the personal views of a doctor in industry

Salvation through Innovation

with one comment

One of the funniest things that I read last year was Ranbaxy’s CEO lamenting the lack of innovation in big pharma. The writer was unremarkable and did not see the joke at all. Sadly, there are many examples of articles about our industry which reveal a very superficial idea about what makes us tick.

An example that recently caught my eye added to the line of nonsense about innovation (Innovation Is the Pharmaceutical Industry’s Only Salvation, The InVivo Blog). If the “salvation” that was referred to had been about evil within big pharma, but that the Lord will forgive us if we just invent a couple more good drugs, then it would have been interestingly novel. Sadly, the piece was about the god of Mammon and consisted the sharing of thoughts from Mr Jay Markowitz, a biotech analyst.

After noting, believably, that “44% of Americans had an unfavourable view of the pharmaceutical industry”, the article veered rapidly off-piste proposing that, “the industry’s woes boil down to a single cause: inadequate innovation”. As a good friend of mine would say, this guy must be smoking the weed! Might not the BILLIONS of dollars in fines we keep paying for improper marketing practices have something to do with our reputation?

The author got himself further into trouble looking at our poor productivity: in spite of the inconvenient fact that the number of new drugs registered by the FDA last year was the highest since 2004, he noted that we need more than a “meagre” 24 new drugs to fill the patent hole.

People think of “the patent hole” as the result of some fundamental failure to innovate in our industry. This is nonsense.

The patent hole is a direct result of pharma management not doing their job very well. No company can generate the steady flow of blockbusters which are required to support a business that is overly dependant on a single big drug – or handful of them. The reason for this is simple probability. We do not know how to make one, and we do not know which of our drugs will become blockbusters even after we launch them. Sometimes we get lucky and a drug does better than expected. Sometimes a drug that was expected to do well does badly. Add to this randomness the fact that big firms tend to lose the ability to take risks appropriately, and you can see why it is unlikely that the big firms will generate a steady stream of blockbuster drugs. Management’s sin is that it fails to recognise this simple truth, and it fails to plan accordingly.

Like many people, the author confuses the few big pharma companies that he deals in with the drug industry as a whole. He confuses the need for the biggest of big pharma to produce bigger pipelines (to improve their chances of netting a big drug for themselves), with the reality that the industry as a whole is doing just fine. Innovation is apparently quite strong still, and record numbers of drugs are being registered. The question does remain, however, whether these drugs will generate the same sales as the biggest drugs today. Time will tell. There is also a real possibility that the biggest drugs among the 24 newly registered ones may not belong to today’s big players.

This analyst has failed to grasp the simple point that we do not make blockbusters, we make drugs, and if we are lucky some of them turn into billion dollar drugs.


Written by Pillhead

March 31, 2009 at 4:16 pm

Posted in Pipeline

Tagged with , ,

One Response

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  1. The problem with too many very large pharma companies is simple management quality and an inability to foster innovation.

    Mandarin Cake Consumer

    April 2, 2009 at 11:06 am

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