Despite striking advances in the biomedical sciences, the flow of new drugs has slowed to a trickle, impairing therapeutic advances as well as the commercial success of drug companies. Reduced productivity in the drug industry is caused mainly by corporate policies that discourage innovation. This is compounded by various consequences of mega-mergers, the obsession for blockbuster drugs, the shift of control of research from scientists to marketers, the need for fast sales growth, and the discontinuation of development compounds for nontechnical reasons. Lessons from the past indicate that these problems can be overcome, and herein, new and improved directions for drug discovery are suggested.Cuatrecasas argues that
The decreasing output of new drugs and the drying up of industry pipelines are well established (1–4). To maintain profitability, the pharmaceutical industry has resorted to practices that have drawn public criticism, including markedly increasing drug prices, increasing spending on advertising and promotion, direct-to-consumer advertising, ineffectively conducting postmarketing surveillance, and limiting comparative efficacy/safety studies with alternative drugs. However, attention should be directed more to the root of these problems — the inefficiencies of drug discovery and development (D&D), which result from the management policies and corporate cultures of the institutions (corporations) that undertake the research and development (R&D). These conditions are so entrenched that we must ponder whether the current system can recover.
What is really wrong?
The low productivity (1–4) of drug D&D is certainly not related to available budgets, which have increased 30-fold since 1970. Many Pharmas devote more than $5 billion/year to R&D, with over $30 billion/year of cumulative spending, greater that the total NIH budget of $28 billion. The falling productivity has been ascribed commonly to a number of well-discussed factors such as regulatory hurdles and high attrition of drug candidates (1–4). Most of these issues are contributory rather than fundamental; at the heart of the problem are the more profound underlying dynamics that drive R&D.
The FDA oversees drug development and approval of new drug applications (NDAs). While the regulatory requirements are well warranted, grossly inadequate resources (5) have resulted in an antiquated process of NDA review that is slow, sometimes of poor quality, and at times subject to political influence. Other issues include the retraction of agreed-upon requirements for approval, the current crisis of FDA leadership (e.g., absence of a permanent commissioner), and the inappropriate role of ideology in decision-making (e.g., the case of approval for the “morning-after” pill). Other critiques can be found elsewhere (e.g., in refs. 1–4 and 5–8). Although significant reforms are in order, the FDA or regulatory issues are not fundamental barriers and contribute only marginally to the decline in drug productivity.
Likewise, we cannot blame the current state of scientific advances, which in the last 20 years have been revolutionary. These advances offer mind-staggering new opportunities in innovative drug discovery and development. It is also fallacious to suggest that the decrease in new drugs is due to our already having conquered the “easy” diseases, a rationalization repeatedly expressed for 3 decades.
The complex, lengthy, and unpredictable nature of drug R&D certainly contributes significantly to high costs and inefficiencies. For example, only 1 or 2 of every 10 compounds entering the phase of human clinical trial ever reaches the market. However, this high rate of loss of drug candidates during development (i.e., attrition) is not greater today than in past decades. As will be elaborated, the current problem of low productivity relates instead primarily to the pervasive mismanagement of the already difficult R&D process.
Changes in the approach to management.
Foremost among the issues that cripple drug R&D is that while utmost creativity and innovation are required, the R&D is conducted in traditional for-profit corporations that are virtually indistinguishable operationally from those that conduct little or no R&D. Most corporations’ top management does not understand the complexities of science, its mode of conduct or objectives, and runs the companies in ways that stifle creativity and innovation (9, 10). Prior to 1980, most drug companies functioned differently. They were smaller than today’s companies, and the nontechnical executives knew and were proud of their scientists and were more likely to allow R&D staff to pursue objectives with little interference. Informal systems dominated behavior. Each company had its unique ways, history, character, and culture. Most appreciated that their existence and fortunes were based on a combination of need and economic benefit, such that profitability was balanced with public responsibility. This tended to minimize the overpricing of drugs. A corporate identity of (and pride in) uniqueness of purpose were evident. Employees felt they were contributing to the improvement of human health.
In the 1970s things began to change. Modern managers entered as chief executive officers (CEOs) and other high-level executives, mostly with little or no technical experience. Many had legal or business school training or came from non-drug industries that functioned with greater organizational discipline. Those promoted internally were often from legal or finance departments, with little or no experience in research, manufacturing, or engineering. Most were unacquainted with research and were uncomfortable with seemingly “unfocused” research organizations that they perceived to operate in a freewheeling, independent style. These executives found comfort in outside management consulting firms that were called upon to suggest structural reshapings and behavioral changes. Corporate management had an instrument by which to introduce order into the research establishments (10).
Unfortunately, while consulting firms had experience in advising non–technology-based corporations, few were familiar with drug companies or complex professional-based matrix organizations. Their recommendations to change organizational structures, procedures, and even program and project portfolios were patterned after companies with which they were familiar, such as General Electric and other so-called well-managed companies. Use of these consulting firms became so fashionable that virtually every Pharma underwent similar externally driven reshaping in an effort to manage and control its scientific enterprise. Further, by popularizing “benchmarking,” a process in which companies review their activities against what others are doing, rather than exploiting their own unique skills and experience, drug companies began to all look alike (10).
With such restructuring, drug companies now felt more confident that they could manage and mandate results with discipline, order, formality, and efficiency. Unfortunately, many of these qualities are ones that suffocate creativity and innovation. Freedom, spontaneity, flexibility, nimbleness, tolerance, compassion, humor, and diversity were replaced by bulky and inflexible organizational structures characterized by regimentation, control, conformity, and excessive bureaucracy. Managers often overfocused and employed top-down decision-making (10). The objective outcomes resulted in more mediocre, not novel, products, and there was no evidence of improved long-term profitability. Ironically, great-sounding slogans were used to achieve conformity while proclaiming the importance of innovation, empowerment, diversity, and compassion.
Managers, not leaders.
It is understandable that most corporate human resources departments are unaware of some of these issues. However, top research managers can unfortunately be similarly uninformed. Most rise through the ranks by satisfying superiors and are selected by nontechnical management (and human resources programs) as “good company players.” While outstanding scientists are often recruited for high leadership roles in research, the “learn about industry” education process and lure of power can ultimately result in an intellectual shortsightedness regarding science. For some, the financial incentives are important. Of course, many of the best-qualified who cannot adjust depart quietly, while others find ways to quixotically manage the system and foster creative environments and research programs. There are still companies that try to focus on excellent science and that attract first-rate scientists. These are, however, exceptional situations.
Drug R&D thrives in a creative, flexible, and nonautocratic environment (9). Success depends on individual freedom and inspiration rather than dogmatic leadership. Instead, in “well-run” corporations today, scientists must contend with “management by objectives,” hierarchical and autocratic organizations, mandates from strategic planning groups, detailed and rigid scheduling, constant reporting, and achievement driven by milestones and flowcharts. Normally, rewards are based on quantitative output (number and weight of reports or numbers of compounds or tests) and extrinsic incentives such as money, promotion, power, and visibility. Is it any wonder that true innovation cannot thrive?
Pressures from shareholders.
The ownership of public companies consists mainly of shareholders who expect rapid (and substantive) returns on their investments. This contrasts (and often conflicts) with the nature of the business objectives, which must be based on long-term investments in science and technology. This dilemma is illustrated by the requirements for quarterly reporting of earnings versus the 10- to 20-year cycles of business operations (product projects). Companies have managed to navigate through this quandary, but it is becoming increasingly difficult.
Shareholders, investment bankers, and analysts, who know little about drug discovery, place intense pressures on CEOs and their boards for quick returns. Boards of directors, although often understanding of the CEOs’ dilemma, are nevertheless forced (by their primary role of representing the interests of shareholders) to push CEOs by setting stringent, short-term financial performance outcomes for determining annual compensation. CEOs are thus under even more pressure to achieve quick results through cost-cutting, low-risk projects, and acquisitions. All too rarely, an enlightened CEO undertakes energetic efforts to educate boards and analysts regarding the nature of their business and to insist that responsibility and accountability to the public are paramount concerns that demand a long-term view and, perhaps, profit expectations more in line with those of other industries.
The decreasing earnings of Pharmas have stimulated mergers and acquisitions, driven by the desire to acquire existing sales (products) while decreasing costs via layoffs. This has created conditions that catalyze further inefficiencies and suffocation of innovation. The merged megacompanies’ research organizations must be integrated rapidly and redundancies eliminated, oftentimes in haste. Decisions regarding people and programs are made arbitrarily, by people far removed from the science and labs. Good programs are eliminated in attempts to consolidate, and knowledge, training, and expertise, often cultivated over many years, are often lost. Active scientists can be transferred to administrative, nonscientific tasks such as project management, licensing, and planning. While these posts often appear glamorous, such appointments can remove the individual from the scientific arena and result in the loss of valuable expertise to the company.
With rapid growth and huge size come changes in bureaucratic procedures and organizational hierarchies that may be confusing or meaningless to individuals (9). Communication, so important in complex scientific undertakings dependent on teams and matrix interactions, becomes burdensome. The dispersion of personnel and projects over geographic regions or buildings is also disruptive.
Pharmas have become much less interested in developing drugs that will sell less than $1 billion a year. Without these “blockbusters” they cannot maintain the traditionally high profits. The loss of major drugs to patent expiration, the high-gross sales required, and the increasing costs of R&D and of advertising, promotion, and marketing require sustaining a sizable number of highly profitable new products. The larger the existing sales, the greater the need for blockbusters.
To optimize the economic potential of new blockbuster drugs, it is necessary that, once they are marketed, the rate of sales growth be as high as possible. The “front-end” upswing benefit is due to the current value of money, maximizing patent periods, preparing for emerging competition, and the inherent promotional value of the rapid growth itself. This is so important that many corporations now even deliberately delay NDAs or marketing itself until they can amass as impressive a promotional “package” as possible. This may include studies that support other clinical indications and dosage forms, marketing support, and economic data on other “benefits,” such as formularies and reimbursement.
This approach contrasts with the practices of 20–30 years ago. The rationale then was to initiate marketing more quietly with whatever was necessary to receive FDA approval and to expand the franchise gradually but solidly over ensuing years with follow-up studies and analyses based on experience. The medical community was perceived as being cautious with new medicines. The drug’s labeling was revised frequently over time to reflect new indications and dosage forms, side effects, warnings, and contraindications. This approach also helped create longer-lasting brand loyalty, very important in the days before automatic generic substitution on patent expiration. The economic value of new drugs was initially lower, but it increased and was spread over many years.
A danger of today’s exceedingly aggressive introduction of new drugs into the marketplace is that it is virtually impossible to obtain postmarketing data from pharmacovigilance programs. Thus, it is more likely that unexpected, serious adverse events will be discovered only after millions of drug exposures. In recent years many drugs have been withdrawn suddenly from the market, under duress, due to such unexpected and serious side effects.
Infrequent but serious adverse events can arouse significant public attention and turmoil. There is little time to scientifically evaluate possible contributing factors. The media’s quest for sensationalism helps create a frenzy of emotion, misinformation, and accusations. It is nearly impossible to rationally resolve complex scientific issues under this type of public scrutiny. Thus, in many cases the only alternative is to take the drug off the market. This can be calamitous for the company as well as those patients who have suffered or who received major benefits from the drug. Many of the adverse events reported are clearly causally related, but attribution in other cases may be questionable. In most cases the stigma of incrimination and market withdrawal is such that no matter what the facts turn out to be, marketing cannot be restored.
Another risk of overzealous development planning for blockbuster status is that unexpected clinical or regulatory “problems” that always arise can become sufficiently discouraging to derail the drug altogether; expectations are not met, and the blockbuster status is compromised. Clearly, to better serve public safety and instill scientifically valid decision-making, and improve the long-term interests of corporations and shareholders, better systems of postmarketing surveillance are needed. But this is probably not possible without more deliberate and cautious marketing of new drugs.
The shift from R&D to marketing.
The decision that a company cannot waste resources on non-blockbuster drugs often leads to unwise decisions. Marketing departments, almost by definition, must control R&D. They decide, ultimately, which research programs, diseases, indications, characteristics, and development compounds to pursue. Marketers rarely have interest in early-stage compounds with novel mechanisms or in unfamiliar clinical indications. They often push to discontinue (or not license-in) programs based on unsupportable commercial extrapolations, to the great frustration of scientists.