Business July/August 2010

No Refills

In 2009, only 25 new drugs were approved—less than half the number in the mid-’90s. Why are new pharmaceuticals so hard to bring to market? Overcautious regulators and profit-hungry conglomerates make easy scapegoats, but they’re only partly to blame. While we’re waiting for both sides to reinvent themselves, even little things like better monitoring of side effects can lead to big new discoveries.

Besides, if companies have really stopped caring about R&D, why is it that according to Joseph DiMasi, an economist at Tufts who specializes in the pharmaceutical industry, spending on R&D is 11 times what it was 30 years ago? (To be sure, R&D spending has dropped in the past year, but it is not clear whether that change represents a new trend or a reaction to the financial crisis.) And why are firms having so many dramatic failures in Phase III, when the compound is tested on a large number of patients and failure is most costly? If they were really so conservative, wouldn’t they be killing those projects a lot earlier?

In fact, while some companies are diversifying into generics and animal medicines, Longman thinks that overall the industry is spending not too little but too much on massive internal research teams hunting for the next blockbuster drugs. He believes the major pharmaceutical companies should make investments in lots of promising compounds at biotech firms—sort of like taking an option on a drug.

No firm has yet taken Longman’s advice and dramatically shrunk its internal research operations. But some companies, notably GlaxoSmithKline and AstraZeneca, are using external partnerships with smaller firms to replenish their pipelines. So far, however, this approach hasn’t been enough to stop the slide. Which raises the worrying question: What if creating new drugs is just getting harder and harder?

In many ways, the task facing researchers is simply more difficult than it was 20 or 30 years ago. Back then, chemists had big fat targets like angiotensin, a protein that causes blood vessels to constrict. Scientists knew it caused high blood pressure, and better yet, they were pretty sure they could develop a small molecule (that is, one that can easily enter the bloodstream) that would hit what they were aiming at. Best of all, hypertension provided an enormous market. Driven by similar finds in other areas, an age of blockbusters dawned: the Lipitors and Prilosecs and Allegras.

These days the targets seem smaller, fewer, and farther away. The best-understood diseases already have a lot of good drugs treating them. New treatments need to prove that they have better efficacy, fewer side effects, or something like a longer-lasting dose that makes them superior to the pills already on the market. Longman likens this process to chasing an Olympic sprinter—who has a head start.

In other words, complaints about me-too drugs are overblown, since they’re actually harder to get approved than something with a novel target. Because clinical trials are the most expensive part of development, such projects are still pretty risky. When you’re up against nothing, it’s relatively easy to show that you’re more effective than the alternative. But when you’re up against already-state-of-the-art treatments, you’re looking for small improvements. That means you need huge numbers of patients to generate a statistically significant result. And since good treatments already exist, the safety hurdles are also higher—the FDA is less likely to approve a statin that causes internal bleeding than a pancreatic-cancer drug that does the same.

Meanwhile, in the areas where we don’t have good drugs, we don’t have so many easy targets, either. The great hopes for finding drug prospects by decoding the human genome have largely faltered; so far, reading our DNA seems mostly to have taught us how little we still understand about our own biology. So researchers are left with complex problems like cancer, which is really not one disease at all, but several thousand different ways that a human cell can go wrong. Or Alzheimer’s: after decades, researchers are still trying to decide whether the disease’s signature beta-amyloid plaques in the brain are a cause of dementia, or a side effect.

Of course it is true that advances in genetic science have yielded some relatively simple targets to shoot for: diseases like Gaucher’s, which is caused by a hereditary deficiency in a single enzyme, and which can be treated with a synthetic version of the missing substance. But it is almost axiomatically true that simple genetic defects with debilitating or fatal consequences tend to be relatively rare. The more-prevalent conditions that we’d really like to find blockbusters to cure are, increasingly, complex metabolic processes like obesity, which may be caused by many things going wrong at once.

Drugs are still being developed for those simpler, rarer conditions—Genzyme, among other companies, has made a good living developing compounds for diseases like Gaucher’s. But the task is harder, and more expensive. A year’s worth of Gaucher’s treatment can cost $200,000.

As Longman suggests, it’s hard for big pharmaceutical companies to target such little markets. Genzyme’s $4.5 billion in annual revenue is less than Pfizer takes in just on Lipitor. Big Pharma isn’t set up for micro-research.

Then there are the customers. Drug-plan managers like Medco and Caremark have gotten more aggressive. Drugs that 10 years ago would have been blockbusters—like the anti-platelet drug Effient, Eli Lilly’s answer to Plavix—now face tough scrutiny. In fact, Medco is funding research that it hopes will make the medical case for the continued use of Plavix (which is cheaper) by most patients, while identifying the subset of patients who would benefit from the new drug. That would be great news for health-care costs, but terrible news for Eli Lilly.

The fact is, no single pipeline theory works well on its own; they all interact. A stodgier FDA can mean stuffier decisions inside companies. Smaller pipelines make for bigger mergers. Bigger companies, in turn, may mean smaller pipelines.

But the way that all these things are intertwined might actually make it easier, rather than harder, to boost our research output: any change has ripple effects. If Big Pharma can look outside its own walls more, and if the FDA can reinvent itself, the whole landscape may well alter. And though we might not quite understand our genome now, give us another decade, and it may start yielding some interesting drug targets for the diseases that we’d still very much like to cure.

Even the smaller targets we’ve already identified may yield more drugs if we can hold down the cost of clinical trials. Strategies like outsourcing our drug trials to countries with lower costs have already helped. And Vijay Vaitheeswaran, the health-care correspondent for The Economist, believes that we will soon be employing electronic reminder systems to ensure that patients take their pills, and monitoring systems that can better track side effects. These two changes alone could make smaller clinical trials more viable and effective; other innovations may follow.

None of this may work—Panacea, after all, was just a Greek goddess. But even if nothing works, look on the bright side: at least we won’t have to pay for so many pricey new drugs.

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Megan McArdle is The Atlantic’s business and economics editor, and the editor of the business channel at

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