Which Countries Excel in Creating New Drugs? It’s Complicated
(Page 3 of 3)
where drugs come from and how they contribute to a company’s growth or expenses. These include:
1) Equity investments (e.g. Sanofi’s investment in Regeneron and Alnylam)
2) Joint ventures (e.g. Eli Lilly and Icos to develop Cialis)
3) Spinouts (e.g. Abbott Laboratories carving off AbbVie)
4) Revenue sharing (Wyeth/Pfizer shared in profits on sales of Enbrel with Immunex/Amgen)
5) Portfolio swaps (Novartis’s acquisition of GlaxoSmithKline’s cancer portfolio in exchange for its vaccine business)
6) Geographic market divisions (e.g. one partner gets the U.S. territory; the other gets the rest of the world).
All of this makes analyzing the innovation process extremely difficult. To paraphrase Winston Churchill’s famous quote, “New medicines are a discovery transformed by development wrapped up in a company approved by a regulator located inside a country.”
People are concerned about the geographic origins of new medicines primarily for two reasons: jobs and taxes. Jobs in biopharma are generally very well paid, and the companies should be contributing to the local as well as national tax base. These tax payments (but not necessarily the jobs) are currently at risk; a number of companies are working on “tax inversions,” as mentioned above, to cut these payments. Lawmakers, in turn, are looking at ways to block these tax dodges. Same old tax battles as before, just new strategies in play.
In addition to the issues of jobs and taxes, some politicians want to establish bragging rights for their nations. They hope that the number of new drug launches will illustrate the merits of their particular economic system or the benefits of funding government and university research programs. I don’t think patients care too much where their drugs are from; affordability is much more important. It’s likely that investors in most companies aren’t much concerned either where the company’s drugs come from. They’d rather have a blockbuster developed in another country as part of their company’s drug portfolio than a homemade dud.
Of more interest to me are the institutional underpinnings of new drugs. Did they arise out of academia, from small biotechs, or were they home grown from within Big Pharma companies? The answer to this question seems more important because understanding this issue might ultimately help accelerate the discovery of new medicines. Robert Kneller published a detailed analysis of the origin of new drugs approved by the FDA between 1998 and 2007 on a country-by-country basis. The most striking finding was that about 61 percent of the 118 new drugs coming out of U.S.-based companies originated in either academia or in smaller biotechnology companies. In contrast, less than 20 percent of the 23 new drugs coming out of Japan and about 25 percent of the 98 new drugs generated by all European companies (including the UK) met these criteria.
Creating an innovative drug is not the same thing as buying someone else’s drug innovation, even if the net output, a new medicine, is the same. If we really want to get a handle on innovation, the data used to create the table shown above should be recalculated using the actual country of origin of each drug (traced back to the beginning), rather than the location of the company’s headquarters. Even then, it’s difficult to determine whether the discovery, the development, or even the marketing was the key element in any drug’s success. Many potentially promising drugs never become winners as a result of poorly executed development plans.
I think this reanalysis would support the idea that the rise of biotech companies in the U.S. tipped the innovation balance strongly in our direction. This is despite the fact that biotechnology, as its own industry, only became profitable in 2008. It would likely also illustrate the critical role the government plays in supporting basic biomedical research, the foundation upon which the biotech and pharmaceutical industries are built. Others have different viewpoints of what factors influence drug innovation. In a recent Forbes article, author Paul Howard wrote, “The imposition of a number of drug price controls or their functional equivalents in the E.U.—reference pricing, capped drug budgets, health technology assessments, and the like— have all helped shift the epicenter of drug innovation from the E.U. to the U.S. (the world’s largest single pharmaceutical market) from the 1980s to today.”
Given that a number of new business models in the biopharma sector (e.g. virtual companies) are currently being tested, the reanalysis that I suggested above might only provide a more accurate look backwards. Drug discovery and development take place within a complex industrial, financial, and medical ecosystem where a change in one small part (e.g. pricing, reimbursement, more efficient manufacturing processes) can cause profound effects on the output. Simple will never be a word that describes a process that begins with something as intricate as biology. You can safely ignore those who try to tell you otherwise. In the end, drug innovation is not defined by country of origin. It arises out of the thoughts and dreams of scientists who choose to explore and expand the limits of biology and medicine, or as James Watson once put it, “Science that leads over the horizon depends on gathering the best minds and enabling them to do what the best minds naturally seek to do: pursue the most thrilling questions of the time.”