Biomedical Engineering Reference
In-Depth Information
2010 were not novel chemical entities or biopharmaceuticals, but improved versions
and altered formulations. Incremental drug modifi cations of this type can ensure
improved treatment, may induce better patient compliance (by interfering less with
the patients' routines or lifestyle), or enable a more convenient drug delivery (e.g.,
weekly instead of daily regimen). Importantly, newly released improved versions of
a drug can ensure cash-fl ow continuity, bring in additional streams of revenue for
the fi rm, and increase shareholders' returns.
Besides, the options for making incremental drug modifi cations or the chance
to manufacture bioequivalent low-cost generics present coveted new opportunities
to scores of eager industry rivals seeking to enter a new market. Thus, in addition to
the creation of new product value affecting millions of patients, there is also the
immense social and economic benefi t from the thousands of new job positions cre-
ated to handle the research, manufacturing, and marketing of novel drugs in multi-
ple formulations and variations. This realization highlights the role of drug
innovation as a powerful engine of economic progress.
But the creation of new drugs is hardly an orderly, predictable process. There are
enormous diffi culties associated with the making of a safe and effi cacious drug.
Despite unprecedented recent advances in science and technology, serendipity and
chance still play a role in the discovery and synthesis of effective compounds. There
is practically no way of ensuring that years upon years of intense R&D efforts and
huge costs will pay off handsomely in the end as the rates of success in drug discov-
ery remain steadily low. Importantly, the performance uncertainty is amplifi ed by
the presence of stringent regulations and intense scrutiny over the entire develop-
ment process. The critical decision to go to market is essentially outside the control
of the fi rm. The market approval for a new drug ultimately rests with the Food and
Drug Administration (FDA), the government agency entrusted to exercise regula-
tory and control functions over the pharmaceutical industry. These idiosyncrasies
combine to make the development and the life cycle of drugs different from the
innovation process in any other technology-intensive industry.
2.2.1
The Economics of Pharmaceutical Innovation
in Facts and Figures
Creating new drugs is a complex, laborious, lengthy, and costly process with very
uncertain outcomes. For instance, in the USA, the total number of new drugs
approved between 2000 and 2010 was only 333, which seems surprisingly low
given the colossal effort and cost expended by large pharmaceutical companies and
numerous biotech fi rms alike. To explore the economics of drug innovation more
closely and to size up the gravity of the issue, we will focus on the USA as the lead-
ing powerhouse in pharmaceutical research worldwide.
3
3
Some estimates indicate that 64 % of all research on new drugs approved in the last 10 years was
done in the USA, making it the most relevant target of scrutiny.
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