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spent about $800 million to develop torcetrapib, a heart drug that seemed like a blockbuster until people began to die in clinical trials. Hours after learning the drug was irreversibly flawed, the company called a halt to further trials, a decision that sent its stock downward and put thousands of jobs in jeopardy.
The drama surrounding Pfizer's high-stakes choice summarizes the challenges facing America's pharmaceutical industry, but it also exposes the conflicts between what the public expects and what the drug companies can realistically deliver.
Our society wants drugs that can cure cancer, diabetes, heart disease, and much more. We want to grow hair where none exists, to restore lost memory and virility, and to make up for a lifetime of unhealthy habits. We want these miracle drugs to be inexpensive - and safe within thousandths of a decimal point. And, because so many of us are aging Baby Boomers, we want them now.Competing demands
These demands tug at the system from competing ends. Drug companies are constantly searching for new compounds, either from traditional chemicals or through biotechnology research. They want to quickly to test those compounds because the clock is always ticking on the life of the patent. Once generic copies of the patented drug enter the market, prices plummet. Careful clinical trials are essential, but anything that can take time out of the process saves money - and increases profits.
Federal regulators must worry first and foremost about human safety, but they can't offer 100 percent guarantees without slowing an already ponderous system to a crawl. If they clamp down too hard, innovation is discouraged. If they cut corners, the public is put at unnecessary risk.
The result is a complicated and often unpopular system that costs a lot and which takes a long time to produce relatively few useful drugs.Tufts luck
Consider a recent study by Tufts University
, which examined the cost of producing biotechnology drugs. Unlike prescription drugs that are made with synthetic chemicals, biotech drugs are derived from substances occurring naturally in the human body or in other living organisms. This is a sweet spot for Wisconsin, which has few traditional pharmaceutical companies but scores of promising biotech firms.
The Tufts study concluded it costs $559 million, on average, to bring a biotech drug to market. From discovery to market is about eight years for a biotech drug, versus about seven years for a conventional drug. On the other hand, a higher percentage of biotech drugs are being approved, even though the industry is still relatively new. Roughly 30 percent of biotech drugs win approval, versus 21.5 percent for traditional drugs.
The $559 million development cost cited in the Tufts study represents out-of-pocket cash. The figure rose to $1.2 billion when the average capitalized cost was calculated. The capitalized costs includes both the cash spent by a biotech company in developing the drug and the implicit cost to investors of having money invested for years before there is a return.Pressure from all sides
Drug company critics say costs are too high, especially given how much federal money is invested in drug research and development. So they keep pressure on Congress and state governments to clamp down on Big Pharma whenever possible.
Meanwhile, drug companies such as Pfizer are under pressure to keep their R&D pipelines filled, so they're acquiring biotech companies at a record pace. It was recently reported that 13 biotech firms have been acquired in 2006 for a total of $19 billion, well over their collective stock price.
Technology is helping take time and error out of the drug discovery process; in fact, that may be the first major contribution of human embryonic stem cell research. Animal tests generally work well, but tests employing stem cells and biomarkers could dramatically increase accuracy - and weed out dangerous drugs earlier.
That's not to say drugs will ever be cheap so far as consumers are concerned. The search for new medicines is a process that will continue to be costly, mainly because we ask so much of it.Recent articles by Tom Still
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Tom Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.
The opinions expressed herein or statements made in the above column are solely those of the author and do not necessarily reflect the views of Wisconsin Technology Network, LLC. WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.