Is the Pharma Industry Turning a Corner?
The Pharmaceutical Industry is undergoing some of the most radical changes to its Research and Development efforts in the last 60 years. 1,2 From the years 2000 to 2010 declining output of new medicines 3 coupled with increased regulatory hurdles 4,5 and greater emphasis on improved clinical benefit to standard of care 6 have led to changes in the way drugs are discovered, developed and marketed. 7 Stagnant R&D budgets , continued staff reductions 8 increasing mergers and acquisitions 9 and the well publicized patent cliff have forever altered the R&D landscape.10 How did the industry get to this point and where is it headed?
A retrospective analysis of the decade of R&D performance reveals trends that may shed some light. Benchmark data collected by the Centers for Medicines Research International (CMR-a Thomson Reuters business) from over 40 large and mid size pharmaceutical companies presents a picture of an industry in transition. When indexed to 2000 (Figure 1) the next 10 years has seen a 75% percent increase in R&D spending (triangles) translate into a 25% increase in development time from Phase I to market (circles) and a 30-40% decrease in the number of NMEs produced (squares) across all therapeutic area. There were many reasons put forth for this decline in productivity. The “blockbuster only” mentality, 11 the failed promises of the “omics” era,12 siloed goal-setting encouraging “shots on goal” over quality, increased regulatory scrutiny, 4 the process of target selection itself, 13 and that the industry is going after harder to drug targets as the “low handing fruit” has already been found. 14,15 The prognosis for the industry was weak.
Then the picture started to change. In 2011 the number of NMEs increased to 30, the largest number of approvals in one year since 1999, a 43% increase from the previous year. The year 2012 was even better with 36 NME approvals. While NMEs alone are not a decisive indicator that the industry is rebounding additional insights from the financial sector increase the confidence of resurgence as investors returned anticipating growth driven by licensing, emerging markets, aging population. Company stock prices are increasing (Table 1), and a three year study conducted jointly by Thomson Reuters and Deloitte shows that while R&D ROI was improving in only 8% of major pharma companies from 2010 to 2011, a year later over 50% of companies were improving R&D ROI.
The reasons for this turnaround may lie in several changes that took place near the end of the last decade. The industry began to place a greater emphasis on biologics, and these proteins are experiencing a higher success rates to market compared to small molecules.16 More efficient R&D models emphasizing external innovation is another, where it has been shown that in licensed success rates are greater than programs run entirely in house.17 Greater cooperation between companies, where precompetitive initiatives such as Alzheimer’s Disease Neuroimaging Initiative (ADNI), the Pistoia Alliance and Transcelerate Biopharma are allowing the collectives minds of the industry to create the next breakthrough medicines to alleviate suffering. And finally, the contributions from translational medicine, which places a greater emphasis on early Proof of Concept in humans and greater reliance on biomarkers, have been cited for an increase in the success rates in clinical trials 18, and supporting the approval of drugs with co-developed diagnostics to personalized treatment to targeted patient populations
Other more subtle signs are beginning to emerge. A recent article 19 proposed that jobs are returning to big pharma. Thousands of new hires in the EU and the US are filling the ranks of Roche, Sanofi and Novartis. The job listings can be viewed as a barometer of enduring big pharma health, at least in the business areas still seen as pharma strengths, such as business development, project engineering, technical services, and quality control.
Where the industry is heading is a subject of great debate, but the need for quality medicines in aging populations and emerging markets is not abating. The data presented here shows an industry trying to correct the failures of the past with innovative and cost-effective strategies. Time will tell if these new approaches will be the medicine the pharmaceutical industry needs.
- Keighley, W. & Sewing, A. New working paradigms in research laboratories. Drug Discovery Today 14, 625-629, doi:10.1016/j.drudis.2009.05.004 (2009).
- Munos, B. Lessons from 60 years of pharmaceutical innovation. Nature Reviews Drug Discovery 8, 959-968, doi:10.1038/nrd2961 (2009).
- Kaitin, K. I. & DiMasi, J. A. Pharmaceutical Innovation in the 21st Century: New Drug Approvals in the First Decade, 2000-2009. Clinical Pharmacology & Therapeutics 89, 183-188 (2011).
- Milne, C. P. & Kaitin, K. I. Impact of the New US Health-Care-Reform Legislation on the Pharmaceutical Industry: Who Are the Real Winners? Clinical Pharmacology & Therapeutics 88, 589-592, doi:10.1038/clpt.2010.167 (2010).
- Honig, P. K. Comparative Effectiveness: The Fourth Hurdle in Drug Development and a Role for Clinical Pharmacology. Clinical Pharmacology & Therapeutics 89, 151-156, doi:10.1038/clpt.2010.302 (2011).
- Chalkidou, K. The (Possible) Impact of Comparative Effectiveness Research on Pharmaceutical Industry Decision Making. Clinical Pharmacology & Therapeutics 87, 264-266, doi:10.1038/clpt.2009.243 (2010).
- Munos, B. H. & Chin, W. W. How to Revive Breakthrough Innovation in the Pharmaceutical Industry. Science Translational Medicine 3, doi:89cm16 10.1126/scitranslmed.3002273 (2011).
- Cressey, D. Pfizer slashes R&D. Nature 470, 154-154, doi:10.1038/470154a (2011).
- Lamattina, J. L. The impact of mergers on pharmaceutical R&D. Nature reviews. Drug discovery 10, 559-560, doi:10.1038/nrd3514 (2011).
- Harrison, R. K., Poulsen, H., Remant, J. & Howard, M. Healthcare reform Is a Global Issue. PharmaTimes (2011).
- Bradfield, R. & El-Sayed, H. Four scenarios for the future of the pharmaceutical industry. Technology Analysis & Strategic Management 21, 195-212, doi:Pii 90773364410.1080/09537320802625280 (2009).
- Ridley, M. in The Wall Street Journal (New York, New York, October 9, 2010).
- Lomenick, B., Olsen, R. W. & Huang, J. Identification of Direct Protein Targets of Small Molecules. Acs Chemical Biology 6, 34-46, doi:10.1021/cb100294v (2011).
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- Segerstorm, P. Endogenous Growth Without Scale Effects. American Economics Review 88, 1290-1310 (1998).
- Philippidis, A. Studies Suggest that When It Comes to Drug Development Success, Size Matters. Genetic, Engineering and Biotechnology News April 9,2012 (2012).
- DiMasi, J. A., Feldman, L., Seckler, A. & Wilson, A. Trends in risks associated with new drug development: success rates for investigational drugs. Clin Pharmacol Ther 87, 272-277, doi:10.1038/clpt.2009.295 (2010).
- Parker, J. L. et al. Impact of biomarkers on clinical trial risk in breast cancer. Breast Cancer Res Treat 136, 179-185, doi:10.1007/s10549-012-2247-6 (2012).
- Gen. Top 10 Pharma Giants Now Hiring, 2013.