Saving the pharmaceutical industry

Sometimes I feel sorry for the big pharmaceutical companies. In popular culture they’re part of an axis of evil that includes other satan-worshipers like oil companies and banks. Have you seen The Constant Gardener? Not a particularly sympathetic portrayal of the industry.

Things have not been looking good for the pharmaceutical industry lately. The health of each company depends on how many drugs they have under patent, and the size of the market for each of those drugs. In 2005, the 9 largest pharma companies had 9 new molecular entities (drugs, vaccines, etc) approved by the FDA. In 2010, they had 2. Many of them face expiring patents with little to fill the gap. Lipitor, Pfizer’s blockbuster cholesterol-lowering drug, lost its patent protection at the end of November. This drug alone accounts for 1/6 of Pfizer’s income, and they are in a battle to hold market share against their new generic competitors. While consumers, the NHS, and other health insurers around the world are ecstatic, we should be cautious about the graves we dance on. Pharmaceutical companies have discovered and developed drugs to treat a myriad of human diseases. Sales fund research. After years of increases, R&D spending fell by almost 3% last year. In 2011 both Novartis and Pfizer closed their major UK R&D sites. Big pharma isn’t finding new treatments and time is running short.

What’s going wrong? Drug discovery is a long and expensive process (see my human genome post). It takes an average of 13 years for a drug to reach the clinic and can cost upwards of $1bn to develop. A much bigger problem is the attrition from drug target identification to FDA approval. After preclinical development, a drug goes through clinical trials (phase I, II and III), gets registered with the FDA and finally becomes an approved drug. For every approved drug there are 24 drugs in preclinical development. Drugs fail at every stage of development, but the biggest drop is after phase II clinical trials. Phase I clinical trials aim to find the best dose, phase II trials examine the efficacy of the drug, and phase III trials compare the new drug with existing treatment regimens. Approximately half of the phase II trial failures are because the drug doesn’t work.

Pharmaceutical companies have responded by making significant strategic and structural changes. Many of them have cut early-stage in-house research in favour of mining biotechs and academia for drugs and drug targets. Many have fostered increased cooperation between industry and academia. These changes are probably a good thing both for pharma and for drug development in general. Pharma companies get to outsource the risky early stages of drug development, and budding biotechs have someone to sell their product to. Academics can publish their results in interesting journals even if they don’t have obvious and immediate therapeutic value. Increased competition amongst the biotechs should foster creativity.

There is, of course, a caveat to all of this. Industry experts have always known that results are not always reproducible from one lab to another. It’s generally thought that about half of drug targets don't validate. It turns out that this is may be a dramatic underestimation of the problem. In fact Bayer scientists could only validate about a quarter of drug targets found in the academic literature. According to Reuters, drugs that originate in-house are 20% more likely to make it to the market. What R&D budgets have saved on in-house programs they'll have to spend on target validation and intellectual property acquisition.

This strategic change may be good for a different reason. While half of phase II trials fail due to inefficacy of the drug, 29% failed for "strategic reasons" (one common translation: Pharma B has a better drug that Pharma A's drug can't compete with). Stage II trials are time-consuming and costly, and overlap is not particularly constructive. Decreased reliance on in-house programs should make the early stages of drug development more open. Small biotech companies with good products will peddle their wares to multiple different pharmas, so even if Pharma A doesn't buy a given drug they still know that the drug exists and is being developed by Pharma B.

GlaxoSmithKline had a different approach. Three years ago they separated their R&D into Discovery Performance Units, each of which should each perform as an independent biotech. Drugs coming out of these units should be as reliable as previous in-house drugs. GSK will be at a distinct advantage: they will have reliable drugs and access to information from biotechs, but won’t have to share information on their own drug development program. Not necessarily good for the industry, but good for GSK.

Strategic changes can help the industry, but they cannot save it. Over half of phase II trials still fail because the drug doesn’t work. They need to find a way to choose better targets. A recent Nature Chemical Biology paper by Mark Bunnage, a Pfizer medicinal chemist, outlined a number of ways in which target selection can be improved. He encourages target selection based on a number of hallmarks of target quality, including human genetic data and the existence of robust endpoints.

In my mind, the purpose of the pharmaceutical industry is to find new cures to diseases. In reality, big pharmas spend twice as much on marketing as they do on R&D. Biotech companies spend about 70% of their revenues on R&D, pharmas spend about 13%. Different companies, different priorities. And different outputs. I’m not saying the pharmaceutical industry is full of saints, but the research that has happened on their dime has improved the lives of millions. I hope they find a way to continue finding drugs to sell.