It takes more than money; external and self-inflicted factors limit the productivity of science-based drug companies

According to a recent survey based on US FDA and Pharmaceutical Research and Manufacturers of America (PhRMA) data [1], research and development (R&D) expenditures of the pharmaceutical industry in the USA are now exceeding US$40 billion. Between 1993 and 2004, R&D expenses have increased by 147% (inflatation adjusted to 2004 dollars).

In other words, the combined R&D budgets of the American pharmaceutical companies exceed the gross domestic profits (GDPs) of many smaller countries (e.g. Columbia, Bolivia, Paraguay and Ecuador).

What makes the increase of R&D expenses so remarkable, however, is not so much its rate or the sheer numbers of R&D dollars spent annually, but the fact that the productivity of the pharmaceutical industry has not even remotely kept pace with the dollars spent for R&D. The total number of new drug application (NDA) submissions increased only by 38% during this time period. More seriously, the number of NDAs for new molecular entities (NMEs) grew by only 7% over the 12-year time period and has been falling steadily between 1995, when sponsors submitted 50 NDAs, and 2004, when only 30 applications were submitted. It is, of course, the latter category that includes most of the relevant innovations. FDA approvals for NMEs were lower in 2002 and 2005 than in all other years between 1993 and 2005. The number of innovative drugs launched today is approximately at the level of the early 90s.

Any direct comparison of R&D expenses with industrial output is, of course, skewed since the drugs financed today will all be launched in the future, while today’s drug launches must be related to expenditures made in the past. However, even with this reservation in mind, one should expect the output to follow expenses with a time delay of a few years. After all, two-thirds or more of the R&D budgets are spent on products in clinical development that are only a few years away from launch. Expenses for discovery research have grown much more slowly. Relative to development costs, they even declined.

In view of these facts, it is difficult to avoid the impression that the industry spends more than twice as much today than in the early 90s, but is turning out fewer medicines that really matter.

In spite of a number of analyses published in the mid-90s [2,3], in which the growing innovation deficit within the industry was analyzed and quantitatively predicted for the years 1998–2002, the extent, as well as the duration, of this deficit is surprising, mainly for two reasons:

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First, in the mid-90s, many scientific and industry experts expected the new biology to gradually mitigate the existing deficit after the year 2000;

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Second, the extensive consolidation that has occurred in the pharmaceutical industry since 1990 (more than 20 major mergers and acquisitions and numerous smaller ones) should have resulted in synergies in the overall R&D process and, therefore, in an increase in industrial output. Perhaps the reasons for the apparent lack of R&D productivity can be traced back to errors or inadequacies in the utilization of these two opportunities.

Let us, therefore, take a look at the impact of molecular biology (including genomics and molecular immunology) on drug discovery and development. In 2004, 75 recombinant proteins had been marketed and 180 were still in various stages of development. Approximately 30 new approvals of recombinant proteins were expected by 2010. At that time, sales for this class of medicines would reach US$55 billion. In addition, 21 monoclonal antibodies had already been introduced and almost 400 were in development, 130 of those in various clinical stages. A number of recombinant proteins had already attained blockbuster status; some monoclonals, such as Herceptin, Rituxan or Avastin, had shown considerable value in the treatment of various types of cancer. In addition, the understanding of proteins has turned out to be vital for the design of small molecules, since the chemical space defined by the human proteome directs and limits the choices of the medicinal chemist. If one looks at the available data (successful protein drugs on the market, the number of proteins or peptides in clinical development and the impact of molecular biology on drug research), one could conclude that the progress allowed by molecular biology has perhaps been slower in coming than expected. However, there does not seem to be a single reason arguing against the eventual effectiveness of the new biology on drug R&D.

Nevertheless, a few notes of caution with respect to the coming years are in order. The first one relates to the experience that the elucidation of a biological mechanism or the structure of a target does not always offer an obvious and easy way to find a drug. Often, the complexity of human diseases may require a broader approach than the exploitation of a single mechanism or target. In this context, the term ‘translational medicine’ has been introduced to describe the scientific efforts necessary to bridge the gap between reductionist science and the system-oriented approach of medicine. Physician scientists, individuals who are trained in biology and medicine, are obviously best prepared to build such bridges. Unfortunately, a recent study has shown that the relative number of physician scientists working in drug research has declined by 22% between 1983 and 1998 [4].

One additional factor deserves mentioning. The advent of genomics seemed to hold the promise that several thousand drug targets would be discovered in rapid sequence providing a powerful impulse for the discovery of new drugs. During the last 10 years, several studies have suggested that the ‘druggable’ part of the genome (or proteome) may indeed be much smaller than expected and be measured by the hundreds rather than thousands of proteins [5–8]. It would then follow that the ‘one drug–one target’ hypothesis would have to be modified, since the medically required variety of drug effects could only be achieved by modifying several targets at the same time. In other words, if the number of targets is relatively small, the desired multiplicity of effects can only be achieved if each drug interacts with a unique combination of targets [9,10].

It is true that mergers and acquisitions can lead to an increase in productivity. One notable example is represented by the Roche–Genentech interaction. The explicit purpose of this acquisition, however, was to secure the benefits of a new technology and of first-rate science as applied to drug R&D in the long term. It worked because the identity of Genentech’s scientific culture was left intact. However, what happens in most other mergers or acquisitions? In the first place, they are undertaken in order to enlarge sales and profits, to build a stronger pipeline and to give the most profitable drugs from either side a more effective reach into markets not yet sufficiently exploited. Cost cutting is the second most dominating objective. The simple rationale was and will be: put together the best pieces of two companies into one entity and you will end up with a somewhat bigger and quantitatively much stronger company. While true in principle, this tenet usually does not work for R&D. There are many reasons for this, one being that the most fundamental motivations of scientists, such as attachment to a particular idea, project or field of research or to colleagues and parts of the scientific community at large, are often violated in the process. Cost cutting under time pressure does not take these factors into account. Second, the evaluation of projects, preclinical and clinical, is difficult. Performing this complex task under time pressure and with a political or commercial bias is tantamount to failure. By and large, the R&D organizations resulting from mergers or acquisitions are not better than any of the two organizations from which they originated. To expect more productivity from a group that is the result of downsizing in the first instance and of questionable compatibility in the second instance amounts to a denial of reality.

Of course, one can combine two R&D organizations into a more productive entity. That, however, takes very good judgment, time, care and good strategic reasoning. In particular, it requires acceptance of the fact that only a more productive R&D organization will be able to provide the stream of new compounds necessary to feed the pipeline of the new bigger entity. The future of a consolidated company can be secured by a better, not necessarily a smaller, R&D organization.

There are, of course, additional factors that can interfere with the productivity of drug companies. Some have to do with the economical and political conditions under which a company operates. A second group of factors relates to the choices that drug companies make in response to financial or political environments, or as a matter of their own culture.

A very serious factor that drug companies, large and small, are facing today is the expense of clinical trials. Approximately 10 or 15 years ago, most hospitals were capable and willing to absorb some of the more basic costs of clinical trials. Today, the sponsor of clinical trials not only pays for the experimental and standard drugs that are being tested, all diagnostic tests and the time of physicians and nurses, but also for the basic care that a patient in a drug trial receives. Patient-related costs per study have sometimes reached the US$25,000 mark per patient and trial. Attempts to use foreign hospitals for clinical trials have been a way out. Countries like Poland, the Czech Republic, the Baltic States or Hungary have a good medical infrastructure. Unfortunately, they are rapidly adjusting their cost levels for clinical work to the standards customary in the European Union to which these countries now belong or aspire. Especially in oncology, the request for trial patients is often greater than the number of patients that carry a particular disease and are willing to participate in a clinical trial.

Among the factors that may well inhibit the creative output of drug companies is the growing influence of marketing expectations on research and development choices. Drugs that do not promise sales of at least US$200–500 million annually according to marketing forecasts will not be developed, independent of their novelty, their impact on urgent medical needs and their scientific promise of being applicable in fields other than the primary indication. This kind of thinking, if applied rigidly, would have prevented quite a few valuable innovations, some of which eventually obtained blockbuster status: cyclosporine A comes to mind and, more recently, drugs such as Gleevec or Enfuvirtide. Even more detrimental to the output of an R&D organization is the belief that blockbuster drugs can be planned and that, consequently, scientists have to ‘look’ for them. The idea is based on the erroneous concept that scientific endeavors can be defined by the desired results. In reality it works the other way around: the deductive scientific process leads to several results (choices), of which a physician scientist must select those for further study that withstand all attempts of falsification and, therefore, appear most promising.

In summary, many of the impediments of industrial productivity are self-inflicted. Therefore, they should be correctible by companies, in particular, the industry as a whole, and by the societies that support the pharmaceutical industry by using their products.

The drastic increases in drug development costs would cause less concern if the output of novel drugs addressing unmet medical needs would be commensurate with the increase in spending or even surpass it.