Where Do Drugs Come From?

Megan McArdle Nov 4 2010, 1:40 PM ET

Derek Lowe blogs a paper that tries to answer this question. The results:

58% from pharmaceutical companies.
18% from biotech companies..
16% from universities, transferred to biotech.
8% from universities, transferred to pharma.

That sounds about right to me. And finally, I have some hard numbers to point to when I next run into someone who tries to tell me that all drugs are found with NIH grants, and that drug companies hardly do any research. (I know that this sounds like the most ridiculous strawman, but believe me, there are people - who regard themselves as intelligent and informed - who believe this passionately, in nearly those exact words). But fear not, this isn't going to be a relentless pharma-is-great post, because it's certainly not a pharma-is-great paper. Read on. . .

Now to the qualitative rankings. The author used FDA priority reviews as a proxy for unmet medical need, but the scientific innovation rating was done basically by hand, evaluating both a drug's mechanism of action and how much its structure differed from what had come before. Just under half (123) of the drugs during this period were in for priority review, and of those, we have:

46% from pharmaceutical companies.
30% from biotech companies.
23% from universities (transferred to either biotech or pharma).

That shows the biotech- and university-derived drugs outperforming when you look at things this way, which again seems about right to me. Note that this means that the majority of biotech submissions are priority reviews, and the majority of pharma drugs aren't. And now to innovation - 118 of the drugs during this period were considered to have scientific novelty (46%), and of those:

44% were from pharmaceutical companies.
25% were from biotech companies, and
31% were from universities (transferred to either biotech or pharma).

Lowe explores some explanations, which will be familiar to those who read my article on pharmaceutical pipelines (unsurprising, since I interviewed Lowe extensively.) The novel treatments tend to be for orphan diseases, because the larger the disease population, the more likely it is that the low-hanging pharmaceutical fruit has been plucked. And orphan diseases are not profitable enough for Big Pharma to pursue them.

Interestingly, one of his commenters makes a response that is fairly common, when you discuss the role of Pharma in drug development: "See! This proves we need basic research!" I get this a fair amount, too, which surprises me, because as far as I know, almost no one is suggesting that we should cut funding for basic scientific research. Even libertarians who are sort of theoretically opposed tend to regard this as literally the last program they're going to attack, when the revolution comes.

It's absolutely true that we need basic research. Indeed, I'd be perfectly comfortable with experimenting with alternate financing schemes for drug development--prizes, say, or directly funded government research, as I believe Dean Baker has proposed. If government really is better at making useful drugs, we should be able to tell within twenty years or so.

But I suspect the less exciting truth is that we need all the bits--the little biotechs that explore small-market drugs and risky targets; the big pharma firms that accumulate capital and build vast distribution chains; the universities and government labs that perform research without any immediately obvious commercial benefit. No one part is where drug discovery "really" happens; or rather, all of them are.