Pharmaceutical industry and health care.

The pharmaceutical industry is engaged in Research and Development (R&D) of new drugs. Over the years this industry sector has acquired the expertise and infrastructure necessary to bring new drugs from laboratory bench to bedside. Much of the preclinical exploration of a new candidate drug is also often performed at industrial research laboratories. For more than a century the conglomerate of global pharmaceutical industries has provided patients with an ever increasing number of new drugs. Many previously incurable illnesses can now be controlled by novel, industry-developed drugs. The contributions of the pharmaceutical industry to improvements in global health care have been considerable. In return the pharmaceutical industry has been generously rewarded for its efforts. This is one, but not the only, explanation for the unsustainable escalation of health care costs over the last two decades.

Other consequences of the for-profit principle in drug development? 
Over the past 50 years the pharmaceutical industry has almost exclusively focused their R&D on potential ‘blockbuster’ drugs: drugs which will generate a yearly profit of at least 1 billion dollars.
Most blockbuster drugs protect patients against the health risks linked to frequently detected ‘abnormal’ lab tests or symptoms, such as elevated cholesterol, acid gastric reflux and high blood pressure. Such symptoms increase the risks of myocardial infarctions, strokes, oesophageal and stomach cancer, stomach ulcers, etc. Millions of people take blockbuster drugs daily for the rest of their lives, because they do not want to get a heart attack, stroke or stomach ulcer. Most of them will never get one of these dreaded conditions, regardless of whether they decide to take the expensive medication. Most blockbuster drugs do cause significant side effects however. To get blockbusters drugs approved for use in patients the companies need to perform preclinical as well as clinical research. The latter is usually in so-called phase 3 studies, in which patients are randomized to one of two arms: arm one consists of treatment with new drug A, the other arm consists of treatment with old drug B or a placebo. Many hundreds of patients need to be recruited for phase 3 studies. A single phase3 study takes a long time to complete and is very expensive. R&D for an average blockbuster drug takes approximately 10 years and costs more than a billion dollars.
Phase 3 studies are usually required for approval/registration of a drug by the Food & Drug Administration in the US or the EMEA (European Medicines Agency) and other national health agencies. Drugs, which are not registered, are not made available for patient use in countries with a national health service and are not reimbursed by insurance companies in countries without a health service. Therefore drugs which are not registered have no commercial value and will not be produced. Since drug development takes a long time, it consumes part of the drug’s patent protection. Patent protection lasts for 20 years after the patent has been approved, but on average only 20 minus 10 = 10 years of protection remain after registration of a drug. So within10 years all the R&D costs must be recovered as well as a profit margin generated. This creates the need for an intense marketing and advertising campaign, which can consume one third of a pharmaceutical industry’s the total yearly budget.

What limits the development of new drugs?
The long and costly R&D of new drugs increases the financial losses incurred by drug ‘failures’, i.e. drugs which fail to achieve registration. On average 5-20 % of all drugs fail to get registered. The failure rate depends on the type of patient population the drug would be used in. For example cancer drugs have a high failure rate. The costs of failures are incorporated into the price of the successful drugs. The consequence is that drugs selected for R&D and clinical studies have to generate a lot of profit at a low risk. Patients’ needs are no longer an important factor in selecting/developing new drugs (1). This creates a vicious circle leading to increasingly more expensive new drugs. Notwithstanding significant progress in molecular biology, pharmacology and biotechnology the paradoxical result is that the number of new drugs being registered in the last few decades is on the decrease.

Is anything being done about this problem? 
Yes –  the problem has been identified and discussed extensively. Many initiatives and proposals have been introduced to possibly improve the undesirable situation at present (1,2,3). However, no significant improvement has been noted so far. For ‘orphan drugs’ (for patients with rare diseases) the market is by definition too small to make a profit. In the US and Europe governments have taken measures to make it more attractive for the pharmaceutical industry to develop orphan drugs – by increasing the duration of patent protection and providing subsidies for doing the necessary research, for example – but until now these measures have failed to make a significant impact, either on the duration of drug development or on the high price of a successful orphan drug (4).
In general, governments and charity are not inclined to subsidize projects which generate financial gain for the pharmaceutical industry or the donors. The pharmaceutical industry has extensive financial reserves and is still bringing in substantial yearly profits. *Public Institutions are hesitant to embark on the development of not-for-profit drugs or other therapies, because they have neither the necessary experience nor the facilities.

Does Cinderella think she can solve this problem? 
Cinderella does not think a single wave of a magic wand will solve the problem. As long as the development of new drugs is financed by private investors, the pharmaceutical industry will have to make a profit and will put a high price tag on the drugs they develop. Candidate drugs which are not going to generate sufficient profits will be put on the back burner, even if the preliminary analysis indicates that the drugs are expected to be efficacious in patients. Cinderella intends to adopt these step-child drugs, call them Cinderella drugs and nurture and develop them to become mature affordable drugs – by combining not-for-profit and open-source methods. The Cinderella approach does not provide unfair competition to the efforts of ‘Big Pharma’, who have already declared they are not interested in developing stepchild drugs. Cinderella’s approach provides patients with a new and real chance to benefit from drugs deliberately left on the back burner by the pharmaceutical Industry (5).

*) Even if – for social reasons – the pharmaceutical industry chose to engage in the development of drugs tahat would not generate enough income for them to cover the production of such drugs, such losses would have to be covered by increasing the prices of the other drugs they produce. These drugs would then become even more costly.

(1) S. Finkelstein and P. Temin, Reasonable Rx: Solving the Drug Price Crisis, FT Press 2008
(2) A.S.Kesselheim, Drug Development for Neglected Diseases – The Trouble with FDA Review Vouchers, NEJM 2008, 359:19, p.1981.
(3) The new Medical Research Council centre for fast-tracking the discovery and development of novel drugs, 2009
(4) in Dutch
(5) The Cinderella approach is similar to the business model described by the economist and 2006 Nobel prize winner Muhamad Yunus in his most recent book: “Building Social Business” (Public Affairs TM, 2010. ISBN 978-1-58648-824-6)