Regulation has pushed pharma off a cliff edge
THE latest big pharma company to fall victim to the so-called “patent cliff” is AstraZeneca. Its announcement last week that it’s shedding 7,300 jobs globally is in part an acknowledgement that it does not have sufficient new drugs to replace revenues lost, as a number of its key drugs come off patent.
Across the sector, big pharma companies are reducing profit forecasts, as swathes of blockbuster drugs that for many years underpinned their profitability begin to come off patent, including top sellers such as Pfizer’s statin Lipitor and Merck’s asthma drug Arimidex.
Given that a patent term is twenty years, executives have had a long time to develop the next generation of drugs to replace these top sellers. But over the last decade rates of drug approvals by both the US Federal Drug Administration (FDA) and the EU’s European Medicines Agency have decreased.
In 1996, when the industry was on the top of its game, the FDA approved 53 new drugs. In 2011, the FDA only approved 35, following on from dismal years in 2010 and 2009, when 21 and 26 new drugs were approved respectively.
Frustratingly, this comes against a backdrop of a significant increase in research and development spending by drug companies, which is eleven times greater than it was thirty years ago, according to research from Tufts University in the US.
So why is much less coming out of the research and development sausage machine than is going in?
It is true that science is getting more difficult, as the easy therapeutic target areas that gave rise to the blockbuster drugs have already been exploited. New research has to focus on smaller, more specialised targets for rarer diseases. This naturally makes the job of bringing genuinely novel drugs to market harder.
But these scientific challenges must also be set against increasing risk-averseness of regulators, who have responded to high profile drug safety scares over the years – for example, Fen-Phen and Vioxx – by setting ever-more onerous and stringent requirements for clinical trials.
Every year, safety-obsessed regulators create further hurdles within clinical trials, which achieve little other than increasing rates of failure and adding millions to the final cost of a drug. The number of mandatory clinical trials has more than doubled since 1980, and three times as many patients are needed for each trial. Their average length increased by 70 per cent between 1999 and 2006.
And when a drug does miraculously make it through this process, it then has to contend with the increasing trend of governments to use stringent cost-effectiveness criteria when deciding whether to make a drug available in public health systems.
Big pharma is – perhaps understandably – responding by buying up generics companies, and increasingly involving themselves in consumer products such as toothpaste.
This is all very well if the aim is to provide solid if unspectacular returns for shareholders. But if we want the next generation of drugs to tackle as yet intractable health problems – cancer, Parkinson’s and Alzheimer’s – governments will need to overhaul completely the way we regulate new drugs.
Philip Stevens is managing director of the Covent Garden Writers Group, a public policy research consultancy.