Prognosis for Pharma: Beatings to Continue Until Morale Improves?

For the last decade, as the biopharmaceutical industry has struggled — largely unsuccessfully — to live up to its anticipated potential, a litany of experts, analysts, participants, and commentators have offered up their diagnosis and treatment for pharma’s productivity problem.

The basic question they’re all trying to solve: how can it be that despite profound improvements in many aspects of drug discovery, actual productivity – measured by cost per new NME – seems to be declining?

That’s the problem that Jack Scannell (an industry analyst at Bernstein & Co.) and colleagues tackle in the latest issue of NRDD (here – abstract only), expanding upon a nice piece of work they did on this subject last year to now offer an even more comprehensive and thoughtful review of this important subject.  While painfully depressing, the article is worth reading, as it cogently summarizes many years worth of hand-wringing and angst.

Having spent much of the last decade wrestling with many of the same issues (his topics will be familiar to regular readers of this column), I was perhaps most struck by the rather dismal take-away: there isn’t a clear unifying explanation for the R&D productivity problem; perhaps if each company examined its internal failures rigorously, new insight might emerge, but meanwhile, essentially, beatings will continue until morale improves. 

More specifically: the payor environment is likely to make reimbursement increasingly difficult; regulators will always have an easier time tightening screws than loosening them; each success raises the bar higher; and the only immediate solution is likely to be continued R&D cuts. 

I am reminded of the Woody Allen’s famous exit line: “I wish I had some kind of affirmative message to leave you with; I don’t.  Will you take two negative messages?” 

If only there were just two; highlights of the Scannell piece include:

  • Analogy to futile coal mining: Scannell observes that if the cost of extracting coal had increased by 80x over the last 60 years despite improved technology, and if the only deposits left were difficult to access, then “continued investment would be justified by the realistic prospect of either massive improvements in mining technology or large rises in fuel prices. If neither was likely, it would make financial sense to do less digging.”
  • Why the drug business is different from all other businesses: “In most intellectual property businesses (for example, fashion or publishing), people get bored with last year’s creations, which maintains demand for novelty. Unfortunately for the drug industry, doctors are not likely to start prescribing branded diabetes drugs because they are bored with generic metformin.”
  • Critique of “low-hanging fruit” explanation: “Many drugs may derive their therapeutic benefit from interactions with multiple proteins rather than a single target. These drugs are ‘magic shotguns’ rather than ‘magic bullets’. If this turns out to be more generally true, then worrying about the ‘low-hanging fruit’ problem would be similar to worrying that a shortage of notes is threatening the future of music composition.”
  • Expectation that regulation tends to move in only one direction: “Each real or perceived sin by the industry, or genuine drug misfortune, leads to a tightening of the regulatory ratchet, and the ratchet is rarely loosened, even if it seems as though this could be achieved without causing significant risk to drug safety.”
  • One “solvable” problem: R&D expense: “Unfortunately for people working in R&D today, tackling the ‘throw money at it’ tendency looks feasible. Investors and many senior executives think that a lot of costs can be cut from R&D without reducing output substantially.”
  • Have we been solving the wrong problem in drug discovery? “So how can some parts of a process improve dramatically, yet important measures of overall performance remain flat or decline? There are several possible explanations, but it seems reasonable to wonder whether companies industrialized the wrong set of activities.” 
  • Potential reason to reconsider “old-school” phenotypic screening approaches:Target-based approaches are efficient for pursuing validated therapeutic hypotheses but are less effective in the search for innovative drugs.”  Scannell adds, “The intellectual challenges of reductionism and its necessary synthesis (the ‘‑omics’) appear to be more attractive to many biomedical scientists than the messy empiricism of the older approaches.”
  • Dominant role of narrative in science: “The ‘basic research–brute force’ bias is supported by survivor bias among R&D projects. This makes drug discovery and development sound more prospectively rational than it really is.  Drugs are sold with a biological story that sounds like molecular reductionism and that sometimes, but not always, turns out to be true.”
  • Need to leverage astute clinical observation – and serendipity: “Even recently, it appears that many — perhaps most — new therapeutic uses of drugs have been discovered by motivated and observant clinicians working with patients in the real world….[Despite this,] opportunities for serendipity are actively engineered out of the system.”

(Interested readers might also enjoy these previous pieces, addressing phenotypic screening, clinical champions, serendipity and reductionism, impact of long cycle times on innovation, and our dependency on narrative.)

As comprehensive as Scannell’s critique is, I’m not sure it brings us any closer to an actionable solution.  If anything, the very breadth of explanations that have been curated seems an implicit endorsement of screenwriter William Goldman’s famous aphorism, “nobody knows anything.”  More to the point, if any of the hundreds of industry critics, observers, and analysts were to become CEO or head of research at a big pharma company, I’m not at all convinced that they would do any better than existing management – or even know where to begin.  (More puzzling, and perhaps disappointing: in some cases, these helpful critics were former industry leaders – discussed here.)

I suspect most current senior pharma leaders have recognized the apparent futility of seeking an epiphany, and long ago stopped looking for the magic key to unlock industry productivity.  Sure, Big Pharmas might pay lip service to grand strategies and innovation-driven visions (undoubtedly articulated for them by well-paid but equally mystified consultants), but at the end of the day, their real strategy is almost certainly the same as everybody else’s – to scramble like hell to survive.  Incidentally, this happens to be a very good description of the current state of play.

As an inveterate optimist, I see a silver lining in all this.  If Big Pharma is truly evolving from a thematic, highly strategic business into what I suspect may be an opportunistic, pragmatic, highly tactical, perhaps even somewhat desperate enterprise, this could lead to important new partnering opportunities for an unexpectedly wide range of small upstart companies. 

Rather than seeing their partnering options limited by what’s in vogue for pharma this week (it’s CV – no its inflam – no its orphan diseases….), small companies increasingly may have some reason to hope that whether they pursue a new idea using target-based screening of established libraries or adopt the sorts of alternative approaches that Scannell, I and others have been discussing for a while (clinical champions, phenotypic screening, etc.), if the data look promising, a Big Pharma partner may be flexible, empirical, and opportunistic enough to carefully consider it.   Admittedly, this does not accurately characterize the considerably more structured and highly constrained way most Big Pharma BD operates at present, but I did point out that I was an optimist.

Meanwhile, we also need to continue to try to change the current ecosystem in a way that lowers the barriers to collaboration (as articulated by Andy Grove and implemented by Sage and other organizations), makes regulation more nimble and efficient (I’m a fan of the progressive approach advocated by Desmond-Hellmann and others), and reduces the cost of clinical trials and drug development so that it doesn’t effectively become a business where only a handful of Big Pharmas with deep pockets can afford to play (a point made in a recent column by Avik Roy, although I don’t agree with his allegations of a vast Big Pharma conspiracy).

A friend of mine taught me the priceless expression: “Oh no, not another learning experience.”  I’m starting to feel this way about the burgeoning literature on pharma productivity as well.  Enough already.

I’m deeply (if conveniently) convinced that the solutions here, if they are to be found, will be developed not by analysts, consultants, and other spectators tut-tutting from the bleachers, but rather by the participants (especially the intrepid start-ups) themselves, bloodied and battered, striving mightily in the arena.

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