Down on the 'Pharma'

FRAMINGHAM (09/24/2003) - What do Massachusetts Governor Mitt Romney, FDA Commissioner Mark McClellan, and Wyeth Pharmaceuticals R&D President Robert Ruffolo Jr. have in common?

They were all keynoters at Drug Discovery Technology*, but that's where the similarities ended.

Romney was forthright in urging pharmaceutical companies to find a new pricing model (any other view would be political suicide). In a familiar refrain, McClellan cited the agency's strategic plan (see story below) and pushed for more speed, "efficiency," and greater communication between drug companies and the FDA in the face of declining drug applications.

Refreshingly blunt and armed with copious detail, Ruffolo decried the alarming decline in drug company R&D productivity, blaming both external and internal factors. He also outlined steps Wyeth is taking to remain competitive.

Most notably, he blasted Japan, which he called an "enigma" for forcing drug companies to repeat clinical trials they had completed in the United States, making a mockery out of the movement to harmonize drug testing internationally. Disturbingly, he showed slides illustrating pharmaceutical company consolidation over the past 20 years that has reduced its ranks from 42 to 8. Mergers, he said, indicate the "failure" of one and usually both of the merging partners.

While Romney acknowledged it was not his place to tell drug companies what to do -- after all, he ran for office as a conservative, hands-off Republican -- he said the model of maximizing pricing and revenue has to be rethought. Most of his fellow governors share this view.

"An important part of pricing has to be the implications of the pricing," Romney said. Public opinion, he said, is running heavily against the drug companies for what many view as extortionate pricing.

He urged rewriting intellectual property laws that "unnecessarily" protect a drug from "generic competition."At the same time, the heavy stream of capital for drug R&D must be preserved, Romney said without explaining how that can be reconciled with substantial changes in a drug-pricing model.

His political side surfaced when he urged the drug companies to do a better job of educating the public about the life-saving drugs they come up with. Consumers need to learn about the mammoth cost and expense of creating new drugs. That said, companies could improve their bad-guy image. "(Drug companies) have to be careful when it comes to compensation, which for the two top executives can distort the perception of the company," Romney said.

Risk and Reward

How drug companies suffer from a mess mostly not of their own making was Ruffolo's tack. Inflation increases drug R&D costs at more than 12 percent a year, and this activity remains the highest-risk business in the world.

"Our costs are spiraling out of control ... as (we are) following more difficult targets," he said, ticking off a long list of contributory factors: cycles and approval times, regulatory hurdles, numbers and size of clinical trials, spending, costs, product liability, investor's expectations, and risk. The only two things that are decreasing are success rates at all trial phases and drug exclusivity.

And if that wasn't bad enough, there's more. Ruffolo said it costs more like US$1.2 billion to $1.4 billion to develop a drug, not the oft-cited $800 million of the Tufts University report. Post-approval studies, a big thorn in Ruffolo's side, consume a whopping 26 percent of an overall clinical trials budget and are often unnecessary.

As for mergers, cost synergies are not achieved in three-quarters of them. Worse, they create a two- to three-year disruption. "There's no fun in merging," he said.

Starting several years ago, Wyeth initiated "gut-wrenching" reforms, which stressed shorter cycle times along with higher accountability and metrics for its scientists, that Ruffolo said have transformed its R&D operation from the worst to the best. The ongoing program is working its way from discovery to Phase III trials. Phase II and III trials are the focus in 2003 after achieving a 3,000-percent increase in productivity in the clinical pharmacology stage with no rise in budget or headcount. "It's our number one issue," Ruffolo said.

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