Big Pharma (2 of…)

Geez, I’m kind of overwhelmed by all the data for The Report. The life science sector is so big and complex. There’s no end to the information. I’ve had to say, “Enough!” to myself just to get started. Also the importance of the market-driven sector in cancer management keeps growing in my mind. I think this is key to anyone interested in the conquest of cancer.

First topic: Big Pharma…

Defining “Life Sciences”
One of the challenges of talking about companies and organizations involved in biomedical R&D today is to define the many labels put on them. The “life sciences”—the broadest term I use to put all these enterprises under—is growing and changing all the time. I’d like to catalog some of the components of the life sciences industry that are familiar and others that are newly emerging.

“Big Pharma”
Public familiarity with companies that produce medicinal compounds and drugs goes back at least to the early part of the 20th century when aspirin was first produced by Bayer, a German company. Pharmaceutical companies that have built large scale success with medical chemistry are often classed under the rubric “Big Pharma.” Currently about 14 to 19 companies receive this appellation. Some pharmaceutical companies retain the names by which they have been known for decades, e.g., Bayer, Johnson & Johnson and others. Increasingly, however, pharmaceutical companies bear compound names that that identify their lineage in which once independent entities have become one by way of mergers and acquisitions, e.g., GlaxoSmithKline or Bristol-Meyers Squibb.

This is a clue to the “big” in Big Pharma. They have become big in total capitalization and products because they have had some singularly successful drugs that generated big revenue, or, increasingly they have become big by merging with their competitors for strategic purposes. The reshuffling of companies is an indication of the uncertainty of the industry and the rapidity of change. This process of organic joining in the life sciences field continues and will probably accelerate in the future for reasons I’ll mention later.

How big is “big”? Pfizer, often acknowledged as the largest of the Big Pharmas, had an R&D budget in 2003 of $7.1 billion. It claims to have 12,000 scientists on payroll. According to PhRMA, pharmaceutical trade organization, pharmaceutical companies invested $33 billion in product R&D in 2002. The industry also claims that the rate of growth of investment in pharmaceutical research and development is greater than the rate of increase in the National Institutes of Health (NIH) budget. If investment growth continues at this rate it will reach $57 billion worldwide in 2006. That’s big!

“Big” also tends to fit with the business model that built the assets of the pharmaceutical firms. Given the high cost of any form of drug development, success has come during the past couple of decades when a drug was found that was fairly effective for a high incidence of disease. A single drug—a “blockbuster”— that survives the gauntlet of development and regulatory approval that can be sold to treat a broad category of disease—breast cancer, for instance—can eventually bring a very large return on investment.
Targeting markets for diseases with large incidence rates is a boost to cancer R&D since common cancers fit that criterion well. According to PhRMA 395 new medicines were in development for cancer in 2003, i.e., in clinical trials or under review by the Food and Drug Administration (FDA). Drugs in development by site are:

· 70 for lung cancer
· 49 for breast cancer
· 48 for colon cancer
· 44 for prostate cancer

This is the famous drug “pipeline” of development and approval as it applies to cancer.

This sounds very encouraging, but it may not be quite as significant as it first appears. Only a minority of those drugs are likely truly new approaches or advances in cancer treatment. A significant number are “me too” drugs—relatively minor modifications of existing drugs or different applications of already existing compounds. Indeed, the pharmaceutical industry has been heavily criticized by investment analysts and other critics for failing to make real breakthroughs in cancer and other diseases for all the money spent on R&D. The most recent blast came in the March Fortune Magazine article, “Why We’re Losing the War on Cancer.”

In another article, “The Failure of Industrialized Research,” Barry Sherman and Philip Ross (Acumen Journal of Life Sciences, vol. 1, no. 1) said:

In 2001, the 14 major pharmaceutical companies were responsible for discovering merely 26% of the 32 biologics and new molecular entities (NMES, defined by the Food and Drug Administration as active therapeutic ingredients that have never been marketed in the United States), while being responsible for 65% of global R&D spending. Biotech and academic labs produced the remainder.2 Furthermore, the productivity of pharmaceutical companies is decreasing: the number of medicines in the early stages of development (preclinical and clinical Phase I and II) dropped by more than 20% from 1999 to 2001.

Furthermore, changes in science and technology are challenging the one-drug-fits-all premise of the blockbuster model. Some industry observers predict that the “blockbuster” model on which Big Pharma is based is coming to an end and that they’ll have to come up with a different way of doing business. However, there’s little doubt that blockbuster drugs remain the Holy Grail of the pharmaceutical industry.

Next: Biotechnology