News

For years, many in the health policy world have talked about the emphasis that pharmaceutical manufacturers were putting on “me too” drugs – drugs that are structurally similar to existing drugs with only subtle differences. And for a long time, I have been reading articles about the lack of new drugs in the drug development pipeline – especially blockbuster drugs that break new ground in the treatment of disease.

A stunning statistic in the New York Times, however, caught me totally unawares in its magnitude. According to David Bornstein, 800,000 medical research papers were published in 2008 but only 21 new drugs – twenty one – were approved by the FDA last year. Assuming there should be some connection between medical research and new drugs, the paucity of new drugs is remarkable.

So: what is going on here? Many explanations have been posited; among the most plausible is the way the structure and financial incentives of the drug industry have built up over time.

I have been fascinated to observe what has happened to Pfizer, as an example. (My fascination might be connected to the fact that our offices are across the street from the old Pfizer Research and Development headquarters in Ann Arbor and I live in a community that suffered as Pfizer’s fortunes suffered.) Pfizer scientists invented Lipitor – a true blockbuster drug in its impact on cholesterol levels, and, concomitantly for many people, heart disease.

Lipitor was a double edged sword for Pfizer – both a blessing and a curse. The blessing bestowed on the company is fairly obvious: profits from Lipitor were enormous and made Pfizer one of the top drug companies in the country. And the curse? Today, as Lipitor is about to come off patent protection, this is becoming clearer: Lipitor brought in $10.7 billion of Pfizer’s $67.8 billion in worldwide sales last year. It is an enormous danger for any company to be so heavily dependent on one product for such a large share of its profits.

The Wall Street Journal interviewed Ian Read, the new CEO of Pfizer, to see how he is planning to handle this major loss of a proprietary market. In the article, Read emphasizes his plans to cut costs – to be a leaner organization.

What costs are being cut, according to Read? One major area he emphasizes is research and development. His plan is for Pfizer to spend one third less on R & D in the future than it does now.

Say what? Isn’t R & D the engine of growth for a pharmaceutical company?

Read defends this decision by saying that he is “right sizing” the company (every CEO says that when they cut costs). But, what is more telling is how Wall Street is viewing these cuts: when the plan was announced in February, Pfizer’s shares reached 52-week highs with more than $7 billion in share buybacks planned for this year.

What is wrong with this picture? Well, nothing, if you are the CEO of a pharmaceutical manufacturer. But everything, if you are a clinician or consumer hoping for new drug development. The drug industry seems to have become more about protecting patents than innovating; more about making money than making new pathways to cure disease. The industry is responding to the incentives in the system: but it is a broken system that rewards short term thinking and cost cutting rather than long term investments.

We are all the losers in this process. The only question is: what will it take to fix this system and will we be able to get there any time in the near future?