The confetti from the New Year’s celebrations has settled, and drugmakers are busy planning their activities for 2011. Some people make New Year’s resolutions in hopes of bettering themselves or adopting good habits. After its recent disappointments, the pharmaceutical industry likely will resolve to improve its research and development (R&D) efforts.
According to preliminary figures, the US Food and Drug Administration approved 21 new drugs in 2010. This number is not much better than the industry’s recent low of 18 new drugs in 2007. Several high-profile drugs failed to get approval during 2010, causing embarrassment for Big Pharma. FDA asked AstraZeneca for more information about its blood thinner Brilinta, and the delay in approval hurt the company’s share price. FDA also rejected a long-acting version of Byetta, a diabetes drug manufactured by Eli Lilly and Amylin Pharmaceuticals, saying that more clinical data were necessary.
Competition from generic drugs will only heighten the importance of successful R&D efforts for innovators, and we can be sure that companies will try various strategies to boost the return on their research investments. We could see a continued increase in outsourcing in 2011, which would help drugmakers share the risk of developing new drugs with service providers. Outsourcing also might help companies lower the costs of drug development and improve the management of their resources, which now seem more precious to many companies. It’s also possible that manufacturers will dedicate more effort to developing monoclonal antibodies, which are potentially quite profitable and increasingly in demand.
Changes are already underway at Merck & Co. New CEO Kenneth Frazier told investors that the company would make “tough” R&D spending decisions and stop the development of less-promising drugs more quickly. To prevent drugs with weak commercial prospects from entering expensive late- stage development, the company has tied researchers’ compensation to the three-year return on invested capital. Time will tell whether this market-based approach will improve the notoriously idiosyncratic R&D process.
I give Frazier credit for recognizing the importance of innovation to Merck’s prospects. Other companies are already coming up with their own approaches to discovering more approvable drugs. For the health of the industry, and of patients worldwide, let’s wish them luck.