Research & Development and Clinical Trials
The research and development of new drugs is the American and European pharmaceutical industries greatest strength. Novel therapeutic drugs have gone on to achieve blockbuster status and have brought about tremendous profits for these companies. For example, Lipitor from Pfizer made about USD$ 10.9 billion in sales for 2004. Similarly, Advair from GlaxoSmithKlien made over USD$ 4.5 billion in same year. 9 The list goes on with top products from the top 10 pharmaceutical companies in the billions. However, the cost of research and development has escalated with a corresponding decline in productivity. Furthermore, more stringent requirements to show prove of efficacy and safety of new drugs has also added to the cost of bringing new drugs to the market.
It is estimated by the FDA that it requires about USD$ 1.7 billion to get a new drug into the market. 10 Besides the cost of getting the drug into market, there is also the time factor. On the average it takes about 12 to 14 years for the process in U.S. This lengthy process has many stages that are strictly regulated. The drug discovery period may take 1 to 3 years and this is followed by pre-clinical trials that can last another 2 to 3 years. The activities may overlap and it most cases they do. less, it takes about 5 years before a potential drug candidate can reach clinical testing. The new drug is required to undergo three phases of clinical trial test where in Phase I the new drug is determined for its pharmacological effects, dosage and safety. Phase II concentrates on a larger population, in the hundreds, made up of patients with the ailment the new drug is intended to treat. This phase investigates the new drugâ?Ts effectiveness and potential side effects. Phase III is an extension of Phase II where the patient pool required are in the thousand to obtain statistically significant results and to determine adverse experiences under long term use of the new drug. Phase I is generally accomplished in about a year and Phase II takes about 1 to 2 years. Phase III generally takes about 3 years to complete. Each Phase is conducted separately as the result of one phase is critical to the approval of the next phase. All in all the clinical trials of a new drug takes about 5 to 6 years to complete. The FDA review and approval process itself can take another one and a half years or longer depending on how well the clinical trial was conducted. There is also the post-approval monitoring period that can last up to 2 years. 11
Conventional research and development methods have relied heavily on screening vast databases of potential chemical compounds. Time has always been the limiting factor but this has been solved to certain extent with the progress made in high throughput screening machines. The ever increasing requirements of efficacy and safety of new drugs have also significantly reduced the probability of finding potential new drug candidates using this hit and miss method of discovery and development. In reality, out of every 5,000 to 10,000 potential new drugs discovered only about 250 make it to preclinical trials. Out of these 250 potential new drugs about 3 to 5 ever make it to clinical trials. Eventually, only 1 out of 5 new drugs under clinical trial is approved by the FDA. 11 All these figures amplify the point that the development of a new drug is an extremely costly and risky undertaking for any pharmaceutical company. The prevailing approach taken by most big pharmaceutical companies is to only pursue new drugs that has the potential to achieve blockbuster status, new drugs that can have more than USD$ 1 billion in sales per year. Otherwise, companies may not see beneficial returns from their investments.
The sheer scale of the investment as well as the high risk nature of drug discovery and development effectively prohibits many new companies particularly from developing countries outside of the USA, Europe and Japan triad to attempt going into the developing new drugs by themselves. In fact, the amount of investment required often far exceeds many countries annual budget. This aspect of the pharmaceutical industry has the least potential for any significant global participation. However, the adoption biological based research and development techniques have the potential to reduce cost and time of new drug development.
The acceleration in advancements of molecular biology, genetics and other related fields and their application in medicine have inevitably attracted the pharmaceutical industry. The biopharmaceutical products have the potential to deliver more effective and targeted therapy with lesser side effects. Studies have shown that pharmacogenomics clinical trials have the potential to be shorter by as much as half time with patients prescreened for responsiveness to the therapy. Herceptin made by Genentech is successful pharmacogenomic product where it is targeted towards specific breast cancer patients with an over expression of the HER2 protein. Such success should be example and catalyst for developing nations, particularly China and India, where there are a sufficiently large talent pool of experts to venture into novel new drugs discovery and development. These capabilities are already recognized by big biopharmaceuticals like Roche, Pfizer and Norvatis have established R&D centers in China as early as year 2004. 12
Such developments and expansion of R&D facilities into developing countries have significant consequences. New drugs or therapeutic agents can be brought to the market faster thus reducing cost. Savings in cost and time can also encourage more new drugs to be developed, particularly targeted at diseases that are more prevalent in other regions as well as diseases with a smaller market since there is a less dependence on block buster products. Bringing a new drug into market will not largely be restrained by the financial capability but by the technical capability of the company. This should be the fundamental driving force in new drug development and truly encourages a global effort.
Markets
The biopharmaceutical industry like any other industry faces enormous challenges in todayâ?Ts global business environment. It is also one of the most regulated industries in the world especially in approval and marketing of products. The big players in todayâ?Ts pharmaceutical industry originate mainly in US, Europe and Japan. U.S. and Europe have almost equal share of companies in the top 50 while Japan has only half the number of companies in this list as compared to U.S. or Europe. Of the 50 companies; 20 are from the USA, 19 from Europe and 11 are from Japan. A further analysis of the top 20 companies shows a similar distribution with only 2 Japanese companies coming in at positions number 15 and 19. The top 10 pharmaceutical companies in the world in terms of revenue are all from USA and Europe with USA having a greater share with 6 companies and Europe with 4 companies. 9 Therefore, it is not surprising the first concerted efforts to work together under common grounds were made up of representatives from these locations in the form of the International Committee for Harmonization (ICH).
An analysis of the distribution of the top 50 pharmaceutical companies in the world in terms of sales shows that all of them originate from USA, Europe and Japan. The total sales of these companies amounted to USD$ 387.81 billion dollars in the year 2004 with the American manufacturers contributing 47.8% at USD$ 185.45 billion, Europe contributing 43% at USD$ 166.84 billion and Japan a distant third at 9.2% amounting to USD$ 35.52 billion of the total sales. A further analysis of the sales figures by region, however, reveals a different distribution. 47.8% of the global sales come from North America with a market value of USD$ 248 billion while Europe constitutes 27.8% of the world market at USD$ 144 billion. Japan is at 11.1% at USD$ 58 billion and the rest of Asia, Africa and Australia contributes 7.7% at USD$ 40 billion. Latin America sales contribution is at 3.8% amounting to USD$ 19 billion and the rest of Europe, non EU member countries, at 1.8% totaling USD$ 9 billion. 9
A simple comparison of the sales figures against the population of the countries shows that on the average each person in the USA spends USD$ 831 per year. In Japan this figure is USD$ 454 per year and in Europe Union it is USD$ 311 per person per year. The difference stem mainly from how the drug market is regulated in the difference regions. In the United States health care is provided by the private sector managed mainly by insurance companies and Health Managed Organizations (HMOs). Thus the market is open to free competition among the pharmaceutical companies and prices are generally determined by the efficacy of the drug and cost of development. This has generally made drug prices in USA the highest in the world and also the most attractive market for all biopharmaceutical companies.
The European Union itself has a few models to determine pricing of drugs. The criteria used in France to determine pricing are based on assessment of R&D efforts, therapeutic advantages and novelty of the new drugs. In Italy, pricing is directly based in production cost. While in countries like Germany and United Kingdom where there is supposedly free market determined by competition, purchasing of drugs are tightly controlled through few purchasing bodies like the regional or national health authorities. 11 Similar situations can be seen throughout developing countries where the need to provide adequate health care has been used as the reason to impose price control.
Emerging pharmaceutical companies particularly those from India, Eastern Europe and Middle East are making inroads into the U.S. and European markets mainly with generic products. The use of generic prescription drugs increased from 18.4% in year 1984 to 54% in year 2004. The sales value of this market is estimated to be USD $ 30 billion. 13 The use of generic prescription is estimated to keep on increasing as generic drugs are one the ways identified to reduce health care cost in the U.S. The number generic drug applications received by the Office of Generic Drugs (OGD) in 2004 was 563 and this increased by 33% to 766 applications in year 2005. In the first six months of 2006 the OGD approved 275 generic drug applications while for the corresponding period in 2005, 230 applications were approved. This represents an increase of 19.6%. In 2005 between January and June 34.3% of the generic applications were for first-time generics and tentative approvals. This figure increased to 46.6% for the corresponding period in 2006. 14 This is a clear indication that the generic manufacturers are well prepared to enter the market with their products when the patent expires for the existing branded products. IMS has reported that by 2009 USD $80 billion worth of top selling drugs would have lost their patents expired. The same report detailed that the world generic market in 2005 was worth USD $45 billion and increase of 14% from the previous year. 15
The generic manufacturers participating in the U.S. market is manly made up of local and EU based companies. However, the participation from other regions is far better in this sector compared to branded drugs. In the first six month of 2005 29.1% of the generic drug approvals were to â?oforeignâ? manufacturers (excluding EU) while the same period in 2006 saw the figure increased slightly to 30.6%. The approvals can be seen as quite consistent over the last year and half, but the main focus of foreign manufacturers are in the tentative approvals where they have obtained 48% share of the approvals. It is clear that these companies are well prepared to provide generic version of branded drugs as and when their patents expire. These â?oforeignâ? companies are from Israel, Taiwan, Canada, Jordan, Australia but a majority of the approvals were obtained by companies from India. 16
The overall generic market in the EU is significantly smaller in value than that of the U.S. The use of generic market varies in the EU member countries with Germany at 41% followed by Sweden at 39%, UK at 22% and Netherlands at 12%. France generic market accounts for only 3-4% of the pharmaceutical market while in Italy, Spain and Portugal the generic market is barely 1% of total pharmaceutical sales.17 The generic drug market is also expected to grow in Europe as governments are looking for ways to control health care cost. Over the past years many Indian pharmaceutical companies have targeted European manufacturers in their attempts to have a bigger share of the market. Some notable acquisitions are Dr Reddyâ?Ts Laboratories (DRL) buy over of Betapharm of Germany for USD $570 million, Matrix Labsâ?T USD $263 million purchase of Docpharma of Belgium and Nicholas Piramal purchase of Avecia Custom Drug Synthesis from UK for USD $16.7 million. Nicholas Piramal also bought Pfizerâ?Ts Morpeth facility in UK while Ranbaxy has acquired Allen SpA in Italy, Terapia in Romania and Ethimed in Belgium.18
Conclusion
In all the aspects of the pharmaceutical industry that we have looked, they have participation from almost all regions of the world. The degree of participation may be varied with some aspects like production being contributed by all regions while in others like research and development and clinical trials are still dominated by the more established countries like USA, European Union and Japan. However, it is clear that other regions like Asia, mainly from India, China, Singapore as well as Australia is making tremendous progress and is becoming ever more attractive places to carry out these activities. Therefore, it is without doubt that the industry is a global industry. A common set of regulations for drug development governed by Good Clinical Practice (GCP) are being followed and similarly Good Manufacturing Practice (GMP) are universally adopted for manufacturing activities.
The global biopharmaceutical industry as a whole is also unique compared to other industries. Its products cannot be viewed solely to make money as in other consumer goods like in the electronic or automotive industry, but also to provide health care to the people of the world. The industry must uphold their social responsibilities to ensure that health care is accessible to everyone and at the same time remain an innovative, profitable and sustainable industry. Therefore, the challenges ahead are to ensure that drugs will not become too expensive and only accessible to the rich, as it is becoming more so in the USA, but available to all those who need it. At the same time the market conditions in the industry must also stimulate research, innovation to provide better drugs to overcome disease and a more even playing field for all players in the industry. These ideals are by no means insurmountable especially in a truly global biopharmaceutical industry.
References
1. Definitions of Globalization on the Web
http://hhhknights.com/geo/4/agterms.htm
2. Definitions of Globalization on the Web
http://www.hsewebdepot.org/imstool/GEMI.nsf/WEBDocs/Glossary
3. Definitions of Globalization on the Web:
http://minneapolisfed.org/econed/essay/topics/glossary05.cfm
4. Official Website for ICH.
http://www.ich.org/
5. JPMA (Japan Pharmaceutical Manufacturers Association) Home Page, Member Companies.
6. 2006 DIA, Round 1, FDA Highlight. eCliniqua, Bio-IT World. July 10, 2006.
7. The Biopharmaceutical Industry: www.infocollective.org/biopharm.html
8. India set to overtake Italy in API production
Gregory Roumeliotis, DrugResearcher.com, Decision News Media. 10/05/2006
9. Untying the Gordian Knot
Nicole Gray, PharmExec 50, Our Sixth Annual Report on the Worldâ?Ts Top 50 Pharma Companies. Pharmaceutical Executive May 2005.
10. Research universities join effort to reduce costs of drug development, manufacturing
Emil Venere, Purdue University News. November 3, 2005
http://news.uns.purdue.edu/html4ever/2005/051103.Basu.pharmacy.html
11. The Global Pharmaceutical Market – International Trade and Competition in High Technology
Pantea Hadaegh, Sherry Y Lin, Luca Schenato, Chi Wai Yiu & Professor Michael Borrus, Haas School of Business, University of California Berkeley. May 15, 2002.
12. Costs, Controversies Frame 2005
Gina Shaw, Drug Discovery & Development, Reed Business Information. http://www.dddmag.com/
13. Generic Drugs (Presentation)
Ted Sherwood, Office of Pharmaceutical Science, Centre for Drug Evaluation and Research, Food and Drug Administration, 2006.
14. Statement of Gary Buehler, R.Ph, Director of the Office of Generic Drugs, Center for Drug Evaluation and Research, Food and Drug Administration before Special Committee on Aging United States Senate July 20, 2006.
15. The World Generics Market 2006-2011 â?” Abstract. May 18, 2006 by Visiongain
16. Generic Drug Approvals, Office of Generic Drugs, Centre for Drug Evaluation and Research, Food and Drug Administration. http://www.fda.gov/cder/ogd/approvals/default.htm
17. Generic Medicines
Health and Pharma, Published 16 April, 2005. EurActiv.com EU News & Policy Positions.
18. Destination Europe
Sapna Dogra, Express Pharma, Fortnightly Insight for Pharma Professionals, 1 â?” 15 July 2006. Indian Express Newspapers (Mumbai) Limited (Mumbai, India). www.expresspharmaonline.com
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