A tale of incompetence, deceit, greed, and an unmitigated thirst for power
It began with strategic incompetence. Prior to the early 1980s, there was no such thing as Big Pharma. Pharmaceutical companies were all big in those days, because that’s what it took to develop a safe, effective, fit-for-purpose medicinal product. In the same way, there is no Big Aerospace, Big Automotive, or Big Electronics sector of those industries; small fry can’t make it. A company supplying highly complex products to consumer markets must be big to get done all the research and design, manufacturing, and product distribution work.
So, where did the boutique pharmaceutical trend that gave rise to Big Pharma come from?
In the early 1980s, pharmaceutical companies that had hitherto been highly vertically integrated began casting off their physical assets, including:
- Manufacturing facilities, making the people working in them redundant
- Distribution warehouses, making the people working in them redundant
- Quality control laboratories, making the people working in them redundant
- Clinical trials units, making the people working in them redundant
- Products that patients were dependent on (out-of-patent products that weren’t netting them cash any more)
Today, what are referred to as Big Pharma companies merely patent molecular compounds, hand them over to third-party contractors, and market the life out of the paltry few that are approved for sale. Those same Big Pharma companies have also outsourced drug development, to small companies that are no bigger than your local supermarket in terms of employee numbers—all in the name of reducing the risk of failure.
The small companies developing medicinal products (known as drugs in the US) will have never brought any kind of drug to market. How’s that for broken?
I explained the background to this strategic incompetence in one of my books, What Patients Need to Know About: Pharmaceutical Supply Chains. For this article, all you need to know is the outcome—pharmaceutical companies selling medicinal products are now dried-up prunes, compared to the fulsome plums they used to be.
Enter Lady Deceit
The number of new medicinal products coming to market every year has been in constant decline for many years. Jack Scannell et al. shone light on this in the paper Diagnosing the decline in pharmaceutical R&D efficiency, dubbing the trend Eroom’s Law (Moore’s Law spelt backwards). They stated:
The past 60 years have seen huge advances in many of the scientific, technological, and managerial factors that should tend to raise the efficiency of commercial drug research and development (RD). Yet the number of new drugs approved per billion US dollars spent on RD has halved roughly every 9 years since 1950, falling around 80-fold in inflation-adjusted terms.
Even more tellingly, the US Government Accountability Office produced a report, dated November 2006, that confirmed this sorry state of affairs. Out of every 250 development candidates entering the development pipeline, just a paltry one gets approved for sale. Failure percentages for products in the industry were recorded as being in the high nineties. The report analysis also revealed the timelines in drug development:
- Preclinical studies = 3 years | Clinical studies = 7 years | Regulatory evaluation = 1½ years
- Total time to develop and gain approval = 11½ years (not the nine months of the Covid era!)
These shocking statistics have been hidden in the shadows, as patent protection allows pharmaceutical companies to charge eye-watering prices, enabled by massive sales and marketing budgets, keeping the customers rolling in.
The ugly truth is that this is an industry in deep trouble, trying desperately to keep its investors supplied with blockbuster returns, while staying tight-lipped on the worrying secrets within. I can confidently say that today, I’m revealing the truth.
Why so confident?
The reason I can say this so confidently is that I authored a book on the pharmaceutical industry, entitled Supply Chain Management in the Drug Industry: Delivering Patient Value for Pharmaceuticals and Biologics, which was published by specialist firm Wiley in 2011. It describes the above issues in detail.
The preface read:
I was staying at a budget hotel on the outskirts of London when I checked my Blackberry for email. It was probably around 3.00 a.m., so my sight was less than perfect. Squinting allowed me to make out the opening: “My name is Jonathan Rose, the Wiley editor for pharmaceutical science books.” Jonathan went on to say: “With interest, I note that you are leading the coming workshop ‘Supply Chain Management in Pharma/Biotech.’ Given the importance of managing supply chain procedures and costs during drug production and manufacture, I believe that a book explaining the concepts, methods, and applications of supply chain management to the pharmaceutical industry would make a timely and well-received text. Such a book would be an important reference and resource for professionals involved in drug development and manufacturing, quality assurance and control, chemical and biological engineering, and regulatory personnel.”
That is what I hope to have achieved with this book. I have attempted, of course, to contribute the maximum possible from my own personal databanks; along with this is supplementary commentary from what I can best describe as “expert witnesses.” The contributors have been hand-picked by me to reinforce, support, and move forward the sentiments in the book. Their powerful contributions are of varying length and depth.
I hope that you enjoy what we present here. The style is meant to entertain as well as to inform; and by informing, the hope is that the overall theme of the book strikes home—the pharmaceutical industry must change in radical ways if supply chains of the future are to meet stakeholder expectations.
I’ve included this short extract above to lend credibility to my comments and analysis here, so please excuse if it sounds immodest. It is, however, essential that as you read this article, you believe me, rather than lending unearned credence to the various actors involved.
Now for the greed and thirst for power
There was a tremendous amount of molecular patenting going…