More on drug innovation
A Business Week online (1/5/2004) interview with Kenneth Kaitin and colleagues from the Tufts Center for the Study of Drug Development reinforces what we have previously written about innovation in the pharmaceutical industry. The Tufts group, as the article notes, is "famous, or perhaps infamous, for coming up with the figure of $802 million as the average cost- direct and indirect" of bringing a new drug to market.
All agree that productivity is the key problem. The colleagues address a number of reasons for the shortfall in innovation in the industry: including a theory of cycles in development, assimilation of new technologies, and the unfair burden places on the US for supporting R&D with its higher revenue stream for drug companies.
The interviewer asks, "Have mergers, and thus larger-size companies, hurt productivity?" Here's the answer from one of the Tufts experts, Christopher-Paul Milne:
The current thought is size has an inverse relationship with creativity. Larger companies are trying to emulate the kind of creativity you get out of biotech companies. There's a feeling that loss of creativity has been one of disadvantages of M&A. Smaller, smarter, more science-driven pharma companies are the wave of the future.
Kaitin follows up:
We have had firms of all different sizes trying to do R&D the same way -- pursuing drugs in a lot of different therapeutic areas, keeping a diverse portfolio. What we're seeing now is that few companies can continue that approach. Pfizer, with a $7.5 billion research budget, can still do this. But all of the medium-size large pharma firms are talking about new strategies and the end of the blockbuster era. Aventis, Abbott, Schering AG, are talking about it, realizing they have to have a strategy that uses their strengths. All of this is leading to a restructuring of the market.
In the end sees the solution as strategic outsourcing and joint ventures with smaller biotech and drug development companies.
As Milne puts it, "It's part of the evolution of the R&D paradigm. It's being forced by necessity but will make it more productive. The goal is to spread the risk and resource cost."
