The Pharmaceutical Research and Manufacturers of America (PhRMA) announced this week that it is creating a new committee of its board of directors dedicated to small biopharmaceutical companies. The committee will be composed of full and research associate members. In a separate item, late last month, Roche confirmed that it was leaving PhRMA to join the Biotechnology Industry Organization (BIO), the US-based trade group representing the biotechnology industry, in the wake of Roche’s recent acquisition of Genentech. Taken on one level, these moves simply reflect an organizational change by a well-established association to better serve and broaden its membership and the strategic shift of one member company. On another level, however, these moves reveal broader dynamics shaping the focus of the pharmaceutical industry.

PhRMA represents innovator-drug companies and its core membership, although not restricted to, primarily consists of the large pharmaceutical companies. PhRMa says it it is forming the committee to address the particular issues facing smaller companies, including the impact public policy may have on this sector. David Holveck, CEO of Endo Pharmaceuticals, will chair the committee. Additional committee members have yet to be selected.

“Specialty pharmaceutical companies, are in many ways, impacted very differently be federal legislative and regulatory proposals than large PhRMA member companies,” said Holveck in a PhRMA press release. “Now more than ever, we need to be proactive as the industry continues to transform. This new committee will focus on developing solutions to policy issues that are most important to smaller companies.”

PhRMA’s decision to form a committee to provide a voice for small companies is a good one as it shows an understanding of the important role that these companies play in drug development for the industry as a whole and as partners for their Big Pharma brethen. Big Pharma, no doubt, will continue to be the dominant financial force in the industry. The top 15 pharmaceutical companies accounted for 65% of the sales of the US prescription drug market in 2008 and more than 50% of the global market, according to IMS data. But the future of the pharmaceutical industry is increasingly being shaped by dynamics in which smaller companies play a significant role. The erosion of the blockbuster model and the ensuing focus on developing specialized drugs or more targeted therapeutic agents for niche patient populations is a paradigm that fits smaller companies, many of which carve out their spot in the marketplace using a specialized-drug approach. IMS projects that approximately 50–60 new chemical or biologic products are expected to be launched during the next two years, and about two thirds of these products will be specialist-driven. Sales of specialist-driven drugs are projected to increase 8–9% in 2009 and contribute 67% of total pharmaceutical industry growth, according to IMS. At the same time, external collaborations, whether among Big Pharma and biopharmaceutical companies or among biotechnology companies, is significant. Financing in the US biotechnology sector through partnerships and external collaborations was $20 billion in 2008, only slightly down from $22.4 billion in 2007, according to a recent analysis by Burrill and Company.

Roche’s defection from PhRMA to BIO is emblematic of the larger trend toward broadening drug development from small molecules to biologics. Roche’s strategic focus on biologics was punctuated by its $47-billion acquisition of Genentech this year, and this emphasis on biologics is also reflected in other large-scale acquisitions. Some notable recent deals with a biologic component include Pfizer–Wyeth ($68-billion, pending acquisition), Merck-Schering Plough ($41 billion, pending), AstraZeneca-MedImmune ($15.6 billion, 2007), Novartis-Chiron ($5.4 billion, 2006), and Merck-GlycoFi ($400 million, 2006). Growth in biologic-based drugs are projected at 11-12% in 2009, far outpacing the projected growth of 2.5–3.5% (on a constant dollar basis) in the global pharmaceutical market as a whole, according to IMS.

The ability of the pharmaceutical industry to adapt to these changes both as individual companies and aggregately as an industry in policy formation and implementation is critical. Let us hope that it is up to the challenge.