

Expanded Poly Styrene?? or does this involve math. I was told there would be no math.

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41. Former Chemist on June 29, 2011 12:04 PM writes...

If you plot the number of MBA's, executive comentation, fees pair out to management consulting companies etc. on a right hand Y axis, this has increased in to counter the lost productivity of discovering drugs.

Anyone else see the same parallel? Our industry screwed itself by becoming buisinesses like the auto, financial, airline inductires etc. If drug companies focused on brining in truely needed therapies instead of trying to sell the heck out of whatever it had (Lamisil, Viagra etc), the industry would be smaller but still immensely profiable.

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42. bbooooooya on June 29, 2011 12:09 PM writes...

"I agree that EPS is critical. However that reflects recent or hindsight measures. I am looking for other metrics that might indicate FUTURE success"

Yes, that's why I noted current and expected EPS. Analysts do build projections of future drug sales into models to evaluate companies. Most biotech (i.e. sans approved products) companies are valued based on projected EPS for "drugs" that may or may not be approved in up to 5 years (this is a component of pharm valuation too, but a smaller % since they tend to have sales). Despite the inherent uncertainty in estimating sales for an unapproved drug in 2014, it is remarkable how much certainty analysts have in their estimates. I do not believe most of them have ever even thought of the idea of "uncertainty" in their projects: after all, their Excel sheets show them NPV of a company to 8 decimal places, so it must be right......

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43. Otis Blanchard on June 29, 2011 12:23 PM writes...

Do we need new diseases or new targets?, This goes back to the NIH and NSA. With the bad grant environment over the last 12 years now has the basic sciences really been able to utilize the genome to find new targets? Do we broaden our understanding of the cell without funding, or have we enhanced the depth of understanding of a few pathways?

I wish I could find the old nature/science article advocating the exploration of proteins and suspected proteins from the genome project. It's just too much of a "fishing expedition" to get any funding. Expeditions into the unknown, although not hypothesis based, do lead to hypothesis driven science.

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44. Rick on June 29, 2011 12:55 PM writes...

TJMC (#29),
The primary data source that people use (including the report Derek shared in his oroginal post) is PhRMA. For example, their annual Industry Profiles give you historical R&D spending both for member companies and worldwide. The 2011 report can be found at http://www.phrma.org/sites/default/files/159/phrma_profile_2011_final.pdf. The Tufts Center for the Study of Drug Development also published numbers, but I had a harder time finding their figures free of charge and they weren't different from the PhRMA figures anyway.

Since you asked for "reliable" data, I should warn that these data are taken directly from self-reports from the pharma companies themselves, with no consistent definition of what actually constitutes "Research and Development". No company publishes their budget in sufficient detail to allow anyone to set up such a consistent tracking mechanism either. In a few cases where investigative reporters were able to get a glimpse at detailed financials, they found that (for example) things we might consider strictly marketing were instead allocated to "education" within the R&D budget and the allocations were a significant fraction of the overall R&D budget at those companies. So, it is fair to be concerned that some fraction of what is reported as "R&D" actually isn't anything any of us would call research or development, but for now this is the best we can do. A good example of the need for the often-repeated term "transparency" in the industry. Caveat emptor.

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45. TJMC on June 29, 2011 1:03 PM writes...

#42 bboooya -

Yes and I have been looking in-depth at performance in the industry for a long time. Analysts that give out the projected EPS are sharing common knowledge, with about a 2-3 year horizon. Beyond that, it is really card reading like you infer.

My thinking is that some firms will find and apply the changes that will effect core performance. See this link to some of my reasons for this and the above comments of surprising upturns in innovation and productivity (surprised me as well): http://bit.ly/krnAYO

But in time when (if) it becomes accepted, everyone will be on the same page and so no insight advantage. Others firms will maybe follow suit of the apparent winners but it takes 5+ years to really change follower's R&D performance.

Uncertainty for the analysts may or not may not have probabilities built in, as we in the industry do to drive decisions and manage the pipeline portfolio.

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46. Rick on June 29, 2011 1:15 PM writes...

To Hibob (#32), One source for some of the data you want to find is the same annual PhRMA Industry Profile I suggested to TJMC in post #45. There are some useful tables on R&D spending, revenue, geographic distribution of R&D&sales, employees. To get a snapshot over time, you may need to dig up Profiles from multiple years, but those are also available from PhRMA's website. My caution about "reliability" applies here too.

For data on screening, the Society for Laboratory Automation and Screening (formerly known as the Society for Biomolecular Screening) has useful resources, including conference proceedings, that are, IMO, quite reliable. Again, you may need to pull up publications from multiple years to get a time-lapse picture of trends and/or dig deeply into the guts of some of their publications.

There is no "one-stop shop" for much of the other data, but everyone likes scorekeeping and, in the wonderful age of this interweb thingie, it only takes a little time and patience to find out, for example, the number of crystal structures solved or genomes sequenced worldwide annually. Of course, it also helps to have time and a neurotic drive to find this stuff out. I highly recommend a year or two of unemployment for providing both of those.

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47. Rick on June 29, 2011 1:27 PM writes...

P.S. to Hibob (#32) If you have a project in mind that needs to look at some specific comparison(s), but you're worried the data hunt will threaten your sanity and you would rather rent a neurotic to do data scavenging, I know this guy who will work for beer and/or food...

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48. hibob on June 29, 2011 2:29 PM writes...

@Rick #47: Thank you for the links, I was guessing most data wouldn't be free, and most "reliable" data would be internal to pharma companies, or more likely, Boston Consulting. All of that benchmarking, process reengineering, sloganeering, etc., may or may not have led to any more drugs, but should have produced quite a few records of how much and what type of pipeline work has been done year after year.

The only output for the "project" on my part would be a rather depressing blog post. That said, I'll offer a beer and a burger to someone who has the data!

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49. David Formerly Known as a Chemist on June 29, 2011 2:49 PM writes...

"We need a new disease. Or several."

My favorite new disease: hypotrichosis

Yep. Having "inadequate or not long enough eyelashes".

Have you seen the Latisse commercials with Claire Danes and her bushy eyelashes? What a joke.

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50. TJMC on June 29, 2011 4:28 PM writes...

Rick - (and bboooya)- Take a look at new analysis posted today on my blog (thanks for the PhRMA link.) Some optimism for the industry? Apparently New Medical Entity per $B is actually going up for past 4-5 years. We just did not notice it because the "me-too" approvals were decreasing.

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51. Rick on June 30, 2011 6:41 AM writes...

Terry (TJMC #6, #49),
Thanks for sharing your link. I think your approach of focusing on drugs that aren't simply minor modifications (e.g. methyl, ethyl, propyl, butyl, futile...) or reformulations of existing drugs provides insights on research productivity that differs from the Bernstein/BCG. It also highlights the limitations of using retrospective analysis and, IMHO, the utter lack of useful leading indicators of innovative productivity in an industry where the time difference between a creative act and the proof of its marketability for its intended purpose (an important, but overlooked criterion for "innovation").

I agree that your graph strongly suggests a significant, favorable break from the downward trend in research productivity. Based on what I've seen in data reflecting a similar measure going back to the 1960s, I would say that 5 years is the bare minimum necessary to suggest a "trend"; anything shorter is a statistical blip instead of a trend. In addition to your proposal that this nascent trend indicates a turnaround in productivity, I would suggest another hypothesis: it simply shows that things can't get any worse. As such, it reflects a new equilibrium based on what we've been doing for a while, not the effect of some new strategy that's "working". I don't think we'll know that for another 5 years, which re-highlights the challenge of trying to do a financial analysis that works on a quarterly time-scale in an industry where new product development trends take a decade or more to play out. The only way to analyze and solve THAT problem is through physics (time travel), not business management.

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52. Doug Steinman on July 1, 2011 8:41 AM writes...

Maybe it's actually due to good science versus bad science with more of the bad science being funded by pharma today compared with 10 years ago. These efforts, while they don't lead to NME's (and never will), are still a significant part of R&D spending and take away from the spending that could support the good science that has lead to NME's in the past (and will conbtinue to do so). I suppose that everyone has a different idea of what constitutes good science and bad science but I believe that it begins with the choice of research targets. If R&D management would de-emphasize the me-too's and the simple-but-useless and return to the difficult and speculative but potentially game-changing targets, we would, perhaps, in ten years time see a different result for R&D spending versus NME approvals. Unfortunately, I don't believe that pharma management has the guts or the intelligence to follow that path.

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53. Ron Wolf on July 1, 2011 1:56 PM writes...

While the pattern is disturbing, its not hard to figure out. Apparently reductionist research (point cures in complex systems) only takes us so far. Nature writes the rules here, not us. The escalation of microbial resistance against a dry pipeline of new anti-biotics is an exemplar of this. Science, in this mode, is failing. Take this as a call to action, please!

And funding health care based on profit - friends, this is not only an apparently failed model, it was never moral. The only question, will we find a new model? Here I'm not hopeful.

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54. Anonymous on July 2, 2011 9:25 AM writes...

@14 - Already been written: "Oryx and Crake" by Margaret Atwood

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55. Anonymous on July 2, 2011 1:17 PM writes...

Part of the problem also stems from the reward system for most managers: killing projects gets a manager noted and amply rewarded (firing people is also rewarded). Often, when a project hits a bump in the road, too often it is killed, rather than slowing down to understand if the bump is just an artifact, something to work around, or if it is indeed an intractable problem. Projects need champions. Champions need to be experienced leaders in order to make these finer judgements. Management needs to trust and support the judgements made by the project leaders.

Bench scientists are terrified - how creative can they be right now?
Project leaders are terrified too. Ditto.
Managers are completely out of touch with reality.
And division heads are creating their own reality by firing scientists in the hopes of lining their own pockets before the organization finally collapses. The reward system is broken.

Bench scientists need to be rewarded for creativity and perseverance.
Project leaders need to be rewarded for due diligence and mentoring of bench scientists.
Program managers need to be rewarded for what actually launches onto the market.
Division heads should be rewarded for how well they support the division, paying particular attention to how well talent is retained in the division.
The reward system must be mandated all the way from the top. My company's new CEO has been notably MIA since taking the helm this year...nothing is changed. We are teetering on the brink.

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56. Anonymous on July 2, 2011 3:21 PM writes...

Part of the problem also stems from the reward system for most managers: killing projects gets a manager noted and amply rewarded (firing people is also rewarded). Often, when a project hits a bump in the road, too often it is killed, rather than slowing down to understand if the bump is just an artifact, something to work around, or if it is indeed an intractable problem. Projects need champions. Champions need to be experienced leaders in order to make these finer judgements. Management needs to trust and support the judgements made by the project leaders.

Bench scientists are terrified - how creative can they be right now?
Project leaders are terrified too. Ditto.
Managers are completely out of touch with reality.
And division heads are creating their own reality by firing scientists in the hopes of lining their own pockets before the organization finally collapses. The reward system is broken.

Bench scientists need to be rewarded for creativity and perseverance.
Project leaders need to be rewarded for due diligence and mentoring of bench scientists.
Program managers need to be rewarded for what actually launches onto the market.
Division heads should be rewarded for how well they support the division, paying particular attention to how well talent is retained in the division.
The reward system must be mandated all the way from the top. My company's new CEO has been notably MIA since taking the helm this year...nothing is changed. We are teetering on the brink.

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57. Nick K on July 15, 2011 10:50 AM writes...

Two thoughts: first, this graph summarises perfectly why the pharma business is in such dire straits right now. Why would anyone want to invest in it currently? Second, while the "low-hanging fruit" hypothesis for the crisis is attractive, perhaps it would be worth considering how many drugs from the 50's to 70's would get over the regulatory hurdles today. Precious few, I'd bet.

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58. mariage on September 23, 2011 4:17 AM writes...

Just to notify you that I am working with Google Chrome 15.0.874.5 on Windows 7 and your header is oddly left aligned. I cleared my internet browser cache, nevertheless it does not appear to have any sort of result. Probably a cross-browser css problem.

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59. Alex Venible on October 18, 2012 2:35 AM writes...

I like the efforts you have put in this, thankyou for all the great articles.

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60. Marianela Gesner on March 29, 2014 1:44 PM writes...

аз лично не маразя евреите мразя релиогиозните фанатици обаче.Мисля че омразата към евреите е основана на религиозна омраза, особено в миналото, а сега е просто традиция по исторически причини.мислех си че видеото ще даде представа защо когато Европа е била обхваната от християнски фанатизъм, подобно поведение като това на евреите би било причина за конфликт

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