Product development drama for big pharma

By Jane Honeyman and Katherine Gracey

Bringing new and improved products into the market place is so important and rewards your company with continued and significant presence. New products create excitement, promote innovation, attract new customers and increase revenue.

So how do you develop a new product?

1

Looks easy right? It can be for the FMCG (fast moving consumer goods) industry but unfortunately this straightforward timeline does not work so well if you are in the pharmaceutical industry….


Let’s look at some key difference between the two markets.

taLooks like life is lot easier for a marketing manager in the FMCG industry!!


The two key problems that pharmaceutical companies face during product development are:

1. Testing, design and development

  • tightly regulated clinical trials and manufacturing requirements (it can take up to 15 years for some products to reach the market!)
  • products are not easily ‘tweaked’
  • difficult to test products during development and subsequently only launch the ‘popular’ products
  • patents may expire before a product is even released

2

The cost of developing a prescription drug that gains market approval is currently estimated to cost around $2.6 billion!!!!

(Source: http://csdd.tufts.edu/files/uploads/Tufts_CSDD_briefing_on_RD_cost_study_-_Nov_18,_2014..pdf)

And only an estimated 1 in 10 drugs currently in Phase I clinical trials are eventfully approved and launched into the market!!!

(Source: http://www.reuters.com/article/2011/02/14/us-pharmaceuticals-success-idUSTRE71D2U920110214)

2. Advertising, promotion and sales

  • restrictions and regulations mean that prescription drugs cannot be advertised to the consumer and the customer (the doctor) chooses the product for the consumer (the patient)
  • products cannot be freely promoted through any channel (TV, social media, radio)
  • generic (‘copycat’ versions) of the drug can be released before the innovator drug has turned a profit (an estimated $113 billion of sales during 2010-2014 was lost to generics)

(Source: http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html)

An unfortunate decline in innovation

The process of discovering and developing new drug products is unique, difficult and unusual when compared to the rather straightforward process experienced by the FMCG industry.

The cost of research and development in the pharmaceutical industry keeps increasing and the development of a new drug requires huge investments into resources and technological expertise, strict adherence to testing regulations and manufacturing standards….and then, and only maybe, will a new drug be available to the general population.

Drugs approved by the US Food & Drug Administration (FDA) have plunged 40% since 2005 whilst R&D costs have surged 40%. The average number of drugs approved per year between 2005 and 2010 was a mere 22.

The FDA is speeding up the approval process for drugs, but is this a wise idea? Lengthy clinical trials minimise the chance of serious, but unusual, side effects from occurring in a small percentage of the population.

Competitors in the industry may have to combine their knowledge and resources and start working together to improve the rate of successful drugs being released on the market.

Maybe the perception that pharmaceutical companies are ‘greedy’, ‘immoral’ and ‘evil’ is not so fitting….

Do you think the pharmaceutical industry needs saving?

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17 thoughts on “Product development drama for big pharma

  1. Great Blog Jane & Katherine! I’m a nurse & a skeptic so it’s great to see others interested in the topic. The perception/stereotype is definately fitting! Some of the so called “clinical trials”are sponsored by the drug company & are usually tested on normal healthy adults, not people over 65 who have a number of chronic medical conditions/diseases who are the ones who will be taking the drug. Statins (cholesterol lowering drugs) are the most prescribed medications in Australia. Catalyst on the ABC did a great 2 part story on this drug – very interesting. http://www.abc.net.au/catalyst/heartofthematter/. Why do we spend so much money on drugs that treat symptoms (not the disease) & sometimes cause unwanted side effects, instead of addressing the causes, as many are “lifestyle” diseases?

    Liked by 2 people

    • I agree Nina not only are symptoms addressed but the industry focuses on the ‘how to treat’ rather than ‘how to prevent’. Based on my experience of 10 years in Medical Sales, we are told that close to 50% of molecules are passed in Phase 3. Not only that TGA approval is required then the company has to lobby for PBS. Think of how much money has been given up until this point.

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    • Thanks for the feedback Nina – totally understand your point of view.

      Unfortunately, the type of drugs that treat symptoms (such as high cholesterol in obesity) are cash cows for pharmaceutical companies. If the causes were treated (poor lifestyle habits), then these drugs would not be in such high demand.

      Sadly the government spends very little of the budget on medical research and it is up to pharmaceutical companies to pick up the slack and develop novel medicines. Without their ‘cash cows’ they cannot afford to do research into lesser known ‘orphan diseases’ and develop medicines to treat these conditions.

      As a result, big pharma wear the reputation of being immoral and greedy but they are in an awful catch 22 predicament!

      Like

  2. Excellent post. Feels kind of partial when it comes to comparison between regulations undergone between FMCG products and Pharma drugs. Both have a different existence in the life of every human. Even though both the expected to be flawless, still, if an FMCG products causes an allergy or reaction, it may be something which can be treated, but when it comes to pharmaceutical drugs, mistakes may also prove to be fatal. If you ask about the saving, what if the particular drug on release into the market shows it side effects only on the later stage of medication and not primitively. Releasing or launching drugs into the market is a very important decision and should be such ones should be committed very carefully, regardless of the investment done. The reason behind the above statement is clear, People’s lives are at stake, rather Sick people’s lives. And successful products often obtain a large amount of profit to the company when compared to its investment.

    Liked by 1 person

  3. I not have a medical background, but i’m so grateful about the advertising restrictions in Australia, compared to what I’ve observed to occur in the USA. Could you imagine the amount of people that would self-diagnose on the internet and then go to the doctor and ask for XYZ pill and if the doctor is reaping financial rewards for prescribing… !!??

    It’s interesting to think of the pharmaceuticals market as being for-profit when as a lay person you almost start to assume the industry is there just for the good of the people!

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  4. Brilliant blog Jane and Katherine. I agree with Nina that sometimes the clinical trials are sponsored by the drug company making those pretty much redundant. You can find a Ted talk by Ben Goldacre that may help you while writing your Reflective essay. ajayvinayan93 also points very well in his comment that speeding up approvals will be high risk for long term side effects. As pointed by Nina lifestyle of a person is also important aspect that needs to be addressed. Cancer research for example has so much money been put in that even after research shows that lifestyle change contributes to major reduction in chances of cancer, due to investments by pharmaceutical companies into RnD promotion of drugs is more than focus on lifestyle alterations.

    Saurabh Pandit

    Liked by 2 people

    • Thanks for the tip Sam – will definitely look up that Ted talk.

      I think the marketing of pharmaceutical products, particularly in the USA where prescription drugs can be advertised to the public, is at the point where the pharmaceutical company is now clutching at straws. They have spent so much money on R&D and but may only be left with one product on the market trying to make all the revenue. Therefore, they will try to say and do anything in order for consumers and customers to purchase it – hence their reputation for being “money hungry” and “unethical”.

      If it were so easy for them to consistently introduce new (and great) products to the market, this perceived unethical marketing and advertising may become redundant because everyone would want their products, and they would work!

      What a shame great cancer drugs aren’t as easy to make as new chocolate bars!

      Liked by 1 person

  5. @jhoneyma As learnt during my Economics for Managers lectures by Prof. Nabin, you may also note that Government can undertake research for benefit of its society but the risk involved is high. To offload the risk, it provides incentives to Pharmaceutical companies in the form of patents which they utilize to have a monopoly in market for sometime (patent period) thus recovering their costs. A pharma company does take into account the time it will need to produce the commercial version of the drug while applying for patents.
    When a patent expires and generic versions are created, the markets become competitive driving the cost low or closer to cost price. This works in favor of the consumers. By then the original inventor is expected to have recovered their costs and also made profits.

    Saurabh Pandit

    Like

    • Patents are a great incentive for pharmaceutical companies but they don’t always give back what they promise.

      I used to work in medical research and now work in an IP law firm, specialising in biotech patents. Quite often a drug has barely reached the market before a patent expires because the commerciisation process is so difficult. To counteract this, many countries offer a patent term extension if your product is not approved close to your patent expiry. This may only give a company a few years to make back the money they have spent on that drug, and quite often they see a loss.

      In term of generic medicines, yes, they do offer excellent value to the consumer but are a nail in the coffin for the innovator company if their product was late to market and they were unable to exploit their patent rights enough to turn a profit.

      .

      Like

  6. Interesting blog raising some vexed issues. Regardless of what you think of large pharma, we do need the industry to develop new drugs to continue to effectively treat disease.Medication is not the panacea, however it is a crucial element in the maintenance of many peoples lives. Whilst I don’t believe large pharma needs saving, they are not all evil and have significantly adjusted their approach to marketing products. Whilst working for a not for profit health agency, we partnered with a large pharma, QUIT Victoria and community health to run a smoking cessation campaign, it really was a win/win for all involved and mostly for the community. Perhaps such a partnership model could be extended to the development of new products.

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  7. Good blog Jane and Katherine. Easy to read and engages you in the comment.

    This is a STICKY issue. We want pharma companies to keep developing new drugs and treatments for disease, the products have to be cheap and we don’t want ANY side effects to new drugs – and the companies can’t make too much profit.

    Perhaps we should merge all the pharma companies and regulate their prices? This eliminate wasteful competition but would kill the associated efficiency. I’m not sure about the rest of the world, but in Australia most of their sales would be to the government through PBS, so why not make them a government business?

    One good thing about pharmaceutical products is that in Australia is that when they go off patent they can be supplied as a generic product and the cost to the government (and us) drops.

    Yes, FMCG would be a lot easier but we don’t eat our fridges.

    Robert

    Like

  8. Agree with the time and cost that pharmaceuticals put in the research and development is the core to their product cost, but in pharmaceutical industry to be competitive one has to invest in r&D once it is done then it pays off really well to the company the margin in pharmaceutical products is huge it can be in many cases more than 200% which will eventually will not only cover their r&d cost but may also make the company a leader in that respective market. The company who produces a successful medicine after have done r&d is also entitled for 20years patent. this our some pros for the pharmaceutical industry. With respect to regulation it is in the favour of general public or else there are many medicines which can be substitute for narcotic drugs.

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  9. Like many I find it hard to find sympathy for large pharma. As a society we have benefitted and likely will continue to benefit from the products they produce. However the risks of bring products forward without the necessary testing is just to great. Also the insights we have gained from this subject make me less concerned about protecting them from the impact of generics. As we have learnt price often implies value and quality and the mere presence of generics does not mean big pharma wont make a profit – only just not as quickly or as large as it would be without it. Is this a bad thing? If generics make benefits of the drug available to more people isn’t that a good thing, Could it just be segmentation issue?

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  10. Pharmaceutical R&D is a very expensive enterprise. To achieve any reasonable ROI, companies must work on areas that will generate significant income. A drug to treat brain cancer will do that. A drug to treat sleeping sickness won’t. When deciding what research programs to invest in, the first question asked is the impact that the new project would have on meeting a major medical need. A project team is then quizzed by management on other aspects of the research plan such as the project’s doability, the challenges facing the development program, the overall projected costs of the entire program, etc. However, there is no doubt that the commercial potential of the envisioned new medicine also plays a role in project selection. A new drug to treat brain cancer would meet a major medical need, as would a drug to treat Human African Trypanosomiasis (sleeping sickness). I have no doubt that the brain cancer program would get funded long before the sleeping sickness program in most, if not all, pharmaceutical companies. After all, a drug for brain cancer would reap a tremendous return-on-investment (ROI). The sleeping sickness drug would likely need to be donated to those who need it.

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  11. I enjoyed that blog! Part of me says that speeding up could possibly save more lives than the few at risk from side effects. How many people have died while there was a perfectly good drug which could have saved them but was in the excruciatingly slow development process? No wonder nobody bothers to develop treatments for rarer diseases. Food for thought.

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  12. Many pharmaceutical companies are facing a gap because of the increasing economic burden and uncertainty linked with internal R&D programs designed to develop new pharmaceutical products. The industry’s is considered to be one of the most highly regulated industries. Pharmaceutical companies are constantly looking for ways to boost their development efforts in order to drive sales and increase profitability. And people may have been harsh with this industry. Developing and launching new products can never be easy, especially in pharmaceutical industry, because the products can do good or harm to people’s lives and, causing a little risk could be devastating not only for individuals’ health condition, but also threatening the survival of pharmaceutical companies.

    Like

  13. Excellent blog
    The huge cost involved in developing a drug and stricter regulation can discourage pharmaceutical companies from innovation, but in long term that will increase their sales and generate more profit.A successful product is an incentive for a pharmaceutical company to
    invest more in r&d to develop new drugs to treat deadly diseases.

    Like

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