The Myth of the “Patent Cliff”
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in the industry, the primary response to these upcoming patent expirations was to curtail research expenditures, cut headcount, and ramble down the other paths.
Updating old drugs with newer versions certainly juices revenues and has a high likelihood of success. However, this is only marginally helpful to patients, especially those with diseases for which there are currently no available treatments. Acquisitions will account for nearly two-thirds of Big Pharma sales growth from 1995-2014, according to Datamonitor. Of course, as companies get bigger, they require larger and larger acquisitions to provide sufficient revenue to maintain their sales growth rates. This approach is clearly unsustainable in the long run. Increasingly popular “pay for delay” agreements are lucrative for the industry; ending them would save consumers an estimated $35 billion over the next decade. As a result, the Federal Trade Commission is currently advocating legislation that will outlaw a practice that many already find unethical and anti-competitive.
As the evidence for internal research inefficiencies continues to mount, Big Pharma will move forward with an increased emphasis on acquisitions and on partnerships with academic institutions. However, abandoning internal research programs, as Morgan Stanley advocated earlier this year, is not a viable long-term solution. Molecules acquired from insufficiently funded startups should be viewed through a skeptical lens, since these potential drugs are not likely to have been thoroughly researched or vetted. Engaging academics to explore the detailed biology of diseases and drug candidates is likely to increase the probability of future success in the clinic if done properly. Drug pipeline-challenged companies have found many willing partners among academic groups strained by fewer grants, reduced government support, and shrinking endowments. It should be obvious to those in the industry that developing a clear understanding of the biological underpinnings of human diseases is the gateway to crafting new medicines. Difficult, yes, and expensive, but clearly necessary. Rushing drugs into the clinic without a mechanistic understanding of how they function is a often a prescription for failure, though even having such an understanding is no guarantee of success. Similarly, non-mechanistic side effects can spell doom for small molecules being developed against any disease. This is what’s helped lead the industry shift into biologics, as I have previously described. Big Pharma, it’s time to heed the call. Keep the primary focus on new drugs, not just new revenues. Don’t cut back on research, but narrow your disease focus if you have to. Remember that even with all of your financial resources, your internal labors will still be dwarfed by the efforts of the worldwide research community. Collaborative approaches may be the best, most cost effective way to achieve this. As Led Zeppelin affirmed in Stairway to Heaven “…there’s still time to change the road you’re on.”