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April 01, 2008 (Vol. 28, No. 7)

Defending Pharma Companies

Innovation Is Alive and Well in the Therapeutic Drug Industry

  • The U.S. Congressional Budget Office reported in 2006 that for U.S. pharmaceutical companies, R&D expense as a percentage of revenues from prescription drugs "has hovered around 19%"e; since the early 1990s, thereby establishing the pharmaceutical industry "as the most R&D-intensive industry in the U.S. manufacturing sector."e; In contrast, all U.S. manufacturers spend an average of barely 3.5% of product revenues on R&D.

    Me-Too Drugs

    Having presented some of the financial evidence that disputes Gagnon's argument, I must emphasize that even though the pharmaceutical industry remains committed to developing innovative therapeutics, there is substantial support for his assertion that drug companies market me-too drugs so as to maximize earnings.

    The reality, however, is that the prevalence of me-too drugs occurs in waves, based on technological advances made possible by mostly unpredictable discoveries in the underlying basic science. The development of antibiotics is a classic example of therapeutic innovation based on an unpredictable discovery years earlier. Because of the still substantial holes in our knowledge of the requisite basic science, technological advances are more unpredictable in the pharmaceutical industry than in other industries. Me-too drugs simply represent the exploitation of such advances and fill the gaps between them.

    Gene Therapy

    A couple of examples will illustrate how difficult it is to predict the length of time it takes to develop a radically new therapeutic following a relevant seminal scientific discovery. In the 1940s it was established that one could genetically alter bacteria by means of isolated DNA. Theoretically, this discovery suggested that gene therapy might be realized sometime in the future.

    It was not until the 1960s that the first reports appeared indicating that mammalian cells could also be genetically altered by means of isolated DNA. Years later, in 1990, the first successful example of gene therapy was demonstrated, albeit for a very rare, life-threatening disorder—severe combined immunodeficiency in a child lacking the normal gene for adenosine deaminase.

    A fair number of gene therapy clinical trials have been initiated since then and many are ongoing. If perfected, gene therapy might be of enormous practical value, saving countless lives and resulting in huge market opportunities. Yet, thus far, over 60 years following the discovery that isolated DNA could genetically transform cells, only a handful of companies have marketed gene therapy for a couple of conditions, and the number of patients treated, mostly outside of the U.S., is relatively small.

    In contrast, the discovery of recombinant DNA in 1972, clearly the seminal event for the modern biotechnology industry, quickly paved the way for a wide variety of innovative therapeutics, beginning in 1982 with FDA approval of genetically engineered human insulin. According to BIO, over the next 14 years, 106 recombinant and mAb products plus a few tissue-engineered products were approved by FDA for 392 indications.

    Personalized Medicine

    On the knowledge front, recent years have witnessed significant advances in genomics and proteomics, resulting in the identification of numerous biomarkers, the elucidation of the molecular architecture of the cell, and the emergence of pharmacogenomics. We are now at the threshold of personalized medicine-targeted therapy based on genotype-dependent diagnostic results.

    For example, in the February 21 issue of Nature, Daniel J. Rader and Allen Daugherty identified 38 clinical and preclinical trials, each trial directed at one of 38 new therapeutic targets for atherosclerosis or its risk factors.

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