Publisher’s Letter: Innovation Crisis?

The recent headlines are alarming—as headlines are always meant to be: According to early reports, the 2011 Pharmaceutical R&D Factbook says worldwide 2010 pharma industry research spending was off 3% from the year before (though it still totaled a respectable $68 billion). FDA approved just 21 new molecular entities in 2010, down from 26 in 2009 and 24 in 2008. The sky is falling.

It’s almost an item of faith that the pharma industry is in the grips of an innovation crisis. Our readers are feeling it. According to early analyses of our 2011 Brand Managers survey (the full report comes out in next month’s issue), marketers rated the product pipeline as the second most significant factor affecting the industry over the past year. (The top choice, no surprise, is the regulatory environment.)

An innovation-based industry should always be worried about where the next great idea is coming from, but numbers like these tell only part of the story. We trawled through some of FDA’s data, with interesting results. Yes, the number of NMEs was down in 2010…but the total was on par with 2006 and 2005, and above the levels of 2007, 2003, and 2002. (“Me, too” may not be the best strategy for market domination, but the farther down the innovation spectrum we look, the more stable the picture appears. Overall rates of NDA approval have looked notably stable for decades, and issuance of Rx ANDAs—line extensions and generics—has skyrocketed.)

The discovery end of the business is cyclical. We may try to tame the rollercoaster by tweaking management styles or reorganizing structures, but these aren’t the drivers. The surges of the past have come from conceptual breakthroughs like chemical library screening (in the ‘70s) and the monumental molecular biology boom of the ‘90s.

But while management can’t create innovation, it can certainly smother it. Anybody who’s been through a big-pharma merger knows how productivity plunges during the integration period: decision-making is unclear, projects are cut, and many folks have to spend their time and energy trying to secure themselves a berth in the re-launched ship, rather than plotting the course into tomorrow’s waters.

Of course, we should be concerned. But it’s way too early to sound the death knell of big pharma.


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