In defence of big Pharma R&D is not just R.
Before a discovery can be used to treat people extensive development is often necessary. An example would be protease inhibitors for AIDS.

Proof of principle was University based, but the molecules had to be tinkered so they would be absorbed and get to where the virus is.

Also, the private sector is needed to deal with the FDA. Strange but true, a key role of big pharma is to finance and run phase III (that is huge) trials to demonstrate safety and effectiveness. This also means that new innovative startup companies need an established partner to bring their products to market.

Clinical trials are very difficult as they must be both rigorous science and ethical patient care. Basically every eventuality has to be anticipated and written into the protocol so the trial is a controlled experiment in which doctors do what is best for patients.

At the stage of developing the product and proving it works, the big old companies have something we need and they expect to get huge profits for providing it.

Now I think this doesn't mean that health care reform is a mistake. Pharmaceutical companies get a huge return on investment. Each one can't afford to accept a normal return, similar to firms in other sectors, because they will be taken over. A stingier medicare administration would reduce profits across the industry, so no one would stand out as under performing.

update: Further discussion at Brad's blog



I attended an interesting conference where one of the high-ups in UK academic cancer research was speaking. They have enormous charitable funding to do basic research, chemists of known competence in vast abundance, and the cancer research organisation has its own hospital so can do phase-I and phase-II trials, but said they couldn't possibly take a drug all the way to market.

The issue seems to be that the cost of synthesising products in reasonable bulk is large enough that you want a partner to bear it, and the cost of phase-III trials where you're working with a fair chunk of the people with some particular cancer in the country is also enormous.

And all partners want patent-scale exclusivity, they want to have the potential of jackpot rather than simple payment for fine-chemicals work.

I didn't ask whether it was possible to get the bulk syntheses done by Dr Reddy's or another of the Indian generics magnates. It's not absolutely obvious that you can't get phase-III trials done with pure public funding; they cost as much as a small space probe or a medium physics facility, but public funding has launched a lot of small space probes in the last fifty years, and there are quite a lot of medium physics facilities around.

Posted by: Tom Womack | November 13, 2007 at 10:25 AM

"The NIH budget is similar to total R&D spending by pharmaceutical companies." -Waldman

Maybe the total budget, but Pharma spends almost twice as much as NIH on drug research. In Anderson, Shea, Hussey, Keyhani, and Zephryin (Health Affairs, July 21, 2004, Doughnut Holes and Price Controls) they report that Pharma accounted for 60% of total drug research compared to 34% from NIH and 6% private.

Posted by: Hederman | November 13, 2007 at 10:50 AM

Tom, its not true that you can't do Phase III with pure public funding. NIH is sponsoring a number of phase III trials. There have also been quite a few successful trials with public funding under the Orphan Drug act. These studies cost in the millions to 10s of millions as opposed to space probe costs. Some of these trials have been influential. Tissue plasminogen activator (TPA) for stroke was an NIH sponsored trial. To be fair, these are often trials of 'off the shelf' agents that Big Pharma has no interest in pursuing. In some areas, its impossible to get Big Pharma interested in phase III trials because the disease in question is rare to uncommon. In other cases, Big Pharma avoids appropriate phase III trials because an adverse outcome would affect profits. For example, trials comparing efficacy of different anti-psychotics and anti-depressants have been done under NIH auspices.
NIH trials are often cheaper than industry trials, partly because academics flock to these trials because the results will always be published. In addition, NIH is more likely to support innovative trial designs than industrial sponsors.

Posted by: Roger Albin | November 13, 2007 at 10:59 AM

Good points Roger, not to mention the aspirin and beta carotene experiment with a sample size of 20,000.

Tom I'm pretty sure that synthesis of enough of a synthetic organic chemical for a phase III trial is not very costly, although setting up synthesis to quality acceptable to the FDA for even phase I and II trials is costly, scaling up can't be all that costly.

Writing the protocol of a study is (and must be) a major effort (as I describe above). The patient care of a phase III study is costly to enormously costly depending (enormous for TPA). Here Roger's "academics flock to" point is key. Almost all of the cost of the TPA trial was not on the NIH budget as it was host entities paying for stroke patient care and eager to be involved.

Posted by: Robert Waldmann | November 13, 2007 at 01:02 PM