Here's another look at the productivity problems in drug R&D. The authors are looking at attrition rates, development timelines, targets and therapeutic areas, and trying to find some trends to explain (or at least illuminate) what's been going on.
Their take? Attrition rates have been rising at all phases of drug development, and most steeply in Phase III. (This sounds right to me). Here are their charts:
And when they look at where the drug R&D efforts have been going, they find that comparatively more time and money has been spent on targets with lower probability of success. That means (among other things) more oncology, Alzheimer's, arthritis, Parkinson's et al. and less cardiovascular and anti-HIV.
That makes sense, too, in a paradoxical way. If we were to get drugs in those areas, the expected returns would be higher than if we found them in the well-established ones. The regulatory barriers would be smaller, the competition thinner, the potential markets are enthusiastic about new therapies - everything's lined up. If you can find a drug, that is. The problem is the higher failure rates. We knew that going in, of course, but the expectation was that the greater rewards would cancel that out. But what if they don't? What if, for a protracted period, there are no rewards at all?
The paper also has a very interesting analysis of European firms versus US ones. Instead of looking at where companies might be headquartered, the authors used the addresses of the inventors on patent filings as a better location indicator. Over 18,000 projects started by companies or public research organizations between 1990 and 2007 were examined, and they found:
Although at a first glance, European organizations seem to have higher success rates compared with US organizations, after controlling for the larger share of biotechnology companies and PROs in the United States and for differences in the composition of R&D portfolios, there is no significant gap between European and US organizations in this respect. Unconditional differences (that is, differences arising when no controls are taken into account) are driven by the higher propensity of US organizations to focus on novel R&D methodologies and riskier therapeutic endeavours. . .as an average US organization takes more risk, when successful, they attain higher price premiums than the European organizations.
The other take-home has to do with "me-too" compounds versus first-in-class ones, and is worth considering:
". . .both private and public payers discourage incremental innovation and investments in follow-on drugs in already established therapeutic classes, mostly by the use of reference pricing schemes and bids designed to maximize the intensity of price competition among different molecules. Indeed, in established markets, innovative patented drugs are often reimbursed at the same level as older drugs. As a consequence, R&D investments tend to focus on new therapeutic targets, which are characterized by high uncertainty and difficulty, but lower expected post-launch competition. Our empirical investigation indicates that this reorienting of investments accounts for most of the recent decline in productivity in pharmaceutical R&D, as measured in terms of attrition rates, development times and the number of NMEs launched."
So, rather than being in trouble for not trying to be innovative enough, according to these guys, we're in trouble for innovating too much. . .