A sizeable chunk of Big Pharma’s sales will fall off the dreaded patent cliff before the year is out. Patent expirations will allow competitors to market, and patients to buy, generic versions of branded drugs. A renewed focus on discovering and developing new therapies would seem to be the obvious solution for Big Pharma. Yet at least one observer predicts cuts in research and development (R&D) spending throughout the industry.
Pfizer’s decision to close its R&D unit in the United Kingdom is a harbinger of things to come, to hear Shire’s Chief Executive Angus Russell tell it. Major pharmaceutical companies won’t be able to sustain their traditional levels of R&D expenditure because “there just hasn’t been the productivity in research and development that there was 10 years ago,” he told the UK’s Sunday Telegraph.
Russell’s prescription? Imitate Shire, which actively buys promising treatments in Phase II and III clinical trials, rather than funding a large R&D operation. The strategy seems to have paid off. Since 1999, the company’s staff has grown from 400 to 4100 employees. And Shire’s revenues have increased by a compound annual growth rate of 16% since 2003.
R&D will remain important to the industry, but it may have to become more efficient. Fortunately, government officials and academics already are trying to boost the productivity of this traditionally idiosyncratic process. The National Center for Advancing Translational Sciences (NCATS), soon to be established by the National Institutes of Health, will consolidate various research efforts and use robotic screeners to identify promising chemicals. And the Massachusetts Institute of Technology (MIT) has developed ranking algorithms that predict drug candidates’ success or failure more consistently than traditional algorithms.
A year ago, I would have doubted the viability of Russell’s strategy of cherry-picking other companies’ research. But the founding of NCATS and the development at MIT are beginning to persuade me that R&D can be improved, and that drug companies conceivably could choose to focus on manufacturing. Here’s hoping that smarter R&D is possible, and that it will yield new products that can improve the health of patients and the industry alike.