OPINION: Big Pharma’s troubles are good news for innovation

Developing new medicines is exceedingly difficult; without exception, it requires many years, a multitude of researchers and much expense.

For every drug on the store shelf, you can be sure that several thousand candidates fell by the wayside over the course of its development, which likely cost hundreds of millions of dollars. It is not uncommon for a large research and development (R&D) facility to go 10 years or more without bringing a single new drug to market.

Innovative pharmaceutical companies — those that devote resources to the development of new drugs — need to offset the financial burdens of all those drugs that did not quite make it, and pay for future R&D efforts by recouping these costs via the drugs that do make it.
 

Patents, price hikes and public outrage

Because the development of new drugs is important to public health, pharmaceutical companies are given an incentive through protection from competition in the form of patents.

In Canada, patent protection lasts 20 years, after which time other companies, which do not have the burden of all of that R&D investment, are free to make and sell cheaper versions of the same drug under a different, generic name.

In the interest of public health, government agencies enforce various regulations on drug manufacturers, and in many cases (though notably not in the US) impose pricing guidelines to increase access to important medicines. In this way, the system creates a delicate balance between rewarding innovation, limiting the power of monopolies and ensuring public health.

Or at least, that’s the way the system is supposed to work. Recent controversies in the US surrounding dramatic price hikes of drugs demonstrate what can happen when the balance is disturbed.

Daraprim is an important antibacterial drug that was developed 62 years ago and has proven very useful for treating patients with malaria and patients with compromised immune systems, such as those with HIV. Last year, Turing Pharmaceuticals purchased the US marketing rights to Daraprim in a clever business deal that allowed them to limit the distribution of the drug prior to increasing the price of a dose, which they did by more than 5,000 per cent, from $13.50 to $750 per pill.

Despite the drug having been off patent for many years, no other companies had been producing generic versions of the drug in the US because the market was small, the drug was relatively cheap and the regulatory hurdles to produce a new generic version were not economically viable.

Publicly, the company claimed that the huge profits would be used to fund the development of newer drugs — which is exactly what drug companies are expected to do.

So why the public outrage? Was it because Turing was not involved in the development of the drug and therefore should not reap such immense fiscal benefit? Was it because of the potential for reduced access to a life-saving drug? Or was it because CEO Martin Shkreli is a notoriously unpleasant character?

It likely has something to do with all three, especially the latter.

After all, recently several other pharmaceutical companies have acted in similar ways, but it is Shkreli who has become the face of the drug profiteering trend. He himself seems keenly aware of this: he recently staged an online charity auction, offering the highest bidder the opportunity to punch him in the face.

Importantly, the situation surrounding Daraprim has been partially resolved, with $1 pill options soon to be available (a similar price for which they are available in much of the rest of the world) and discussions of reforms to US healthcare legislation to prevent this level of profiteering.
 

New opportunities 

The Daraprim story is an example of a pharmaceutical company being innovative, albeit unscrupulously so, in their business strategies. It runs counter to the ways in which society needs pharmaceutical company to innovate, which is through their contributions to health and life sciences by developing newer, better drugs.

How is the modern pharmaceutical industry doing on this front?

An answer can be found in the closing of several large pharmaceutical R&D facilities in the Montreal area a few years ago. The global pharmaceutical industry has been dealing with challenging market conditions, many historical products coming off patent, and a plateau in the number of new drugs being approved each year. In an effort to reduce risk, lower costs and expedite innovation, the industry has begun outsourcing some business functions.

In this new model, start-ups and smaller companies will play a bigger role in drug development, as will partnerships, both industrial–academic and private–public.

For scientists, this is a particularly exciting development, as it will allow for opportunities in drug discovery for a wider group of researchers and lead to new ideas and new approaches to challenges in the field.

This is critical, because an industry that relies on pricing games, rather than new products, to be profitable is unlikely to meet the needs of its customers over the long term.

And when that industry is pharmaceuticals and the customers are patients, those needs can be matters of life and death.

Rafik Naccache (PhD 12) is an assistant professor of Chemistry and Biochemistry in Concordia’s Faculty of Arts and Science. He was a research scientist for 10 years at Merck Frosst Canada, Ltd.

His colleague Pat Forgione is an associate professor. Prior to joining Concordia, Pat was a medicinal chemist at Boehringer Ingelheim.

Chris Coenjarts — previously a technical service director at Munzing — is a chemist currently based out of Ontario.

Find out more about Concordia’s Department of Chemistry and Biochemistry.