Summary of the articles that are required to be read during the course Management Life Sciences Innovations about innovation and the way to manage it in the pharmaceutical sector.
2.1 Innovating in large life sciences companies
Lessons from 60 years of pharmaceutical innovation - Munos (2009)
New molecular entities (NME) = medication with active ingredient that has not been previously
approved for marketing in any form in USA → small-molecule drugs → in this article the term
includes biologics (all therapeutic proteins) → NME output differs widely with different firms.
Rate of production of NMEs by companies responsible for output has been constant.
→ (a) raises questions about sustainability R&D, (b) challenges rationale for major mergers and
acquisitions (M&A), (c) suggests drug companies need to be bolder in redesigning research.
→ M&A is not an effective way to promote an innovation culture/remedy a deficit of innovation.
Prescription Drug User Fee Act (PDUFA) = US law (1992) that allows the FDA to collect fees from
drug manufacturers to fund the new-drug approval process.
Blockbuster = NME with peak sales that exceed $1 billion, expressed in year-2000 dollars.
Large pharmaceutical companies: the top 15 drug companies, or their predecessors and joint
ventures → need to produce 2–3 NMEs per year to meet growth objectives (none have) → all
other companies, including biotech companies, are small pharma companies.
Sustainable innovation possible by: focussing on particular disease area or therapeutic strategy.
- Some sell products and services in addition to drugs → some are anchored in their home
country market → some are conglomerates → some concentrate on generics.
Larger number of companies accelerates the
acquisition of knowledge, creating a spillover =
industry-wide benefit that enables all
companies to be more productive.
Cost of NME: average cost per NME was
$802 million in 2000 for small molecules
and $1,318 million in 2005 for biologics (do
not include post-approval costs, phase 4) → NME
costs: dividing company’s annual R&D spending by its rate of NME production.
Countries with demanding regulatory apparatus (UK, US) promote more innovative, competitive
pharma industry → force companies to be more selective in choosing compounds for marketing.
Increase in NME output of small companies driven by 2 factors: (1) rise in number of small
companies producing NMEs, (2) mean annual NME output of small companies has increased.
→ decline in output large companies driven by decreasing number of large pharma companies.
Orphan drugs = drugs specifically developed for diseases affecting fewer than 200.000 patients.
What’s next? ( 1) scaling patent cliffs: discovery NMEs is elusive (ongrijpbaar) and sales prospects
are nearly zero → reduces odds of obtaining a return on investment in R&D → solution; combine
knowledge of drug innovation and new-product sales with patent expirations to model how
firms survive large revenue losses due to patent expiration of blockbuster drugs (patent cliffs).
(2) choosing a course: industry must embrace more radical change and seize the opportunity to
redesign the model → 4 points of improvement/redesign for pharma industry;
1. Change its innovation dynamics to move beyond constant NME output → R&D
productivity is the number one issue → it is not fixed.
2. Ursing radical and successful experiments as building blocks → FEX. public– private
partnerships (PPPs), innovation networks and open-source R&D = virtual network of
volunteers that uses online tools to address a problem of shared interest → advantages
open architecture for R&D; heightened competition, reduced costs, increase in ability to
initiate and terminate projects and makes it easier to manage disruptive innovation =
, turn cutting-edge science into novel products with superior features to create new
markets, which unsettles established products and tech.
3. Short-term priorities to encourage marginal innovation → more reliable returns on
investment, at the expense of major changes→ a separate, protected area to generate
disruptive innovation for companies relying on breakthrough discoveries.
4. Rethink industry’s process culture → success depends on random occurrence of black
swan products = rare events of key importance, reshaping markets, industries, societies.
Jean-Pierre Garnier: R&D assumed as scalable, could be industrialized and driven by detailed
statistics and automation → result; loss of personal accountability, transparency and passion of
scientists in discovery and development.
Diagnosing the decline in pharmaceutical R&D efficiency - Scannell et al. (2012)
Advances in R&D (high-throughput screening (HTS), X-ray, identification drug targets), new
inventions (biotech, transgenic mice) and advances in scientific knowledge (biomarkers).
R&D efficiency = measured by number of new drugs brought to
market by global biotech and pharmaceutical industries per billion
US dollars of R&D spending → declined steadily.
Moore’s law = techs that improve exponentially over time → Eroom’s
law = powerful forces have outweighed scientific, technical and
managerial improvements → unpleasant consequences; there will be
fewer new drugs and/or drugs will become expensive.
→ explaining Eroom’s Law should address 2 things: (1) progressive
nature of R&D decline in the number of new drugs per billion US dollars of R&D spending, and (2)
scale of decline. Primary causes Eroom’s law (innovation struggles):
1. “Better than the Beatles” problem: hard to achieve commercial success with new pop
songs if it has to be better than the Beatles → yesterday’s blockbuster is today’s generic
→ increases complexity and hurdles for approval, adoption and reimbursement.
→ “Low-hanging fruit” problem as fifth, less important cause of Eroom’s law → gradual
exploitation of more manageable drug targets → easy-to-pick fruit is gone, while “better than
the Beatles” problem argues fruit that has been picked reduces the value of the fruit that is left.
2. “Cautious regulator” problem: lowering the risk tolerance by regulatory agencies raises
the bar for the intro of new drugs and increases R&D costs → medicines have to
demonstrate efficacy, s afety hurdles are increased → rise in R&D efficiency in 90s due to
2 regulatory factors: (1) clearing the regulatory backlog (getting rid of the accumulation of
uncompleted work) and (2) rapid development and approval of HIV drugs.
→ follows the “better than the Beatles” problem → regulator is more risk-tolerant when few good
treatment options exist → availability safe, effective drugs raises regulatory bar for other drugs.
3. “Throw money at it” tendency: tendency to add resources to R&D, because it is believed
every dollar spent gives a return → due to; (a) good returns on investment in R&D, (b)
poorly understood and stochastic innovation process (sequence of random outcomes),
(c) long pay-off periods and intense competition between marketed drugs.
4. “Basic research–brute force” bias: tendency to overestimate advances in basic research
and brute force screening methods to increase probability of a safe, effective molecule in
clinical trials → drug discovery and development sound more prospective than really are.
→ (4) dominates drug research, because; (a) slowing pace of pharmaceutical innovation (new drugs
had only modest incremental benefit over generics). (b) older approaches for early stage drug
R&D seemed to yield less (molecular reductionism = genetics and molecular biology provide the
, best, most fundamental understandings of biological systems). (c) matches the opinion of many
commercial managers, management consultants and investors → (4) manageable in several ways:
A. Analysing the better systems-level insights, (sets of) targets and candidate drugs of
research from other therapeutic areas.
B. Putting more emphasis on iterative approaches, animal-based screening or early proof of
clinical efficacy in humans → less on predictive power of molecules from a static library.
C. Stop believing in predictive ability “basic research–brute force” screening approaches
and putting molecules into clinical trials without more validity of the hypothesis.
How can parts of R&D process improve, but overall
efficiency decline? → i ndustry industrialized and
optimized the wrong set of F&D activities.
2 potential problems: (1) much of R&D is now based
on idea that high-affinity binding to a single target
linked to a disease will lead to medical benefit in humans (no attention to off-target effects). (2)
shift from iterative processes to serial filtering (with HTS) of a static compound library against a
target (directed iteration may be more efficient).
Signal-to-noise ratio = chosen drug candidates should demonstrate effectiveness and safety in
clinical trials successfully → comparing level of desired signal to level of background noise.
→ improve signal-to-noise ratio by: (a) a detailed understanding of why drugs fail, (b) leading to
discovery of common failure modes and (c) using this to change early stages of the R&D process.
Secondary symptoms Eroom’s law:
- Narrow clinical search problem: shift from broad focus on therapeutic potential in
active agents to a focus on precise effects from molecules designed with a single target.
- Big clinical trial problem: expansion of patients in clinical trials results from; (1) “better
than the Beatles” problem increases trial size (if the effect size halves, 4 times as many
patients have to be recruited). (2) phase III trials are messy mixture of science,
regulation, public relations and marketing (trying to satisfy multiple constraints inflates
size + cost).
- Multiple clinical trial problem: increased complexity of medical practice and many
different treatment options means narrower indications and more clinical trials per drug.
- Long cycle time problem: increase in duration of clinical trials between 60s and 80s.
Solution: Chief Dead Drug Officer (CDDO) = someone who focuses on drug failure at all stages of
R&D → has fixed time to compose a detailed report with the explanation of the causes of Eroom’s
Law → this gets submitted to the board of the company and health institutes (FDA in the USA).
→ advantages: (1) CDDO has no incentive to be irrationally optimistic. (2) R&D costs dominated
by cost of failure (lot of time spent on failed molecules). (3) CDDO has expertise in drug failure.
Other solutions: reorganization of R&D (smaller/larger R&D units, outsourcing to lower-cost
countries) - quick-kill strategies (sudden and rapid victory) - mergers - connect with science
(universities at frontrow for new scientific discoveries) - radical experiments (PPPs).
Prognosis Eroom’s law: (A) amount spent on R&D will not increase (“throw money at it” tackled by
most companies). (B) cumbersome biosimilar approval pathway in US (causes endless conflicts).
(C) signal-to-noise ratio may improve among compounds developed for oncology.
→ declining R&D costs, oncology drugs, more orphan drugs and biosimilars can put an end to
Eroom’s Law at an industry level.
2.2 Project-based innovation
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller yaralangeveld. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.39. You're not tied to anything after your purchase.
