Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 49

discoveries, mandated by the public goods nature of this knowledge, makes them
promptly available to all industry participants.
Scientifi c discoveries of great social value can transcend any private fi rm inter-
ests. This rationale dictates that they be kept in the public domain for maximum
social returns. 16 Still, the widely accessible knowledge generated by the public sec-
tor creates a strong and positive externality for the private sector. This unconstrained
availability of new fundamental knowledge is called open science (Cockburn 2007 ).
The expected rapid diffusion of open science serves to stimulate distributed, decen-
tralized research efforts and essentially prompts innovation. However, it can also
make the returns on investment in fundamental science generally hard to attribute or
appropriate (Cockburn and Henderson 1996 ).
However, the notion of the public sector as a designated entity for creating and
disseminating fundamental knowledge is a simplifi cation of its actual involvement
and contribution. Many public sector institutions engage in building molecular
libraries by screening compounds that can directly benefi t private fi rms. The train-
ing of a vast pool of qualifi ed personnel for the pharmaceutical industry is also in
the hands of publicly funded organizations. They are often tasked with providing
the necessary infrastructure for drug discovery and conduct clinical trials for com-
mercially oriented, for-profi t fi rms.
The distinctions between the roles assumed by the public and the private sectors
can easily blur. Private fi rms sometimes straddle the boundaries between creating
fundamental science and applied know-how. On occasion, pharmacologists working
at for-profi t fi rms may have to conduct basic research. Many academic institutions
fi le for patents and retain exclusive rights on their innovations, underscoring the
shifting roles the industry participants go through. Such practices notwithstanding,
the current trend seems to be toward greater mutual dependence among autonomous
organizations, which we discuss below.

2.3.3 Maps, Engines, Vehicles: The Trifecta Model

for Navigating Drug Innovation

The traditional blockbuster model based on genuine breakthrough innovations has
become increasingly hard to maintain. The majority of new drug launches are those of
follow-on or next-in-class compounds that may not provide highly differentiated thera-
peutic value, but are released at short intervals. In fact, only about 20 % of fi rms' R&D
budget associated with clinical testing is for drugs categorized by the FDA as offering
signifi cant improvement over marketed products (Angell 2004 ). New innovation
opportunities are associated mostly with segmentation strategies: niche markets, com-
bination drugs addressing related or concurrent disorders, drugs tailored to specifi c

16 For example, the eradication of the smallpox virus was made possible, thanks to the efforts of the
World Health Organization, which mounted a global vaccination program.