Economics of Drug Development - AAPS 1

Pharmaceutical companies need to reduce costs and increase efficiencies in the R&D process in order to remain viable, according to Ken Kaitin, director for the Center for the Study of Drug Development at Tufts University. "Pharmaceutical innovation is at a crossroads," said Kaitin, speaking at the AAPS conference in San Diego on Monday. While not earth shattering news, Kaitin had the facts and figures from his stuidies to back it up. While the average pharma company profits have increased by 27% in the last 4 years, at the same time the market cap (the anount of product produced X the value of the company's stock) has declined. This has led to a loss in the stock value in pharma companies to the tune of over a half a trillion dollars over the last 6 years. Ultimately, this has been the reason for the layoffs experienced by many pharma companies over the past year, according to Kaitin. "NDAs are not keeping pace with R&D spending," said Kaitin. "Industry is not able to reap enough revenue to support R&D." For once, the FDA might not be the one's to blame. Kaitin showed data demonstrating that although drug approval times have dropped by half (from 3 years in the mid-80s to 1.3 years in 2006), clinical times have increased. "The overall advantage in approval times is being offset by these increasing clinical times."  In addition, drug approval rates are low. Despite more cancer drugs in R&D than ever before, approval rates for these drugs were only 8% in 2006. Coupled with the high cost for drug development, (1.2B for bio drugs and 1.3B for small molecules), this is a recipe for disaster according to Kaitin. "Things can't go like they have in the past. The R&D paradigm for drugs has not changed since the 1960s. What other industry can say that and survive?" According to Kaitin, companies are trying to change their ways. Their success will depend on reduced development times, improved patient recruitment, failing faster and dramatically improving productivity. Best practice companies are focusing on developing core competentcies/outsourcing, collaboration and enhanced utilization of e-data. The Critical Path Initiative has helped build consortiums that include industry, trade associations, FDA and NIH. The goal is to bring drugs faster to market. In addition, companies are re-thinking the typical four phases of development. "There has been a greater reliance on Phase IV of the process. Distinctions between Phases I-III are becoming obsolete," said Kaitin. "The key is to quickly identify the obstacles to the R&D process and steer around them." BS