Pharmaceutical Development Slows Down In Search of New Products

Over the last month or so, there has been a series of reports and articles discussing the difficulty pharmaceutical companies are having with their drug pipelines—or so they say. 

For example, AstraZeneca Chairman Leif Johansson recently said that the company is planning “to replenish its pipeline of new drugs through external collaborations and by buying drugs in late stages of development from other drugmakers.”  In April, AZ paid $1.26 billion for Ardea BioSciences and more recently, agreed to spend $3.4 billion toward the purchase of Amylin Pharmaceuticals by Bristol-Myers Squibb. In doing so, AstraZeneca expanded its partnerships with Bristol-Myers to develop diabetes medications.  Recently AZ announced they were discontinuing their stock buyback program until further notice.  This move is perfectly in line with the need to conserve cash to buy new compounds and biologic products. 

Other companies have been following these steps over the past few months, including Pfizer and Novartis.  Additionally, French drug company Sanofi recently announced a new research collaboration with Brigham and Women’s Hospital, a teaching and research affiliate of Harvard Medical School.  The collaboration is focused on the immunology of type 1 diabetes. 

Under the terms of the agreement, researchers from both organizations will undertake studies for a novel approach to treat type 1 diabetes. Sanofi has an option to exclusively license intellectual property emerging from this collaboration.  

Johansson also noted the number of drugs going off patent, which the company needs to replace.  For example, AZ’s Seroquel antipsychotic lost patent protection this year, while the Nexium heartburn pill Nexium and Crestor cholesterol pill lose US patent protection in 2014 and 2016, respectively.  Nevertheless, he noted opportunities, such as the possibility of buying late-stage drugs, emerging markets and advances in science, including genome technology, which he touted as a way to learn how the human body works and possibly help find new drugs. 

His comments came shortly after AZ hired Pascal Soriot away from Roche as its new chief executive.  The move comes nearly three months after David Brennan abruptly retired from AZ.  His position will take effect October 1 of this year.  “No one is blind to the challenges that confront the pharmaceutical sector and this company, but the underlying strengths of AstraZeneca in delivering on its strategy are clear.  AstraZeneca will continue to make a positive difference to patients over the longer term and I’m looking forward to playing my part in shaping that future,” Soriot, 53, says in a statement.   

It is because of innovations that pharmaceutical companies are making, that “The life expectancy of people diagnosed with type 1 diabetes dramatically increased during the course of a 30-year, long-term prospective study, according to researchers at the University of Pittsburgh whose findings currently appear online in the journal Diabetes.  The life expectancy for participants diagnosed with type 1 diabetes between 1965 and 1980 was 68.8 years – a 15-year improvement, compared to those diagnosed between 1950 and 1964, according to the study.

Additionally, it is because of the drugs companies develop that people living with HIV in the U.S. may be doing better at getting treatment and controlling their virus.  The long-running North American AIDS Cohort Collaboration on Research and Design has seen significant increases in the proportion of patients who were on highly active antiretroviral therapy (HAART), according to Keri Althoff, PhD, of Johns Hopkins Bloomberg School of Public Health, and colleagues.  And there have also been increases in the proportion with a suppressed viral load from 2000 to 2008, Althoff and colleagues reported in the Sept. 4 issue of Annals of Internal Medicine. 

What is Causing Slow Drug Development? 

While companies maintain that regulatory burdens and other challenges affect their ability to produce new drugs, a recent study published in the British Medical Journal maintained that lagging drug development is occurring because drug companies are not really innovating.  The study, authored by Donald W. Light, PhD, of the University of Medicine and Dentistry of New Jersey in Cherry Hill, N.J., and Joel R. Lexchin, MD, of York University in Toronto, asserted that, “pharmaceutical research and development turns out mostly minor variations on existing drugs, and most new drugs are not superior on clinical measures.” 

The article disputed estimates from companies that it costs roughly $1.3 billion to develop a new chemical entity (NCE).  Instead, the authors said that of the purported $1.3 billion average, “half… comes from estimating how much profit would have been made if the money had been invested in an index fund of pharmaceutical companies that increased in value 11% a year, compounded over 15 years,” citing the research center at Tufts University in Boston that produced the estimate.  And, these estimates were based on the most expensive 20% of new drugs, they pointed out.  When the calculation was done on all NCEs, the average actual expenditure came down to $90 million. 

They also disputed the rate of approval of NCE’s.  They noted that recent annual rates of 15 to 25 NCE approvals are consistent with averages from 1955 into the early 1990s, Light and Lexchin indicated.  Nor has the percentage of approvals involving genuine medical advances — as opposed to “me-too” products — declined much.  They cited a 1991 analysis that found only 34% of drugs approved from 1974 to 1989 represented “important therapeutic gains.”  Meanwhile, between 2000 and 2001, new oncology drug approvals in the US outpaced European approvals by 33 percent, ccording to a new report from the Tufts Center for the Study of Drug Development. 

The authors also argued that while research and development costs have risen significantly for drug companies (by an estimated $34.2 billion between 1995 and 2010), revenues have risen faster (by $200.4 billion within that same time period).  “Companies exaggerate costs of development by focusing on their self reported increase in costs and by not mentioning this extraordinary revenue return,” write Light and Lexchin. “Net profits after taxes consistently remain substantially higher than profits for all other Fortune 500 companies.”

The real enemy of innovation, they suggested, is the industry’s devotion to marketing and defense of existing blockbuster products, they claimed.  According to a published estimate by Lexchin and a different co-author, pharmaceutical companies spend only 1.3% of revenues on discovering NCEs versus 25% on promotion (PLoS Med 2008; 5:e1).  “This hidden business model for pharmaceutical research, sales, and profits has long depended less on the breakthrough research that executives emphasize than on rational actors exploiting ever broader and longer patents and other government protections against normal free market competition,” Light and Lexchin wrote in BMJ.

They argued that regulatory agencies should dramatically stiffen requirement for new drug approvals. 

“The low bars of being better than placebo, using surrogate endpoints instead of hard clinical outcomes, or being non-inferior to a comparator, allow approval of medicines that may even be less effective or less safe than existing ones,” they wrote.

More provocatively, they recommended that companies no longer be rewarded for innovation by being allowed to charge high prices for new products. 

Instead, Light and Lexchin backed a proposal by Sen. Bernard Sanders (I-Vt.) to give large taxpayer-funded cash prizes to companies that deliver real improvements in healthcare, but allowing generic competition to begin immediately in order to keep costs to patients and payers relatively low.  Under such a system, they argued, “innovators are rewarded quickly to innovate again,” while countries pay billions less in healthcare costs and patients’ health and quality of life improve.   The problem with “Prizes” for improvement is, prizes are arranged to “please” the master state, not a workable model. Prizes are a Soviet and North Korean style of doing business and in the end no one can sustain a business based on prizes as seen first hand the successes of the Soviet Union.  In an investor note published by Pharmalot, Sanford Bernstein analyst Tim Anderson writes that data from KMR Group, reveals what he calls “several potentially disturbing” trends.  “Pipeline success rates across all phases of development have been slowly worsening or at best staying flat, depending on the phase.”  For instance, success rates for Phase III drugs went from 70 percent to 67 percent to 65 percent from 2003 through 2007; from 2005 through 2009, and from 2007 through 2011, respectively. 

For Phase II drugs, success rates fell from 34 percent to 25 percent to 22 percent during the same periods.  The number of preclinical drugs needed to yield one approved drug also rose. From 2003-2007, 12 preclinical drugs were required to yield one marketed drug, but then jumped to 24 from 2005 through 2009, and 30 between from 2007 through 2011.  

When you measure the time needed to go from preclinical to development to regulatory approval, so-called ‘cycle times’ have also risen.  From 1999 through 2001, it was 11.4 years and rose to 13.7 years between 2009 and 2011.  Between 2008 and 2010, cycle times increased to 13.6 years, Anderson notes.  However, the discovery segment remained fairly constant at an average of about 4.5 years, he adds, while the development portion rose from 7.1 years a decade ago to 9 years. 

Growth in Developing Markets 

To address investors concerns about blockbusters going off patent, companies have been pointing to growth in developing markets, like China and India as ways to replace lost revenue.  However, as reported by the Wall Street Journal, companies are not seeing such a fast response.  “Slowing economic growth, intense local competition and governments’ efforts to control health-care costs and bolster homegrown firms have damped the prospects for the top drug makers in so-called emerging markets.  And that threatens the lofty sales goals baked into many pharmaceutical stocks,” Jonathan Rockoff wrote.   

According to the article, “Drug sales in emerging markets will grow by $157 billion over the next five years, reaching at least $345 billion or about a third of the global drug spending, IMS Health predicts.  By contrast, the U.S. and European shares of world-wide drug spending are expected to fall as a result of patent expirations, cost cutting and anemic growth.”