How can the discovery of novel pharmaceuticals for diseases, old and new, be better, faster and cheaper? The pat answer is, of course, research. But, given that more than 80% of all scientists who have ever lived are alive today, why are there only 10-20 new drugs approved each year? Why does it cost $1 billion and take 15 years to get each one to market? And why are there fewer and fewer global pharmaceutical companies charging us more and more for our prescription drugs?
There are two reasons, one of which - the sheer complexity of biology - we can do nothing about. The other is more tractable and is our focus here - the cost efficiency of drug production. It is poor and getting worse, but we believe that it could be turned around. For this to happen, we have to understand the barriers to efficiency, and how to get around them.
In the stock market "bubble" of 2001, the process of scientific innovation in universities – which led to the formation of biotech companies and, in turn, contributed to an increase in new methods and projects for pharmaceutical companies – seemed to be working quite well. Since then, however, commercially-oriented productivity has dropped dramatically. The recent flattening of research budgets has done nothing to help restore applied innovation.
Investors, too, have changed position. Perhaps the Human Genome Project catalyzed unrealistic short-term expectations. Investment firms, who were prepared to back cutting-edge and dramatic university-based inventions, are now backing away from start-ups. And the public is no longer prepared to support companies financially that may take 10 years or more before they can deliver a commercial product to the marketplace.
The transfer of innovation from the academic research setting to commercialization – a current hot topic known as translational medicine – helps cure people. But right now, for the reasons above, we have a translational disconnect. What needs to be done? The catalyst for translating scientific breakthroughs requires collaboration among universities, disease foundations, companies and the investment communities. But are there barriers in the current process?
Should we even expect commercially-useful information to originate from university research? We say yes, absolutely. Given the magnitude of current funding where the NIH spends $28 billion per year on grants for biological research, we are justified in asking where this money goes and what sort of return the public taxpayer should expect. For those who argue that university-based biological research should not be used for commercial purposes, but only training purposes, it is perhaps worthwhile to point out that many foreign students return to their own countries armed with the knowledge and experience, paid for by the American taxpayer, to commercialize science.
In fact, the responsibility for innovation is spread: researchers supported by universities, disease foundations, biotech companies or pharmaceutical companies might all be doing essentially the same research to understand a disease or its potential cure. Just as the investor in a biotech company or a pharmaceutical company expects a return on investment, so should the investor (i.e., the taxpayer) in university-based research.
Is another of the stakeholders, Big Pharma, really ripping us off? No one likes to pay $10 per pill for a new antibiotic. But look at the simple arithmetic: 20 new drugs on patent for 17 years equal 340 expensive drugs. Our PDR (physician's desk registry) indicates well over 2,000 generics. Revenues from new drugs drive the process that ends in cheap generic medicines. An estimated $13.1 billion of drugs are going generic this year and $6.7 billion next year. These revenues need to be replaced since it is clearly better having large pharma than not. We obviously rely on the pharma industry to produce the vast majority of new drugs.
As a starting point to finding more efficient and effective pathways, we must first examine the current barriers or lack of pathways for new innovative research to see daylight, meaning commercialization, and how these barriers may be addressed. These possible pathways to commercialization must be evaluated carefully as most have pros and cons.
Based on our experience, the barriers themselves may be predominantly financial and managerial. Financing in the pharmaceutical sector is particularly problematic. The current financing venues that must be further examined and evaluated include:
• Angel Investing – Some wealthy individuals are prepared to invest in high risk start-up companies, but, in practice, these companies are often undercapitalized and cannot reach milestones that will convince professional investors to take over the financing.
• Foundation Financing – Most foundations addressing disease conditions support university-based research, and some have started providing grants or investing in start-up companies to address the bottleneck between lab work and public benefits.
• Direct Investment in Technology Incubators by State Institutions – Unfortunately, biotechnology industry incubators have rarely spun off substantial companies because of many complex factors ranging from management recruitment to the paucity of support institutions. Areas such as San Francisco and Boston are success stories because original big successful biotechs – Genentech, Biogen, etc. – spun off seasoned management who seeded additional companies near the "mother ship".
• Pharmaceutical Companies – Pharmaceutical companies catalyze and invest in small biotechs to shore up their own pipeline of technology and products, but traditionally large companies trying to solve problems through venture investing on their own have not been particularly successful.
• Governmental Support – Should a small portion of the NIH budget be reserved for development, or a new NIH institute - the NIPHD (National Institute of Pharmaceutical Development) - be considered? Academics fear that money will be taken away from their fundamental research, the public may rail against using tax dollars for industry, and the pharmaceutical industry, ever suspicious of government "interference," could see such an institute as "moving into their territory".
• Management – Companies don't just need cash, they also need high-quality founding entrepreneurs and management. The best entrepreneurs can generally attract capital, but tend to choose well-funded start-up companies. Thus, in advancing innovation one needs capital to attract entrepreneurs and entrepreneurs to attract capital.
No easy, one-size-fits-all solutions exist to improve how we, as a sector, discover, develop and commercialize life saving products. However, some first steps are commitment and leadership and an honest dialogue among the bioscience community to examine and develop new business and policy paradigms to ultimately revolutionize itself.
This will be our mission at the Committee on Bioscience Innovations, a non-profit think tank dedicated to help translate scientific breakthroughs to commercialization. The Committee has assembled world renowned scientists, biopharmaceutical financiers, leaders of university research centers, and founders of some of the most innovative bio-pharmaceutical companies to understand why the current commercialization models may be inefficient and ineffective from a risk/reward paradigm.
We posit that to circumvent the barriers to translational medicine, we must examine some of the most innovative models being developed and pursued today, which often evolve out of necessity and from a mixture of existing financing venues discussed above. As one of our first in a series of White Papers, the Committee will look at the evolving role of venture philanthropy and the challenges it faces as it increasingly plays a critical role in bridging the "valley of death" in commercializing new biomedical innovations. We believe to find the answers, we must consider integrating new innovative business and public-policy models that will create more efficient and effective pathways for the translation of new biomedical innovations.
Alan Walton was a professor at Harvard Medical School among other institutions, and for the last 20 years has co-managed Oxford Bioscience Partners. Frederick Frank is vice chairman and a director of Lehman Brothers Inc. (More information about the Committee can be found at www.committeeonbioscience.org.)