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Developing new drugs is an expensive business. It now costs drug manufacturers such as Merck, Pfizer and Bayer over $900 million to put a new drug on the street, twice as much as it used to only 10 years ago. Investment in R&D has grown even faster: Drug companies now spend over $30 billion on research and development alone, more than 15 times what they spent 20 years ago. And with over 90,000 sales reps in the US alone, drug companies are descending on doctors daily in an effort to get them to prescribe their company's drugs. To recoup these huge investments the pharmaceutical industry relies almost solely on a "Blockbuster" strategy: developing drugs that generate over $1 billion in revenues or more.
The only problem is that the strategy doesn't work any more.
In 2001, the drug industry introduced 24 new drugs--half the number it did in 1996. Last year things got even worse: only 17 new drugs were introduced to the market--the lowest number of new drugs since 1983. One drug manufacturer, Bristol-Myers, spent over $17 billion in R&D since 1990, without introducing a single new drug of its own.
Part of the reason for the drug discovery slowdown has to do with the way new drugs are developed. Most drugs work by interacting with enzymes, chemicals that speed up various functions within our body. But enzyme research seems to have hit a wall, with Merck's deputy chief of research operations claiming that "there are a limited number of enzymes that you can target... and many of those targets have already been dealt with".
But the main reason the industry is stuck in a rut is its inability to change the way it discovers, develops and distributes drugs. Most drugs don't work for half of the patients they're prescribed to.
For about 2,000,000 each year, this results in the continuation of an ailment, or some discomfort. But for over 100,000 people a year (in the US alone) this spells death. Contrast that figure with the 5,000 or so people who die every year from illegal drugs and you understand that the drug industry has a lot of room for improvement.
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"The sad part is that though the technology to make drugs better is already here, the Pharmaceutical industry is behaving as if that's not such a good thing." |
One of the reasons many drugs don't work as well as they should has to do with genetic differences between people. Recent developments in the field of genetics now enable us to decode our genetic makeup and build an individual profile. Knowing how your genetic profile reacts to a certain drug could enable drug companies to develop "personalised" medicines that are much more effective at treating illnesses than what's available on the market today. In addition, drugs that originally were not approved due to the serious side effects they caused some people could be brought back to the market and prescribed only to people whose genetic profile fits well with the drug. Yet for all the promise held for personalised medicine (or pharmacogenics as it is called), drug companies aren't in a hurry to use it. In fact, they have a huge incentive not to use genetic testing (or let anyone else use it).
Why? It all comes back to their Blockbuster strategy.
Time for an example. Say GlaxoSmithKline, a huge pharmaceutical company, develops a new drug for treating Asthma. And say GSK generates millions of dollars by selling this drug to patients, many of which discover that the drug isn't all that effective in alleviating their symptoms. GSK could develop a genetic testing kit and prescribe the medicine only to those patients whose genetic makeup would benefit from the drug. But in doing so it would also decrease the market size for the drug, and the amount of revenue it could generate from selling it.
But surely a company committed to improving the quality of human life would jump on the opportunity to offer such a genetic test? Surely it would realise the opportunity to develop a wider range of treatments to a wider range of symptoms?
Think again.
GSK has, in fact, filed patents for genetic testing of the effectiveness of Flovent, its Asthma medicine. But GSK has no intentions of actually developing these tests, nor giving anyone else the permission to do so. "They can go screw with someone else's drugs," said Allen Roses, GSK's head of genetics, when asked about his views of a biotech firm trying to develop a battery of tests that would match between Asthma patients and the best drugs available to them on the market.
Not all drug firms have their heads in the sand. Roche, another large pharmaceutical, has just launched the first gene test that can predict how well a patient will react to a large variety of commonly prescribed drugs. But Roche, with sales of over $16 billion a year, estimates these tests will only generate about $100 million by 2008--hardly what you'd call a blockbuster.
The predicament the drug industry is in isn't unique. The music labels are probably the best current example of how an industry can bring itself to its knees from self-inflicted wounds. Similar to the pharmaceutical industry, the music industry was presented with a disruptive technology: Internet file-sharing. And just like the pharmaceutical industry, the music industry is choosing to fight the technology, instead of using it to develop and deliver better products and services to its customers.
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"The predicament the drug industry is in isn't unique. The music
labels
are probably the best current example of how an industry can bring
itself to
its knees from self-inflicted wounds." |
Changing the way you do business is painful. Sometimes it takes a life-threatening experience to convince your company it needs to change. But for companies willing to swallow the bitter pill, the future holds great opportunities. All it takes is the courage to set the agenda before someone else does it for you.
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