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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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February 10, 2012

The Terrifying Cost of a New Drug

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Posted by Derek

Matthew Herper at Forbes has a very interesting column, building on some data from Bernard Munos (whose work on drug development will be familiar to readers of this blog). What he and his colleague Scott DeCarlo have done is conceptually simple: they've gone back over the last 15 years of financial statements from a bunch of major drug companies, and they've looked at how many drugs each company has gotten approved.

Over that long a span, things should even out a bit. There will be some spending which won't show up in the count, that took place on drugs that got approved during the earlier part that span, but (on the back end) there's spending on drugs in there that haven't made it to market yet, too. What do the numbers look like? Hideous. Appalling. Unsustainable.

AstraZeneca, for example, got 5 drugs on the market during this time span, the worst performance on this list, and thus spent spent nearly $12 billion dollars per drug. No wonder they're in the shape they're in. GSK, Sanofi, Roche, and Pfizer all spent in the range of $8 billion per approved drug. Amgen did things the cheapest by this measure, 9 drugs approved at about 3.7 billion per drug.

Now, there are several things to keep in mind about these numbers. First - and I know that I'm going to hear about this from some people - you might assume that different companies are putting different things under the banner of R&D for accounting purposes. But there's a limit to how much of that you can do. Remember, there's a separate sales and marketing budget, too, of course, and people never get tired of pointing out that it's even larger than the R&D one. So how inflated can these figures be? Second, how can these numbers jibe with the 800-million-per-new-drug (recently revised to $1 billion), much less with the $43 million per new drug figure (from Light and Warburton) that was making the rounds a few months ago?

Well, I tried to dispose of that last figure at the time. It's nonsense, and if it were true, people would be lining up to start drug companies (and other people would be throwing money at them to help). Meanwhile, the drug companies that already exist wouldn't be frantically firing thousands of people and selling their lab equipment at auction. Which they are. But what about that other estimate, the Tufts/diMasi one? What's the difference?

As Herper rightly says, the biggest factor is failure. The Tufts estimate is for the costs racked up by one drug making it through. But looking at the whole R&D spend, you can see how money is being spent for all the stuff that doesn't get through. And as I and many of the other readers of this blog can testify, there's an awful lot of it. I'm now in my 23rd year of working in this industry, and nothing I've touched has ever made it to market yet. If someone wins $500 from a dollar slot machine, the proper way to figure the costs is to see how many dollars, total, they had to pump into the thing before they won - not just to figure that they spent $1 to win. (Unless, of course, they just sat down, and in this business we don't exactly have that option).

No, these figures really show you why the drug business is in the shape it's in. Look at those numbers, and look at how much a successful drug brings in, and you can see that these things don't always do a very good job of adding up. That's with the expenses doing nothing but rising, and the success rate for drug discovery going in the other direction, too. No one should be surprised that drug prices are rising under these conditions. The surprise is that there are still people out there trying to discover drugs.

Comments (62) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Drug Prices


COMMENTS

1. wwjd on February 10, 2012 2:14 PM writes...

Part of the problem with the Forbes number is they are pricing per new drug approved. A lot of R&D is spent developing new indications and dosage forms. They obviously ignore new vaccines (a new Flu vaccine comes out every year) but lots of R&D money get spent on those. I doubt pharma would be pushing a numnber like 1 billion if the truth was nearer 8.

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2. Student on February 10, 2012 2:15 PM writes...

I don't think we can ever really get a good picture. Even with a set definition, there are always going to be tricks.
Maybe someone wants to hide R&D expenditures in different departments (classify support staff as Sales rather than Research or something of that nature) so investors (we know how much they hate R&D) don't see them "throwing away money."
Conversely, maybe someone wants to inflate the numbers to flash at the FDA or convince drive the price up for a licensing deal.

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3. DrugA on February 10, 2012 2:23 PM writes...

Derek,
Do these numbers take into account acquisition costs when a company grows its pipeline by buying smaller companies? It seems it would have to, but there is then a question whether that reflects the real development cost (ie dollars spent) or an over-estimate of the value in the pipeline.

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4. anon on February 10, 2012 2:47 PM writes...

Slightly different question:

If a start-up company was developing a single drug from start to approval, does anyone know how much money it would cost to do that?

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5. anon the II on February 10, 2012 2:56 PM writes...

It seems to me that money spent on chemists was a very critical but not so large part of that R&D expenditure. And much of that expenditure sits in the institutional knowledge that has been discarded along with those instruments on Dove bid. Sad.

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6. Spike on February 10, 2012 2:56 PM writes...

At least Forbes are being efficient and utilizing one piece of data in multiple places. The cost of a Superbowl commercial was also published today by Forbes as being approximately $3.5M (without production costs). It is interesting that in a article that talks about the high cost of drug development that includes all costs (successes + failures + overheads) compares it to the cost of a Superbowl commercial, the total costs of which are underestimated.
Not sure how many commercials were aired but let's say 40 - that will have "cost" $140M. In terms of providing benefit to society, I guess that we look pretty darned efficient

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7. SwedenCalling on February 10, 2012 3:04 PM writes...

Thanks for your view and the link to Forbes Derek. Thoughtful and Interesting as always. I think this is pretty much like Leesons attempts to correlate simple descriptors like MW and logP to drugs on the market. There are simply too many unknowns to draw any real conclusions. Useless basically. But we do spend to much and lipophilicity is bad. That's for sure. Found another interesting piece on Forbes by Mike Myatt, about leadership styles. If only the guys ruling our world would be better at listening...

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8. Joe Corkery on February 10, 2012 3:19 PM writes...

Interesting data, but looking at a static window of time like this seems to be a slightly flawed methodology because for drugs approved early in the window, you will vastly underestimate the costs associated with them and for drugs that don't get approved until after the window, they will contribute to a significantly higher overall cost. Perhaps the hope is that they will all even out, but I'm not sure that is a good assumption. Perhaps that is another contributing reason as to why the numbers were so different for the different companies.

I'm not sure about the best way to do this, because you are always going to have multiple projects in the pipeline in an analysis like this, but it might be worth looking at the costs that went into developing a first drug for a company as a better indicator. For instance, has anyone looked at what it cost for Vertex to get amprenavir approved as a benchmark? And how about all the costs since up to the kalydeco and telaprevir? Ideally, these costs should go down per drug as R&D is amortized over time and projects, but I think that would be a more interesting study.

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9. RD on February 10, 2012 3:24 PM writes...

Did we force the MBAs to relocate everyone from the Midwest to the more expensive cost of living states on the coasts? Did we force them to merge company after company and put projects on hold for a couple of years, paying researchers to vamp while they rearranged the deck chairs? Did we force the MBAs to hire expensive consultants to make our jobs harder, make processes more cumbersome, let the corporate IT people have control of the research computers and in silico environment? How much money could we have saved if we hadn't been subjected to stupid management tricks?
And what about the FDA? Did they have a responsibility to modernize? Let's not even start on the expense and risk aversion caused by the out of control class action industry.
Finally, how much more quickly would we have gotten things done if we hadn't had to ration human resources all the damn time?
The industry has been mid train wreck for almost two decades now and a lot of this has been self-inflicted.

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10. pete on February 10, 2012 3:45 PM writes...

So if it's 4-12 x 10^9 USD/new drug, then we'd better rethink the movement toward smaller market, sub-population therapies.

Tenable business model only if such drugs are:
- unusually cheap to discover/develop (..doubt it)
- really successful (..hope springs eternal)
- sell for an unusually high price (..the GOP may help you here)

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11. HelicalZz on February 10, 2012 3:50 PM writes...

I made a couple of comments in the article itself (casalera). Some referred to the tax bias to allocating expenses to R&D which Derek mentions, and I agree doesn't explain away much. But also I wondered about M&A activity. When acquiring a drug in development, you effectively capitalize the R&D done elsewhere, and the full R&D spend doesn't get captured in the expense line.

Zz

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12. J. Peterson on February 10, 2012 4:02 PM writes...

I work in another industry, and always felt bad that the first half-dozen or so years of my career went towards product development that never shipped. But two+ decades?!

That's a whole new perspective.

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13. skatesailor on February 10, 2012 4:13 PM writes...

Mr. Herper does not present the correlation coefficients among his variables. They are negative 0.503 (number of drugs, R & D spending per drug), +0.430 (number of drugs, total R & D spending), and +0.386 (R & D spending per drug, total R & D spending). The respective t-statistics are negative 1.421, positive 1.506, and positive 1.323; with t-critical equal to plus or minus 2.23. At the 5% confidence level and with 10 degrees of freedom, none of three hypotheses can be rejected. They state that no relation exists between drug approvals and spending per drug, none between drug approvals and total spending, and none between spending per drug and total spending.

With alpha equal to 0.20 instead of 0.05, we can be somewhat confident that the number of drugs declines [sic] with increasing spending per drug, but rises with climbing total spending. In these cases, t-critical falls to plus or minus 1.37.

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14. NoDrugsNoJobs on February 10, 2012 5:36 PM writes...

I consider it almost impossible to make a drug these days - That is the reality. And if one is going after a new target or broad indication or whatever than that statement is even more true. Look, we can blame the stupid MBA's, the CEO's or whatever all we want but no matter how you slice it, we still spend a shitload of money on R&D. So what if there were less mergers, etc - even the companies that didn't merge aren't really doing a hell of a lot better, are they? (e.g. LLY). The fda doesn't want to approve drugs, the governments/insurers/people do not want to pay for drugs, and if you are successful, people will be lining up to sue you for taking your drug. What's the point? Using my own money, I'd be making widgets or sport's drinks or whatever...the return is more assured and the outlays and risks smaller.

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15. Biotechtranslated on February 10, 2012 5:38 PM writes...

@#4,

There is no set number for what it costs to bring a drug to market. It can vary incredibly.

The biggest chunk of cash is required for development, not initial research. When I was in big pharma, the number people liked to throw around was 1/3 R and 2/3 D for how a typical R&D budget was split (and there are several fold more projects in R than in D at any given time).

If you really luck out and discover a novel lead that doesn't require much optimization (ADME stuff), it's for a life threatening orphan disease with no current way to treat it (FDA hurdle is low) and it has a relatively clean profile (no serious safety issues and some level of efficacy), I would not be surprised you could go from pre-clinical to NDA approval for less than $50M or so.

Unfortunately, those types of drugs only exist in scientists' wildest imaginations. :P

Mike

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16. JasonP on February 10, 2012 6:55 PM writes...

It seems like the real question is how do you reduce the cost of clinical development? There needs to be a development revolution of some form.

Or perhaps make all marketing of drugs illegal and create a centralized method of drug information promotion. That would free up half the damn budget of any large company, who are usually the closers of drugs in clinical development. Wouldn't the ethical thing to do be to let a drug promote itself by its data rather than how many TV ads you can spread around?

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17. Matthew Herper on February 10, 2012 7:51 PM writes...

OK. Here we go...

@1 wwjd: fair point, and fairer for some others. I'll do some more work. There are some companies who might see their average cost go down.

@3 DrugA: they don't take into account acquisition costs. (I did that with Pfizer several years ago, and the numbers were daunting!) But I did the calculation this way to help taking into account the effects of mergers, which temporarily boost R&D.

@4 anon: One example, given in the article, is Optimer, for $175M. I think of I know of a few that are cheaper. And there's Questcor, which is a special case -- they didn't invent their drug, they raised the price.

@10 Orphan drugs usually are a lot cheaper to discover, faster to test, and are often cost effective at higher prices. This model has some legs to it.

In answer to a lot of other questions: I've quoted Munos on the $4B number before, when I profiled him back in August. He says internal estimates for per drug costs at most companies are that high and rising. (So does Corey Goodman, who would know.)

I'm not going to swear by the estimate for each company. But I do think it is pretty clear that the cost per drug is in the billions. And I think we are starting to get signs of fundamental change, which could be a good thing.

Here's to new medicines that really help people!

Best,
Matt

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18. Biotechtranslated on February 10, 2012 7:59 PM writes...

@16,

Marketing is not included in the costs that were the focus of this paper, this is truly just R&D costs.

The problem with reforming clinical development is that you have to get it past the FDA! It's hard to reduce the costs of a 10,000 patient clinical trial when the FDA says you won't get approved without it.

And I'm not sure I agree with your comments about banning marketing of drugs. Pharma companies don't spend millions a year on promotion because it costs them money, they spent it because it makes them MORE money.

Mike

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19. quasimotto on February 10, 2012 9:39 PM writes...

Society must place a great value on life if we are willing to pay this kind of monetary price to extend and improve it. Regardless of the reasons for the cost, we are willing to pay.

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20. Shanedorf on February 10, 2012 10:29 PM writes...

We can certainly quibble over the cost calculations, but we might be missing the mark.So far all the focus on cost containment hasn't worked. Maybe a better way to reduce the cost of drug development is to reduce the time of drug development. I know it sounds naively simplistic, but imagine a document landing on your desk at 5 pm and you wait until the next morning to finalize it. That's 15 hours wasted. Multiply that times thousands of people moving (or not moving) thousands of documents/data/reports over a 12 year development program. That's an astronomical amount of time.

If a moderately successful drug nets $1 million /day and the patent clock is ticking - then the focus on reducing costs is missing the point. Reducing time is a better strategy imo. Documents, reports, data crunching, even sample analysis should all be happening around the globe with teams in Tokyo,London, Boston, SF, etc. We have the technology to squeeze significant time out of the process. Pharma is global, CRO's are global. After 20 years in the industry I find it astounding that any development tasks could sit idle in an internet connected world.
"We have met the Enemy and he is Us."

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21. pete on February 11, 2012 12:52 AM writes...

@17 Matt H.
Good point about orphan drugs.

However, I was thinking about moves to target subtypes of major disease. For example, going after a particular molecular phenotype seen in a cancer subpopulation. So, where the biology might be extremely compelling for use of drug-X in this group of patients, the overall disease incidence (population size) may be rather modest. And even if the host company can get approval for drug-X in 2-3 different cancer subtypes, the aggregate patient size may still be inadequate to offset drug development costs of the scale that you cite. What a gloomy scenario for patients and drug hunters alike.

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22. soWhat on February 11, 2012 6:45 AM writes...

@20: Interesting point, but all these time savings will be lost asnyway in the next reorganisation.
Motivation is another point, good individual or even site performance is no job guarantee. In the next disease area strategy you are fired either way.

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23. BossHogg on February 11, 2012 7:04 AM writes...

Derek or Matt,
There is always a lot of assumptions and fuzzy math on this subject. We know it costs a lot and big pharma takes a lot of critisism from public and politics over the cost of drugs. The insight I have always wanted to see demonstrated and which never gets any press, is how much of the retail drug cost is actually attributed to manufacturing/intellectual property of the drug vs. pharmacy and hospital markups. I get that everyone needs to make money, but it seems the burden of development and letigous risk lays with BigPharma. So why when I go to the ER do I have to "pay" $40 for an aspirin. And when you take the numbers in this article and subtract from the price of a generic since they have virtually no development risk or marketing costs, shouldn't generics be a hell of a lot cheaper than they are?

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24. Jon Nilsen on February 11, 2012 10:14 AM writes...

@18 Depends on what you consider marketing. Medical Liaisons and MedComm both fall under R&D and most wouldn't consider those true costs of drug development.

R&D spend also includes all post marketing studies, obligates or not; and again would arguably not fall under the cost of developing a drug.

The other elephant in the room that limits the usability of this data, is that it rests on the assumption of existing market forces that function properly to set the costs of drug development. As all companies set R&D spend as a percentage of revenues and ,as Derek mentioned, there are pretty hefty tax advantages to expensing something under R&D if the money is going to be spent anyway. All the numbers tell us is what the organizations were willing to spend on "R&D" expenses. Not surprising that the larger companies with higher revenue had higher costs to develop drugs, Wall Street Allowed them to throw more money at "R&D."

This analysis answers the question "How much did pharma companies spend to run their operations?" Not "How much does it cost to develop a drug?"

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25. MTK on February 11, 2012 10:35 AM writes...

@20,

sounds great, except that most of the time is not "wasted" sleeping.

The time sink is the clinical trials, which are always (or at least should be for any project) on the critical path. It's not too easy to shorten the time it takes to run a clinical trial.

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26. johnnyboy on February 11, 2012 11:12 AM writes...

Sniping about the methodology of Forbes' number gathering is academic and pointless - as Herper points out, the purpose of the exercise is not exactitude, it's to give a reasonable estimate, and personally i'm satisfied with its validity. But not so satisfied about what this means - as Derek says, I don't think I see how that level of spending could be sustainable. This makes me seriously wonder how long it's going to take before we all pack it in and go fishing. At some point, it's entirely possible, perhaps after a couple of the larger pharmas sell out or go bankrupt, that the message comes through that we have done all we possibly could in terms of developing new drugs, and that pushing forward simply will not provide benefits in relation to the staggering costs. How many billions is worth a couple of months of cancer-free survival ? Sure there are orphan indications that will be worth pursuing, but things like high blood pressure, cholesterol, metastatic cancer - when will we give up on those ?

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27. polymer bound on February 11, 2012 11:47 AM writes...

I feel like some of this cash could be saved by letting science dictate clinical trial design instead of marketing. I know of a few phase III trials that I either wouldn't have let happen or would have redesigned had I been the one signing the checks.

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28. Anonymous on February 11, 2012 12:04 PM writes...

I second johnnyboy. Well said.

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29. cirrus on February 11, 2012 2:31 PM writes...

Derek: you are in the wrong business. You are more productive writing this blog, which is very good, than doing drug discovery, which is very bad as you have admitted. Nothing is that simple as just adding things up. Besides just making drugs, the pharma industry produces many other benefits to the society. At least, you are making a living and raising a family out of it.

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30. TJMC on February 11, 2012 3:41 PM writes...

I have been looking at the metrics on Pharma R&D for over twenty years. The span of comments above reflect its complexity and some of the confounding issues. Some additional points (some of which may be a recap of above):

1)Understanding performance should begin by comparing apples to apples. NME approvals are not dollars and it can be misleading to represent it that way. A better (best?) way is to measure the net present value (NPV) of the approved drugs’ revenues against the NPV of aggregate R&D spending.

2)Some estimates could be applied to remove the tax avoidance and “what portion is for marketing of Phase IV” confounders, etc. However each firm has reasons for very differing allocations. Therefore, these approaches may be useful for overall industry measures but fail when trying to compare firms to one another (unless you have that internal data across all.)

3)So, there are plenty of statistics and analytics we can apply (and we keep trying – myself included.) But we end up misleading ourselves to at least some degree.

Beyond understanding these issues, what is our PURPOSE? To improve the performance of R&D and to what ends? To uncover those (past or future) winners and losers? To lambaste management or justify our POV?

One simple idea is to just look at what the industry has done overall in terms of surviving or growing. If it serves society well, society rewards it. The fact is that returns on the industry were in the high teens in the 1980s and 1990s (and maybe earlier.) The past decade has seen that drop in half. Maybe stabilized and maybe reversing that trend. The key is, what are we doing to change that decline? Can we do more of them or additional things (and they need to be new, not just six-sigma)? What firms are winning comparatively and can others follow suit?

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31. Pete on February 11, 2012 7:27 PM writes...

Matt, Thanks for the clarification with respect to DrugA's question about acqusitions. It makes the cost of AZ's acquisition of MedImmune, for what I believe was about $15.6 billion, even more terrifying than it was at the time.

SwedenCalling, Attempting to correlate correlate simple descriptors like MW and logP to drugs on the market is really vital work. Surely new drugs would cost even more if this important work was not done.

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32. Jose on February 12, 2012 1:22 AM writes...

"Seattle's Sage Bionetworks seeks a drug-discovery revolution
When Stephen Friend formed the nonprofit Sage Bionetworks, his aim was nothing short of revolutionizing the way drug discovery is done so patients don't have to wait for help."

Seriously? How many time have we been through this? Don't drink the Kool-Aid!

http://seattletimes.nwsource.com/html/pacificnw/2017392286_pacificpsage12.html?cmpid=2628

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33. Rich on February 12, 2012 5:19 AM writes...

@jose

The majority of the cost comes from failure. What's worse, it's mostly copied, joint failure. Pharma has to embrace joint, pre-competitive research up to some proof of concept point (like PII). The current competitive landscape is clearly completely unsustainable. The Sage network, in particular their ARCH2POCM set up, is attempting to gather big pharma and academia together in such an arrangement.

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34. Anatoly on February 12, 2012 8:06 AM writes...

Could it be that the costs are rising so much because the pharma industry is moving too fast into areas that we don't know enough about yet?

Namely, if pharma industry would take a 10-years pause while it waits for the academia to generate more knowledge, would the costs go down?

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35. Jose on February 12, 2012 11:22 AM writes...

But, Rich, that assume corporations are rational beasts....

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36. MolecularGeek on February 12, 2012 2:10 PM writes...

@Anatoly:

In principle, pharma could even speed things up more by doing more of the target-oriented basic biology that they need themselves. But as long as each company is in direct competition with the others for being first to market at a drugable target, the "strategic planners" will press R&D forward into lead optimization before anyone really understands what's going on beyond a superficial level.

MG

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37. Katie on February 12, 2012 2:19 PM writes...

Everyone agrees that the model is screaming out not just for change but revolution - it's just that no one can see where that might come from.
And if they can't see where it might come from, then they can't 'manage' (ie control) it.
And if they can't control it, then it's a threat.
And if it's a threat, they don't want anything to do with it....

Why? Because the inconvenient truth for the Industry is: though the environment may be hard, enough people can still make enough of a living, enough of the time, to not risk rocking the boat.

For, as George Bernard Shaw pointed out, all professions are conspiracies against the laity, and while the laity (patients) still believe without question that discovering new medicines is phenomenally expensive (and so must be phenomenally difficult), nothing will change / the revolution will not appear.

One day I still hope that a Big Pharma CEO will stand up and announce to the world, "You know, we really could do this for a fraction of the cost".... but I'm not holding my breath.

However, should enough patients start asking enough questions, and loudly enough... then our house of cards will surely tumble.

That, I suspect is what gives the more perceptive Chief Executives sleepless nights.

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38. bbooooooya on February 12, 2012 2:54 PM writes...

CLDA got Vilazodone as an anti-depressant for

MDVN will submit an NDA on MDV3100 for CRPC for

SVNT got Krstexxa approved for gout for

NGSX got Qutenza approved for

AMAG got Fereheme approved for

There are, I'm sure, 10s of other examples.

The approach of looking at big pharm expenditures versus approvals is likely a good outer boundary of inefficiency (which maybe explains why some of them have realized they're better at returing capital to investors than actually finding drugs. Looking at more focussed biotechs is likely a good lower bound (omits expenditures on crap drugs).

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39. Deepthroat on February 12, 2012 2:59 PM writes...

Drug discovery and development costs are high simply because the failure rate is high. Why is the failure rate high? Because drug discovery is run like a process using simplified science and metrics like throughput and timelines as the prime focus. There is probably only one way to reduced costs of new drugs (i.e. to decreased failure rate): high quality (sophisticated) science that enable delivery of safe and efficacious drugs. It is as simple as that.

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40. weirdo on February 12, 2012 3:35 PM writes...

Gee, Deepthroat, you should be running a company or something, with brilliant, insightful commentary like that. Thanks so much.

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41. milkshake on February 12, 2012 5:23 PM writes...

@40: the Big Pharma's record of doing research has been piss poor over the last decade and it is management-induced malady. (One would expect that with all the new research tools it would get easier to find and develop successful drugs than it was in the past. And the scientist quality did not stagnate, so something else is the problem. It could be shown that management has had obscene incentives to ruin the research)

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42. Anonymous on February 12, 2012 5:41 PM writes...

@40 you've nailed it. The layoff of talent over the years in big pharma has decimated the research in the industry, PERIOD! The problem is simple...they layoff the best talent (most knowledgeable and experienced) and rely on the remainders to produce. So, "Greenies" and sycophants (the boys or girls) are charged with moving the R&D ahead. Problem is, the lack of talent is quite evident and the wheels spin even faster.

What I'd like to see?? The complete removal of R&D from big pharma. Jettison the trash. Let biotech do the R&D...afterall, all the best talent is there now. What's left in big pharma is coffee drinking politicians that have no clue how to develop a drug....going through the motions, acting arrogant and trying to pull the wool over someone's eyes.

Look no further than Med. Chem. at Roche Nutley, NJ!! I'm sure there are other places as well. What a mess and a disgrace to this industry...

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43. weirdo on February 12, 2012 5:42 PM writes...

Milkshake;

You (and many others here) have stuck to that tired line for literally years here.

I would argue that scientist quality has stagnated. That plenty of scientists tell "management" what they want to hear. That many "managers" are, in fact, scientists, and not the MBA's so many like to blame.

That, in fact, (many if not most) drug discovery scientists have been complicit in generating the environment we have today. We took the big salaries and bonuses of the late '80's & early '90's (without thinking of the sustainability), bought into the year-end metrics to get those big bonuses (again, glossing over the sustainability), chased stock options at the latest -omics based biotech (the ultimate short-term horizon).

We have met the enemy and he is us.

Don't like what's going on? Don't buy in. Go somewhere where "management" gets it. Grab some buds and start your own company.

Then see what it is like to be a "manager".

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44. Anonymous on February 12, 2012 5:55 PM writes...

I meant to say: @41 (milkshake) you've nailed it....

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45. Anonymous on February 12, 2012 6:00 PM writes...

weirdo...you're living up to your name dude!!

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46. darwin on February 12, 2012 6:01 PM writes...

Sad state all pointing back to the day we began direct to consumer marketing. That opened the floodgate of MBA's, allowing them behind the curtain, which they then began to compulate with HR and multiplied like the cockroaches they are. Call an exterminator and we will be fine.

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47. milkshake on February 12, 2012 6:23 PM writes...

@weirdo: I don't think the people who start their own companies are bad or have easy job - the exact opposite in fact. But that is not what I was talking about. Big pharma execs have not started their own biotech companies as a rule. Typically, they have a law or business degree and come from finance industry or from a multinational corporation...
The system is rigged to benefit the large players, thats why companies like Pfizer can temporarily prop themselves by buying up they competitors and the promising startups. (And we all know what happens to these comapnies after the merger). But somehow this had worked or Pfizer, and they may well continue at it for another 10 years.

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48. Anonymous on February 12, 2012 11:27 PM writes...

There are two fundamental issues with the data in the Forbes article (which probably make the picture for the industry even worse).

One is that the number of actual new drugs approved in the 15-year period is overstated. Take Amgen for example supposedly the most efficient organization in the list in terms of R&D spent per drug. Two of Amgen's 9 drugs are the same molecule (Prolia/Xgeva) for different indications. Epogen and Neupogen were first approved more than 15 years ago while Aranesp and Neulasta are modified versions of these two original molecules. This more than halves the number of actual new drugs for this company in the period.

The other issue is that much of the R&D spend for the drugs approved in the 15-year period probably occured earlier and was much less than currently. Much of the R&D spend in the 15-year span (and likely most of the last 5 years) is likely for not-yet approved drugs the number of which is unknown.

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49. simpl on February 13, 2012 5:36 AM writes...

The costs to drug launch are going up pretty much in line with other essential servces. My gut feeling is that the main difference after 1995 is that the risks of stumbling in the roll-out years are picking up, and the rewards are getting smaller. I don't have any figures though.

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50. Anon on February 13, 2012 8:52 AM writes...

Derek,

Any chance you can post on the excessive pricing of drugs these days? I just heard that the new CF drug by Vertex is priced at $298,000/yr! I find that a bit extreme, granted only ~1,200 people are good fits for it. This jives with the orphan drug premise by Harper.

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51. johnnyboy on February 13, 2012 9:12 AM writes...

@38 booooya: Sure, biotechs put out drugs for less, but are they really 'not crap' ? And if not crap, are they commercially viable ?
AMAG's Feraheme is just reformulated iron for injection, not exactly a scientific breakthrough. Forest/CLDA's vilazodone is yet another me-too for depression without obvious advantages to its many competitors, and it's not selling terribly well. Savient's Krystexxa might be a useful drug, but it is selling so poorly that the company's market cap is the fifth of what it was when the drug was approved. Qutenza is a patch of capsaicin (ie cayenne pepper extract) - nuff said...
As far as real, breakthrough, first-in-class drugs coming out of biotech, I can think of a handful at best, and they generally are from the larger-cap biotechs - I'd be curious if their cost of development was really that lower than that of the big pharmas.

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52. Aspirin on February 13, 2012 10:17 AM writes...

@40 Weirdo: I second milkshake. Most top-level managers in pharma are either MBAs or are two-decade old PhDs with no current appreciation and understanding of bench chemistry. The rant may seem like a tired one, but that's because it's true. The managers have lost touch with scientific reality and are only pushing their narrow-minded, short-term financial agenda.

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53. watcher on February 13, 2012 10:50 AM writes...

While there is a lot of waste in the way R&D is done, I found the entire premise and basis of this article very, very naive.

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54. RB Woodweird on February 13, 2012 12:08 PM writes...

"I'm now in my 23rd year of working in this industry, and nothing I've touched has ever made it to market yet."

That's the saddest thing I have read in a while.

Is the future that the majority of the drug companies in the US and Europe just die off, leaving companies in China and India - whose business model will be high drug approval for domestic markets due to lower approval standards while selling a select subset of those which do pass stricter trials to the US and Europe?

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55. Anonymous on February 13, 2012 7:51 PM writes...

I saw this on another post on this blog and thought it was quite suitable. Thanks to the individual that posted it.

This may be one of the major reasons for all the failure in big pharma given that layoffs are rampant. This may be a good description of many of the layoff survivors. So how did they survive?

http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect

Speaks volumes about what went on over at Roche Nutley and others especially in chemistry....

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56. Anatoly on February 14, 2012 3:12 AM writes...

@54

High drug approval with lower approval standards will mean less people will trust the new drugs, which will mean less people will use them, which means less profits... you get the picture.

A few well-publicized incidents, and China\India will have its own FDA in no time...

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57. RB Woodweird on February 14, 2012 7:23 AM writes...

Anatoly, we are talking about a culture which thinks powdered rhinocerous horn and dried tiger penis are the gold standards for efficacy.

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58. Anonymous on February 14, 2012 9:53 AM writes...

Agree with #26 Johnnyboy. The current paradigm is not sustainable. Can we not have an open and honest discussion to identify the problems and ways to correct them?

Regarding the comment of letting biotech discover new drugs, I have been in biotech for over 10 years and the track record there isn't any better. The failure rates are not as spectacular because so often many of these companies aren't on the radar. Biotech is not immune to bad management decisions.

Two examples I experienced both involved in-licensing/acquiring new technology/new drug candidates so as to diversify the drug pipeline, reduce risk, be more attractive to investors etc. In one case, I clearly recall where we (me and my research team) were not observing the supposed enhanced efficacy with one new candidate we had in-licensed from an academic lab. I spoke out in a project meeting that it wasn't working and after this meeting my boss told me "to just shut up". He removed me from that project and put it under his direction where he was faced with negative result after negative result. Over time the "story" of the candidate was toned down from "wonderful enhanced efficacy" to other improvements. What finally killed the candidate was a toxicity issue that just couldn't be ignored. However, two years had passed from my original complaint over which time we spent money on a GMP manufacture and a large/long toxicology study.

The case with the other candidate, was one where the candidate proved itself in the laboratory studies, passed clean toxicology studies only to fail in a poorly designed clinical study. The biotech was too small and underfunded to give this candidate a second chance but it is a candidate that could still have potential.

Although apparently different, in both cases I see that rather than having the business decisions support the science, it was a case where the business decisions overruled the science.

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59. Anonymous on February 14, 2012 8:10 PM writes...

"we are talking about a culture which thinks powdered rhinocerous horn and dried tiger penis are the gold standards for efficacy"

Could be another option rather than legalized pot in the US. At least it's legal, but it sure ain't gonna smell too nice!! I don't think Bob Marley would approve...

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60. LJStewartTweet on February 15, 2012 1:57 AM writes...

How many safe drug candidate molecules (past Phase I) exist with CNS activity (penetration of the Blood Brain Barrier), but with no clear therapeutic efficacy for their original intended clinical use? Could such molecules be found to work for a different indication such as Alzheimer’s Disease? Would Pharma cos. consider making their failed assets available to the community to be freely used for study?

The answers to these questions are unknown! However, we (pharma, patients, doctors) need to find out the answers to such questions as soon as possible. If we are to reduce the economic burden (and suffering therein) of brain disease in a meaningful way within the next 10 years, we will need to make use of existing chemical assets in a very significant manner. Key societal changes need to occur very soon so that we may begin to repeatedly test compounds in small clinical trials designed to look for big and rapid effects, from existing failed Pharma assets.

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61. Chris Singleton on February 16, 2012 10:05 PM writes...

@42, this has been hapening for some time.

'The complete removal of R&D from big pharma. Jettison the trash. Let biotech do the R&D'

I used to work at Biogen, and the CEO made explicit statements that he wanted to pursue drugs that small biotechs had already developed, where Biogen would then buy the rights to the drug. One example:
tinyurl.com/7rxyp6q

Some of the most substantial costs are for development and clinical trials, with the regulatory and compliance costs. Phase 2 and 3 trials are incredibly expensive, and as another poster said, companies won't try to change this unless the FDA gets on board with it.


one thing to note, it appears that a lot of low-hanging fruit has already been harvested in terms of developed drugs. Seems like personalized medicine or medicine aimed at specific populations is where things are heading, and that the new drugs will take a lot more investment in research just to find druggable targets.

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62. DensityDuck on March 6, 2012 3:28 PM writes...

Asking as a layman who read Wikipedia: Would it work any better if certain therapies were reclassified as "devices" rather than "drugs"? The latter are subject to far greater scrutiny (and more stringent trial requirements) due to the still-unknown nature of how pharmaceuticals interact with the human body.

The example of regenerative medicine, for example; does it make sense to classify a plastic tissue-growth scaffold as a "drug" and test it like one?

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