1.2. The dilemma of R&D in the pharmaceutical industry

Consistent annual cuts by the health care providers in the budgets for drug reimbursement, imposed fixed prices and maximum treatment costs, large discounts and discounted contracts enforced on the pharmaceutical companies, and the legal obligation of hospitals, physicians and pharmacists to constantly lower expenditure for drugs caused a stagnation of profits and profit growth for the pharmaceutical industry. When the poor growth of the European economy and the international financial crisis hit the pharmaceutical industry lately, profit growth rates dropped to low single digits at many companies, while they had traditionally been used to see profit growth rates in the two digit range.

This coincided with the expiry of many of the patents protecting the companies’ block buster products, which in some cases resulted in dramatic profit losses for the proprietary companies and additionally increased competition from generic competitors. Generic companies compete with proprietary companies gaining advantage from their higher efficiency in the production of these drug products compared to the originator itself.

Additionally most of the big proprietary companies had not been able to maintain their product pipeline at the same level as in the past and therefore could not compensate the losses from expiring patents of block busters by the introduction of new, potential block buster products.

The development of new drug compounds and drug products is an extremely long, expensive and highly regulated process and traditionally prone to high failure rates during the 4 to 8 years it takes to bring one new drug compound onto the market. Out of 100 drug compounds that go into phase I development (first in human studies) only 1 compound actually will obtain approval to be marketed as a new drug product. Drop out rates are even higher at the preclinical stage, when less than 1% of all screened compounds makes it successfully through the preclinical GLP toxicity phase, which is a mandatory requirement before any new drug compound can be investigated in humans.¹¹

Therefore, the number of new drug products that were submitted and obtained regulatory approval has dropped consistently over the last 15 years as the pipelines of most companies got depleted. This drop in the number of submitted NMEs per year was so dramatic that the FDA as the biggest regulatory authority openly expressed its concern about the future shortage of new drugs. While 45 NDAs were submitted in 1996, only 22 were submitted in 2002 and the number for 2010 was down again to 23 from a high of 38 in 2005 for all submitted NDAs and BLAs together.¹²

Development costs for a new drug product are immense and often exceed 1 billion US$¹³ for a new drug in a chronic indication. The company covers these costs for all of its development projects by the large profits it makes from the few successfully authorised products while these are protected by intellectual property rights and thus free from generic competition and price reductions.

At the same time regulatory bodies in all countries and especially the FDA have increasingly pressed the companies to increase the quality of drug products over the last decades. As a result the requirements of CGMP standards for the production and testing of drug compounds and drug products raised and so did the ever increasing requirements for preclinical and clinical studies to demonstrate the efficacy and safety of new drugs. All of this has considerably increased the costs for the manufacturing of drug products and even more dramatically the time and costs for the development of new drugs. While safe and efficacious drugs are obviously of utmost importance to every society in order to improve the health of its people and at the same time protect them as much as possible from detrimental side effects, this also generates increased costs for the health care systems. Pharmaceutical companies request premium prices for these new drugs that are providing a higher value proposition for the customer, i.e. the patients and the health care providers, in being more efficacious, safer or providing better compliance for the patients in using them safely and conveniently.

Despite the immense development costs and stringent regulatory requirements for the production and quality control of drug products there is however, still a high rate of failure in both, the development of new drugs and even the manufacturing of market supplies for approved drug products. In 2007 the average batch rejection rate in the pharmaceutical industry ranged around 6.7% corresponding to 3s.¹⁴ This means that 3.7% of all manufactured batches did not fulfil the defined quality criteria as they showed either deviations during analytical testing or could not be manufactured at the required process conditions. In other words, a failure rate of just 1% (0.7% corresponds to 4s!) means that there would be 2 unsafe landings every day at London Heathrow or 6 hours of unsafe drinking water every month!¹⁵

This visualises the other dilemma of R&D in the pharmaceutical industry quite strikingly – despite the high costs spent during the development, the immense quality systems in place, and the extremely high regulatory burden experienced during development and manufacturing of drug products the outcome still lags behind the standards in other industries. Considering the consistency of quality and the reliability with which these drug products can be manufactured at a commercial scale in routine manufacturing, this reflects the shortcomings during development to adequately investigate the impact of material attributes and process parameters on the relevant attributes of a drug product. While many scientific investigations are carried out most of them fail to provide relevant criteria to ensure consistent quality performance during manufacturing throughout a product’s lifecycle. This results in batch failures or low yields as a consequence of system immanent variability and observed changes in these systems during a product’s lifecycle.

¹¹ Tickell; Rebuilding Pharma’s Contract with Society; p 12-19
¹² NME applications to CDER (last 15 years); 2011
¹³ Fuhr; Why quality-by-design should be on the executive team’s agenda; p 195-203
¹⁴ Erni; ICH Q8, Q9 and Q10; 2008
¹⁵ Erni; ICH Q8, Q9 and Q10; 2008