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Threats Towards Radical Innovation in the Biomedical Industry: From a Pharmaceutical Perspective

Essay by   •  November 17, 2011  •  Case Study  •  2,061 Words (9 Pages)  •  1,845 Views

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John C. Lechleiter, Ph.D., Chairman and CEO of Eli Lilly and Company, recommended during the discussion on health reform changes in the US Chamber of Commerce in Washington, DC, USA 14 May 2009, a focus on innovation in the pharmaceutical industry needed to be encouraged. He argued that if innovation was not placed in "the spot-light" beside quality, access, and expenses it would be hard to avoid what he called "unintended side-effects." Innovation needs to be put in focus or else "the important goals of expanding access, improving quality, and controlling costs will prove illusory" (Drennen, 2009).

By this Dr. Lechleiter was addressing the exact issue in the trend seen in the medical industry of the western world today, where patent licences is harder to get and is generally less worth than what have been seen earlier. This makes the risk of investing in radical innovation less tempting leading towards a trend where it is more cost-efficient to make trivial improvements of already existing drugs. It is absolutely essential to find a balance between benefits for the society as well as for the industry, to keep essential innovation in the biomedical field.

In an opinion article published in the Wall Street Journal after the meeting on the 14'Th of May 2009, Lechleiter said that "Biomedical innovation is not incompatible with the healthcare reform goals of universal access, quality improvement, and cost control. On the contrary, without new, more effective medicines--along with new devices and diagnostic tools, and better treatments and surgical techniques--it will be impossible for larger numbers of Americans to obtain better health care at a manageable cost." (Lechleiter, 2009).

This review essay will briefly look at how current and future changes in patent licence regulations may affect the pharmaceutical industry. The text will discuss how lack of appropriate cost-efficiency in the medical industry can result in less quality and regression of innovation, and finally it will be argued how this may also affect outsourcing of research and development (R&D) towards "cheap workforce" in Asia.

Patents are wildly used, and it has to be stated that there should not be raised question that they are important for promoting drug innovation. However, because of their interference with access to lifesaving and health improving medications patens systems have been widely criticised (Kapczynski et al., 2005). Patents licences have therefore become less acknowledged, despite its endorsing effect on medical innovation. Without patent licenses it is unlikely that such large amounts of money put in to medical research over the last century would have been economically beneficial enough (Cohen, 2000). The consequences of that will only be speculations, though the likeliness of such an early invention of medicaments such as Insulin, already made available in 1923 and the mass production of penicillin which opened the pharmacy industry's eyes for the work to find cures for infectious diseases (Lilly, 2011).

A new drug brought to the market can take five to ten years to develop and in 2000 the R&D costs was estimated to be more than $800 million (DiMasi et al., 2003). This is only the cost of the projects that actually leads to a product on the market, leaving the industry with much larger expenses, as most of their projects will never reach the customers. Because of these large investments in research, without any guarantee of success, they merely rely on large revenue for those few, but often very important, products that reach the market. The only thing that can promise such a reward for all the hard work in our society is patent licences.

Changes in regulations that we can see in the western world today can result in insufficient revenue compensation to suppliers of medical products or services will be likely to result in less innovation, and also the quality will eventually suffer (Drennen, 2009).

A significant share of medical research and development (R&D) carried out in the developed parts of the world is conducted by the pharmaceutical industry. In Europe this industry counts for about 13% of the total medical research (Lexchin, 2003 & Love, 2003).

The pharmaceutical industry have the latest years been increasingly accused for using the prime share of their recourses to do trivial improvements of already existing medications , instead of urging research towards drastic innovations or "new molecular entities" (NMEs). A NME is an active substance that has never before been approved for marketing in any form, and to develop such substances requires many years of research and testing. To save time and costs, simple modifications of already existing drugs has become the "easy potion", requiring shorter clinical trials, and giving a higher chance of being approved. Evidently it was seen that in the period of 1993-2004 the number of drastic innovation stayed stable, even though R&D costs in the same period increased by 147% (United States Government Accountability, 2006).

In 2002, 60% of the drug applications that were submitted to the Food and Drug Administration were applications for drugs that were merely modified from their earlier form, and this in comparison to the modest percentage of strongly innovative drugs which represented only 12% of all the applications (Lexchin, 2003 & Love, 2003).

As Weisbrod argued already in 1991 the cause of declining profit rewards for medical innovation pharmaceutical companies gets motivated to create expensive and intricate treatment over cost efficient and simple treatment. This trend is promoting inefficient "halfway" technologies that can result in little benefit for the society, instead of engaging definitive technologies, where a full understanding of a disease is understood and the consequential treatments are normally less costly, more simple and effective (Thomas, 1971).

From 1990 to 1994, in the pharmaceuticals sector 88 NME pharmaceuticals came to market in Europe when €8 billion was put in to R&D and 74 in the USA with investments of €6 billion. The numbers of NMEs are seen to be decreasing, based on the same numbers from 2000 to 2004, and this even though a large increase in R&D investing can be seen: 57 NME reached the marked in EU (€21 billion invested) and 70 in the USA (€27 billion invested) (EFPIA, 2003).

This can only be explained by that the trend of research focus towards priority review drugs, where there appears to be a clear and important advance over available therapies, is clearly decreasing. At the same time R&D expenses are directed towards standard review drugs, which are drugs with therapeutic qualities

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