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Published on 27 August 2015 on http://pubs.rsc.org | doi:10.

1039/9781782622345-00001

The Pharmaceutical Industry and the


Future of Drug Development

DAVID TAYLOR
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ABSTRACT
The pharmaceutical industry has a number of unusual characteristics,
both in its structure and in the nature of its business operations, which
are little known outside the industry but which materially aect the
process of bringing new pharmaceuticals to the patient. The develop-
ment of a new pharmaceutical is very time consuming, extremely costly
and high risk, with very little chance of a successful outcome. The
process of research and development is described, together with all its
challenges, including environmental ones. The commercial realities
and constraints of the business, together with its current problems, are
discussed, followed by an exploration of some of the likely future
commercial and technical developments in the business, including the
development of a greener pharmacy.

1 Introduction
The pharmaceutical industry has a number of unusual characteristics that
make it very dierent from what people normally think of as industry. It
is also an industry replete with contradictions; for example, despite the
undisputed fact that for over a century the industry has made a major
contribution to human wellbeing and the reduction of ill health and
suering, it is still regularly identified by the public in opinion surveys as
one of the least trusted industries, often being compared unfavourably to the

Issues in Environmental Science and Technology No. 41


Pharmaceuticals in the Environment
Edited by R.E. Hester and R.M. Harrison
r The Royal Society of Chemistry 2016
Published by the Royal Society of Chemistry, www.rsc.org

1
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2 David Taylor

nuclear industry. It is undoubtedly one of the riskiest businesses in which to


invest money, yet it is perceived by the general public to be excessively
profitable. The major pharma companies rightly promote themselves as
being research-based organisations, yet most people believe that they spend
more on marketing than on research.1,2 Despite the acknowledged risks and
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

costs associated with pharmaceutical development, many citizens still


believe that pharmaceuticals should be being developed to meet all human
needs and that when developed they should be given away to everyone on the
basis of need.
This opening chapter aims to provide a basic understanding of how the
industry works and attempts to provide an explanation for some of its
contradictions. The objective is to provide a backdrop to the business so that
the challenges of the issue of pharmaceuticals in the environment can be
better understood.
Note that the words medicine, pharmaceutical and drug are often
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used interchangeably and the word drug can also mean both a medicine
and an illegal substance, depending on the context. In this chapter the
word pharmaceutical is arbitrarily assigned to the end-products of the
pharmaceutical industry that are used by patients. The word drug is mainly
used for potential pharmaceuticals whilst under development by the industry.

1.1 Historical Background


Human beings have been using drugs to treat illness and disease for more
than 3000 years. A few dozen drugs of plant and animal origin were already
recorded in China around 1100 BCE and by the end of the 16th century the
Chinese were using at least 1900 dierent remedies.3 Today Traditional
Chinese Medicine recognises more than 13 000 drugs.
Outside China, the first known pharmacopeia, the five volumes of De
Material Medica, were written in the first century CE by Dioscorides, a Greek
botanist.4 Herbal practitioners of this early period have been identified in
many indigenous populations across the globe, such as North and South
America,5 India6 and Australia.7 In the later mediaeval period, herbalism
flourished in both the Islamic8 and Christian parts of the world.9 This
tradition continued up to the 17th century, encompassing the work of
Paracelsus10 in Switzerland and Culpepper11 in England. Culpeppers work,
The English Physician, published in 1652, was one of the first English
language pharmacopeias.12
Until the 18th century the use of herbal medicines had been entirely
based on empiricism: practitioners knew what worked but not why or how.
However, in the late 18th century the foundations of pharmacology, the
study of the actions of drugs and how they exert their eects, began to
emerge. William Withering13 in the 1780s was one of the first people to study
and isolate the active ingredient in a herbal remedy. He isolated digitalis
from the foxglove, describing its extraction from various parts of the plant,
its subsequent eects and the optimum way of using it to treat patients.
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The Pharmaceutical Industry and the Future of Drug Development 3

The science of pharmacology developed slowly during the next century and
Oswald Schmiedeberg (18381921) is now generally recognised as the
founder of modern pharmacology.14 In 1872 he became professor of
pharmacology at the University of Strassburg in Austria where he studied the
pharmacology of chloroform and chloral hydrate and in 1878 published the
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

classic text, Outline of Pharmacology.


Coincidentally, modern organic chemistry also began to emerge at around
the same time as pharmacology. Before the 19th century, chemists had
generally believed that compounds obtained from living organisms were
endowed with a vital force that distinguished them from inorganic
compounds. However, in 1828 Friedrich Wohler produced the organic
chemical urea, a constituent of urine, from the entirely inorganic com-
pound, ammonium cyanate. Although Wohler was always cautious about
claiming that he had disproved the theory of vital force, this event has often
been thought of as the starting point of organic chemistry.15 These two
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scientific developments in pharmacology and organic chemistry led,


amongst other developments, to the foundation of the pharmaceutical
industry in the last decade of the 19th century.
The modern pharmaceutical industry can trace its origin to two main
sources: companies such as Merck, Eli Lilly and Roche that had previously
supplied natural products such as morphine, quinine and strychnine,
moved into large-scale production of drugs in the middle of the 19th
century, whilst newly established dyestu and chemical companies, such as
Bayer, ICI, Pfizer & Sandoz, established research labs and discovered medical
applications for their products. Nevertheless, growth was relatively modest
and at the start of the 1930s most medicines were still sold without a
prescription. Almost half of them were compounded locally by pharmacists
and in many cases physicians themselves dispensed medicines directly to
their patients.
However, a number of major advances were made in the early part of the
20th century. Salicylic acid, a natural constituent of willow bark, had been
recorded by Hippocrates as having analgesic properties. In 1897, scientists at
Bayer demonstrated that a chemically modified version of salicylic acid had
much improved ecacy and the product, aspirin, is still in widespread use
today.16 In the 1920s and 1930s both penicillin and insulin were identified
and manufactured, albeit at a modest scale. The Second World War provided
a major stimulus to the developing industry, with requirements for the large-
scale manufacture of analgesics and antibiotics and increasing demands
from governments to undertake research to identify treatments for a wide
range of conditions. After the war, the implementation of state healthcare
systems in Europe, such as the UKs National Health Service (NHS),17 created
a much more stable market, both for the prescription of drugs and, much
more importantly, their reimbursement. This produced a major incentive for
further commercial investment in research, development and manufacture.
This greater role for the state was paralleled on both sides of the Atlantic,
with increasing government regulation of medicine production.
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4 David Taylor

The post-war period from the 1950s to the 1990s saw major advances in
drug development with the introduction of new antibiotics, new analgesics,
such as acetaminophen and ibuprofen, and complete new classes of
pharmaceuticals such as oral contraceptives, -blockers, ACE inhibitors,
benzodiazepines and a wide range of novel anti-cancer medicines.
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

The thalidomide scandal of 196118 triggered a complete reassessment


of state controls on the industry. New regulations now demanded proof of
ecacy, purity and safety, with the latter leading to a massive increase in the
requirements and costs of research and development, particularly in the
clinical testing of new drugs.19 As the barriers to entry in drug production
were raised, a great deal of consolidation occurred in the industry. Likewise,
the processes of globalisation, which had begun before the war, increased.
This resulted in new drug development being dominated by a small number
of very large multi-national companies and the beginning of the era of the
blockbuster drug.
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In 1977, Tagamet, an ulcer medication, became the first ever blockbuster


pharmaceutical, earning its manufacturers, GSK, more than US$ 1 billion
a year and its creators the Nobel Prize. This was followed by a succession
of products, each seemingly more successful than its predecessors. Prozac,
the first selective serotonin re-uptake inhibitor (SSRI) was launched by
Eli Lilly in 1987 and omeprazole, the first proton pump inhibitor (PPI),
was introduced by Astra in 1989. Atorvastatin, marketed as Lipitor in 1996,
became the worlds best-selling drug of all time, with more than
US$ 125 billion in sales over approximately 15 years.
This was probably the golden age for the industry, with research
producing an apparently endless stream of increasingly successful and
profitable products; since then, the industry has been beset by a series of
major problems, many of which have yet to be solved.

1.2 What is a Pharmaceutical?


This may seem an odd question since we all surely know what a pharma-
ceutical is. However, there is no straightforward scientific answer to this
apparently simple question. Pharmaceuticals are not a class of substances
like phthalates or PCBs. They have no chemical, physical, structural or
biological similarities. There is thus no scientific justification for treating
pharmaceuticals collectively as a coherent set of chemical substances.
Pharmaceuticals are often thought of as being complex chemical
structures but they can also be simple aromatic molecules like the anaes-
thetic, propofol (2,6-diisopropylphenol), simple aliphatic molecules like
the vasodilator, nitroglycerine (1,2,3-trinitroxypropane), or more complex but
still relatively low molecular weight molecules like the statin, atorvastatin
(MW 558.6) ((3R, 5R)-7-[2-(4-fluorophenyl)-3-phenyl-4-(phenylcarbamoyl)-
5-propan-2-ylpyrrol-1-yl]-3,5-dihydroxyheptanoic acid). Increasingly, new
pharmaceuticals are likely to be very high molecular weight biopharmaceu-
ticals such as insulin (MW 5800 Da).
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The Pharmaceutical Industry and the Future of Drug Development 5

In fact, the only common factor which unites pharmaceuticals is their use;
substances that we identify as pharmaceuticals are simply those substances
that we use as human (or animal) medicines. This means that, in principle,
any substance might be identified, at some point, as a pharmaceutical.
Not surprisingly therefore, many pharmaceuticals are also used for
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

non-pharmaceutical purposes. For example, the vasodilation properties of


nitroglycerine were only discovered by William Murrell20 after its invention
by Alfred Nobel as the active constituent of dynamite. Similarly, the dis-
coverers of warfarin ((R,S)-4-hydroxy-3-(3-oxo-1-phenylbutyl)-2H-chromen-2-
one) at the University of Wisconsin in 194821 would be amazed that at the
beginning of the 21st century this rat poison is still the most frequently
prescribed anticoagulant in the world. This is not just a historical oddity.
The most recent example is dimethylfumarate, which has widely been used
as a mould inhibitor. It is interesting to note that a year after the European
Union applied the new REACH regulation to impose severe restrictions on
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its use as a mould inhibitor,22 dimethylfumarate under its trade name,


Tecfidera, was granted a pharmaceutical marketing authorisation in 2013 for
use against multiple sclerosis.23 In other words, the global inventory of
chemical substances can be divided into two groups: pharmaceuticals and
those substances for which no pharmaceutical use has yet been identified,
e.g. before 2013 dimethylfumarate was not a pharmaceutical, however, after
2013 it was.
Many commentators seem to believe that pharmaceuticals should be
subjected to dierent regulatory treatment because they are designed to be
biologically active,24 with the implication that this criterion is sucient
to dierentiate pharmaceuticals from other substances. However, this is
incorrect, being derived from a misunderstanding about pharmaceutical
development and it wrongly implies that pharmaceuticals are uniquely
biologically active by design. It would be more appropriate to say that
pharmaceuticals are selected from the many substances that produce a
specific eect in animals, including humans, based on their overall safety.
The majority of pharmaceuticals are initially discovered using high-
throughput screening techniques capable of screening 4100 000 com-
pounds day1, applied to chemical libraries containing several million
compounds.25 The vast majority of chemicals are known to exhibit some
biological activity, so the screening assay is designed to identify only those
substances that exhibit the specific biological activity of interest. It is not
unusual for this initial screening step to generate several hundred potential
leads which then need to be refined down to 1 or 2 candidates for further
investigation. All these initial potential leads exhibit the relevant biological
activity but this may be accompanied by other less-welcome toxicological
properties which must be ruthlessly screened out of the selected set during
the refining period. Thus the final candidate(s) will have the desired bio-
logical activity, but few or no undesirable properties; the purpose of the
refining process is to eliminate those compounds with worse toxicological
profiles, many of which may already exist in the environment.
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6 David Taylor

Thus, from an environmental risk assessment perspective, pharma-


ceuticals are indistinguishable from any other chemical. They are but one
class of the myriad numbers of micro contaminants that emerged at the
end of the 20th century due to major improvements in analytical science.
However, from a risk-management point of view, pharmaceuticals as a group
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

do need to be treated dierently due to their major direct impact on human


health and wellbeing.26 Pharmaceuticals do not pose any more risks to man
and the environment than other chemicals, but the risk/benefit calculations
may be very dierent.
Finally, it is worth mentioning the way in which pharmaceuticals are
named, as this can be a source of confusion. Pharmaceuticals, as chemical
substances, all have systematic IUPAC chemical names to describe their
molecular structure. However, although useful to the synthetic chemist,
these long and cumbersome names are poorly suited to either the
description of experimental work or for use in a marketing context. For
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example, it is clearly much simpler to describe something as warfarin rather


than use its systematic name (R,S)-4-hydroxy-3-(3-oxo-1-phenylbutyl)-2H-
chromen-2-one. Consequently, during its life cycle the same drug will be
described in several dierent ways. Initially, as it makes its way down the
development pathway, the substance will be given a unique reference code,
e.g. Sanofi has a series of codes such as SAR391786 and SAR438037 to
identify substances in their R&D pipeline.27 This convention is primarily for
simplicity, but it also has the advantage of hiding any structural information
about the compound from competitors.
As the drug progresses through clinical trials it will acquire a generic
name, which describes the active ingredient. Initially such names were often
simple contractions of the systematic name, but in 1953 the World Health
Organisation (WHO) created the international non-proprietary name (INN)
system28 to bring some order into the nomenclature. Although there has
been a major improvement in generic naming, there are, however, still
instances where an active ingredient has acquired more than one generic
name from dierent parts of the world. For example, N-(4-hydroxyphenyl)-
ethanamide is known as acetaminophen in the USA and Japan but as
paracetamol in the rest of the world. Today, the generic name of a drug will
be created from descriptors that classify the drugs into dierent categories
and also separate drugs within categories. The generic name is widely used
in the scientific literature and the medical profession since it represents the
specific active ingredient whereas the common name, by which the drug
will usually be known to the public, is the company trade name.
A drug is usually given a trade name during the later stages of its clinical
trials as the marketing strategy for the product begins to be developed. The
trade name will be protected as a trademark, it relates only to the specific
company product and will have been designed with marketing of the drug in
mind. For example, Novartis market the -blocker, metoprolol, as Lopressor
since it is eective at lowering blood pressure. Once a drug is out of patent
the same active ingredient may acquire a large number of dierent
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The Pharmaceutical Industry and the Future of Drug Development 7

trade names, which can cause additional confusion, e.g. acetaminophen


(paracetamol) is marketed as both panadol and tylenol (and has 4100 other
trade names in dierent parts of the world).
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1.3 Environmental Impact


Until the late 1990s the environmental impact of the pharmaceutical
industry was universally considered to be insignificant. Any environmental
impact was considered to arise solely from manufacturing facilities and,
since these were relatively small in size with well-controlled emissions,
environmental impacts were not considered to be a problem. It was
appreciated that the pharmaceutical products themselves were biologically
active, but in view of the small quantities being manufactured and the high
cost of production, releases of the active product to the environment from
manufacturing were expected to be very small.
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However, the discovery of pharmaceutical residues in surface waters from


1994 onwards led to this view being revised. Although the presence of
pharmaceutical residues in surface waters had been predicted by Richardson
and Bowron in the mid-1980s,29 it was not for another decade until such
residues began to be routinely measured following the identification in 1994
of clofibric acid in German rivers by Stan and his colleagues.30 Residues have
now been found in ground waters, estuarine and coastal waters and rivers,
and some compounds have also been detected in drinking water. Low
concentrations of pharmaceuticals in surface waters are now thought to be
ubiquitous, although they are rarely found 40.1 mg l1 and are frequently
o0.01 mg l1.31 Concentrations in wastewaters are usually in the few mg l1
range but in some cases much higher values have been reported.3235
We now know that pharmaceuticals can enter the environment in three
dierent ways: in euents discharged from manufacturing sites, from the
disposal of unused and life-expired medicines, and via excretion from
patients undergoing treatment. Detailed quantification for any individual
pharmaceutical is dicult, but there is general agreement that the latter
source dominates the global environmental input, with euent discharges
and the disposal of unused medicines making relatively small contri-
butions.36,37 Relatively high local concentrations can occur adjacent to
discharges from industry, particularly in developing countries,32,35 and from
hospitals.34
Most scientists, in academia, governments, regulatory bodies and indus-
try, that have evaluated the published data have concluded that there appear
to be no appreciable acute aquatic life eects due to pharmaceuticals in the
environment.38 In other words, short-term immediate damage to the en-
vironment is very unlikely. However, work continues on evaluating potential
chronic eects in order to refine these assessments. This emphatically does
not mean that all pharmaceuticals are benign as far as their environmental
impact is concerned. The devastating impact of diclofenac on the Asian
vulture39 and the implication of EE2 in the feminisation of fish40 are clear
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8 David Taylor

examples that this is not the case. However, pharmaceuticals should be


considered on a case-by-case basis according to their individual properties,
not as a coherent group of substances.
One area of focused eort concerns certain hormones because they are
potentially a class of compounds with observable eects at environmentally
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relevant concentrations. However, as research accumulates it is becoming


clear that hormonally active compounds do not all have similar properties
and this confirms the view that such medicines need to be considered on a
case-by-case basis rather than as a single class. Scientific knowledge of the
potential long-term eects of pharmaceuticals in the environment on plants
and wildlife is still in the early stages of development and is an area of active
research.
The other area of major concern is that of antibiotic resistance.41 Anti-
biotic resistance is a serious and growing phenomenon in contemporary
medicine and has emerged as one of the pre-eminent public health concerns
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of the 21st century. An increasing number of pathogenic bacteria have


developed resistance to commonly used antibiotics, e.g. MRSA (methicillin-
resistant staphylococcus aureus) which has now produced an epidemic of
community-acquired MRSA.42 There continues to be concern that the release
of antibiotics into the environment might be contributing to the growth of
antibiotic resistance. However, there is, at present, relatively little empirical
evidence to support this hypothesis, 43,44 although this remains a very active
area of research.45

2 The Pharmaceutical Industries


As far as most people are concerned, the Pharmaceutical Industry consists of
a small number of very large multinational corporations with household
names such as AstraZeneca, GlaxoSmithKline (GSK), Eli Lilly, Merck,
Novartis, Roche and Pfizer. These companies are collectively known as Big
Pharma, a phrase that is intended to be prejudicial.46 However, this is very
misleading. If you ask a member of the public if they have heard of Teva or
Mylan there is a high probability that they will have never heard of either of
them, despite the fact that Teva is the 11th largest pharmaceutical company
in the world47 and may very well be supplying the medicine that they are
currently taking.
The pharmaceutical industry in some ways resembles an iceberg. These
very well-known companies, which are loosely defined as research-based
pharma companies, represent ca. 40% of the market in terms of finance;47
however, they correspond to only a small fraction of the industry as a whole,
with 490% of pharmaceutical companies, known as generic companies,
being largely invisible to the general public. In turn, these generic com-
panies produce the vast majority of all pharmaceuticals sold. In 2013 84% of
the 4000 million prescriptions issued in the USA were filled by generics.48
This asymmetric situation is caused by the patents system: the large re-
search pharmaceutical companies invest many billions of dollars searching
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The Pharmaceutical Industry and the Future of Drug Development 9

for new drugs.49,50 The majority of the candidate drugs never make it to the
market place because, during development, the drug is found not to work or
to have serious side eects that mean it can never be used in patients.
However, a small number of new pharmaceuticals do enter the market each
year and the patent system ensures that for a limited period of time the
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

innovating company retains exclusive rights to sell the pharmaceutical.


When the patent expires anyone is free to manufacture and sell what is now
termed a generic pharmaceutical. The majority of pharmaceuticals, i.e. all
those that are out of patent, are therefore manufactured and sold by the
generic pharmaceutical companies. Generic pharmaceutical companies
never have an unsuccessful product, whereas the research pharmaceutical
companies rarely have a successful one. This has a major eect on the profile
of the business, the way in which companies are structured and the way in
which they operate.
Generic pharmaceutical companies are low-cost, low-margin and low-risk
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businesses. The products that they choose to manufacture and sell have
already been shown to be valuable and commercially successful in the
market place. Generic companies do not need to incur any research and
development costs, although some of the larger companies do undertake
process-orientated R&D in order to introduce more ecient, and lower cost,
manufacturing. Although manufacturing in the industry is highly regulated,
product volumes are small and manufacturing costs are relatively low.
Marketing costs are also very low since the products are already well
established in the marketplace and the demand is well understood. In many
ways, generic pharmaceutical companies are in commodity markets where
competitive dierentiation is based on cost of goods and profitability is
determined by market share.
The research pharmaceutical companies operate under a completely
dierent business model. It is these innovative companies that bring the
new pharmaceuticals to the market. This is very expensive, time consuming,
and involves extremely high risks. Research and development in the
pharmaceutical industry is very expensive, but it is the development activity
that dominates the costs, particularly in the clinical trials which follow the
pre-clinical development.
Research into ill health and disease can sometimes identify targets where
chemical intervention could generate positive outcomes. High-throughput
screening and other techniques can then be used to identify possible sub-
stances that might be suitable candidate drugs. The most likely candidate(s)
then move from research into development. This not only involves the major
issues of determining whether the candidate drug works satisfactorily
(ecacy) but also whether it causes any significant side eects (safety). It
is also necessary to investigate whether the active substance can be
delivered to the patient satisfactorily, i.e. can the substance be turned into a
useable drug?
The success rate though this development phase is extremely low: o1% of
candidate drugs eventually end up in the pharmacy. This rate is continuing
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10 David Taylor

to deteriorate as regulatory requirements increase and people, both inside


and outside the industry, become increasingly risk averse.

3 Research, Discovery and Development


Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

We saw in Section 1.2 that almost any substance has the potential to find use
as a pharmaceutical, but how do we know which ones to use? In the days
of the herbalist and apothecaries, knowledge was derived from simple
empiricism, substances were used when they had been shown to work, and
such valuable information was passed on in oral tradition until documen-
tation became available. However, although at the beginning of the 21st
century we have far more knowledge than the first century herbalists had,
the process of identifying new drugs is, at least in principle, very similar. The
following recent quote from a medicinal chemisty is apposite:51
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In medicinal chemistry were still fundamentally an observational science.


(That should have been obvious given how little math any of us need to know).
We have broad theories, trends, rules of thumb but none of it is enough to
help us very much, and were constantly surprised by our data. That can be
enjoyable, if you have the right personality type, but it sure isnt restful, and a
lot of the time it isnt very profitable, either.

The following section provides a simplified overview of the process


involved in developing a new pharmaceutical. In view of the low success rate,
the R&D departments of research pharmaceutical companies will not just be
investigating one drug but, at any one time, will be looking at many dierent
substances at varying points in the development cycle. A large company may
have 100200 substances going through its development pipeline at any one
time.52

3.1 Pre-clinical Trials


Identifying a new drug starts with research into the particular illness or
disease of interest. This can be being undertaken within the research
laboratories of the pharmaceutical company but may also be being carried
out in academia, government research organisations, small boutique
pharmaceutical companies or any combination of these. Medical research is
now so complex that large pharmaceutical companies currently undertake
most of their research in combination with partners.
In those situations where the research identifies a specific receptor or
target within the body which could deliver beneficial eects, the search can
begin for a potential drug. The target can be a wide variety of things: a
y
The general public tends to think that the person who provides their prescription is a
chemist, when in fact the correct description is a pharmacist. A medicinal chemist,
sometimes called a pharmaceutical chemist, is someone who uses a combination of chemical
and biological knowledge in the design of new drugs.
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The Pharmaceutical Industry and the Future of Drug Development 11

particular cell type, enzyme, gene, pathway or process. It is estimated that


more than 500 targets are currently under investigation in the research
pharmaceutical companies.
Once a target has been selected, the next step is to identify any substances
that might have some sort of regulating eect on it. Advances in automated
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chemical synthesis techniques, such as combinatorial chemistry, have


enabled chemical libraries to expand rapidly. Aurora Fine Chemicals,53 for
example, has a compound library containing 418 million substances and a
compound library for a pharmaceutical company will now typically contain
samples of 12 million dierent substances.
The search for a likely candidate drug within these vast chemical libraries
has been simplified in the 20th century by the introduction of high-
throughput screening techniques (HTS) which use advances in robotics,
automation, miniaturisation and data handling.54 In these techniques
automated equipment can be used to apply simple biochemical assays to
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very large numbers of chemicals in a short period of time: throughput can


range from 50 000 to 100 000 samples a day. Developments in ultra-high-
throughput screening (UHTS) since 2010 now make assay rates of 1 000 000
samples a day possible. Screening usually takes place in several stages.
Initially a simple assay is used to pre-screen a very large number of samples,
potentially the complete library, although a more clearly defined sub-set is
often used. Subsequently a more complex assay will be used to refine the
initial group, which might contain several hundred compounds, down to a
more manageable number, usually o10. HTS/UHTS techniques can also now
be used to provide initial pharmacokinetic information on absorption, dis-
tribution, metabolism and excretion (ADME). Guiguemde and colleagues
have provided a useful review of the application of these techniques in the
search for candidate drugs to cure or alleviate malaria.55 The outcome of this
activity is the identification of a small number of substances that might lead
to a candidate drug and eventually to a useable pharmaceutical.
This Lead Identification is the second major stage of the R&D process,
following Target Selection, and marks the transition from research into
development. Although there is probably a further 10 years of development
work needed before a drug could be submitted for marketing authorisation,
it is at this point that the drug is likely to be patented. The R&D costs up to
this point will have been relatively modest at a few million US$, but beyond
this point costs escalate rapidly and the business needs to protect its
investment.
The next step in the process, Lead Optimisation, endeavours to reduce
the number of potential leads from ca. 1015 down to 34 substances. At the
same time, attempts will be made to modify the molecular structure in
various ways in the hope of increasing the ecacy whilst simultaneously
decreasing any potential side eects. This sounds simple but will usually
take 23 years of detailed pre-clinical experimentation using in silico, in vitro
and in vivo techniques. During this period, work will also have commenced
on the design of the process chemistry that will initially be used to
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12 David Taylor

manufacture trial batches of the substances (the active ingredients) for use
in the subsequent clinical trials and eventually for full-scale manufacture.
In parallel, work will begin on the potential druggability56 of these
substances, i.e. can the active ingredient be converted into a form that could
be taken by a patient such that the substance can interact with the target.
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This is by no means a straightforward task. The ideal pharmaceutical from


the perspective of the patient is a tablet taken once a day. Any departure from
this ideal has an adverse impact on adherence, i.e. the likelihood that the
patent will actually adhere to the treatment regime. However, if, for example,
you need the pharmaceutical to be absorbed in the intestine, you have to
ensure that it is able to pass though the highly acidic conditions in the
stomach without being degraded, which can be a challenging problem.57
At the end of all this activity it is possible that a candidate drug, and
potentially a reserve candidate, will have emerged. The reserve candidate is
usually the second best candidate to emerge at this point and is the one that
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can be taken forward rapidly to replace the lead candidate should any
unexpected problems arise during the clinical trials.

3.2 Clinical Trials


At this point a decision is needed as to whether to take the candidate forward
into clinical development, where the costs will again rapidly escalate still
further. Although informed by advice from the scientific team, this is pri-
marily a commercial decision. In parallel with the scientific activities, a
considerable amount of additional work will have been undertaken to assess
the commercial potential of the candidate. Have any negative indications
appeared during the pre-clinical development? How good is the drug at
meeting the medical criteria? Are there any significant remaining challenges
in formulation or manufacturing? How secure is the intellectual property?
What is the current competitive situation? What is known about future
competition? How large is the target market? And crucially, what is the likely
sale price, etc. etc.? Provided that these questions can be answered satis-
factorily, the candidate then moves on to the first phase of clinical trials.
Clinical trials take place in four distinct phases, the first three before the
drug is marketed and the fourth phase begins when the pharmaceutical is
prescribed for the first time and continues for the lifetime of the product.
Clinical trials are intended to provide answers to two essential questions
in the development of a new drug: (a) does the drug work? and (b) if it does,
is it safe for the patent to take? However, in many cases, even at the large
scale that some of these trials are undertaken, the answer to these questions
may not be clear-cut. Many people assume that in a clinical trial all (or at
least a majority) of the patients given the treatment will get better, but this is
a rare occurrence. We know that not all patients react in the same way to a
drug, although we rarely know precisely why. One example where we do
know the reason is the breast cancer drug trastuzumab (marketed as
herceptin),58 which only has beneficial eects in those patients with a
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The Pharmaceutical Industry and the Future of Drug Development 13

specific gene; it is of no benefit to all the others. Fortunately, this fact is


known and there is a diagnostic test to identify those patients who will
benefit. Otherwise we would be in the situation that pertains for many
pharmaceuticals that they only work in some patients. For this reason,
amongst many others, the results of a clinical trial usually require advanced
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statistical techniques for their interpretation.


Clinical trials are also beset with a wide range of practical59 and ethical60
problems. Every trial must be approved by an ethics committee and all
patients must give their prior informed consent to participate. In order to
eliminate observer bias, in patients, administrators and doctors, all trials
will be blinded (i.e. the patients receiving medication will be unaware of
whether they are part of the trial group or the control group) and many trials
are now double blind (i.e. neither patient, nurse nor physician will be aware
of this information). All clinical trials undertaken for the purpose of drug
registration must be subject to good clinical practice (GCP) guidelines.61
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A candidate drug will take from six to ten years to complete the first three
phases of clinical trials. The time taken is determined by the duration of the
disease that is being treated and by the extended time that it can sometimes
take to assemble sucient patients for the trial.
Phase 1 trials are to confirm that the results derived from the in silico,
in vitro and in vivo trials in experimental animals are replicated in human
subjects. Small numbers (1015) of healthy human volunteers are exposed to
very low amounts of the candidate drug for short periods under carefully
controlled and monitored conditions. Data from the trial are compared with
data from the pre-clinical studies to ensure that the drug is working as
anticipated. These studies are first time in man experiments and, despite
the care and preparation taken, the unexpected can happen. One of the
best-known examples is the recognition that sildenafil, a drug under
development by Pfizer to treat hypertension, subsequently marketed as
viagra, had a notable impact on male erectile dysfunction.62 However, in
some rare cases the consequences can also be severely adverse.63
If all has gone according to plan in Phase 1, Phase 2 trials can begin, the
primary purpose of which is to establish whether the drug works, i.e. is it
eective against the target disease? In addition, further information on
pharmacodynamics and safety is collected. These trials are larger (100300)
and now involve patients with the illness concerned.
In Phase 3 trials, the treatment is then given to much larger groups of
patients (10003000) in order to confirm its eectiveness, monitor any side
eects, compare it to commonly used treatments and collect information
that will allow it to be used safely. Despite the vast amount of information
that has been generated on the candidate drug before it enters its Phase 3
trials, many drugs fail at this point, with some analysts estimating the failure
rate to be as high as 30%.
This is the first time that the drug will have been given to a large number
of patients and only now will low-frequency side eects begin to appear.
Even a serious, potentially life-threatening, side eect that appears in less
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14 David Taylor

than 1 in 100 people will not have been identified previously.64 In addition,
the higher level of statistical power in the Phase 3 trial may also demonstrate
that the drug has, in fact, little if any ecacy.65 In fact, frequently the drug
doesnt work or works much less eectively than originally predicted or only
works on a sub-set of the population. This information is itself immensely
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valuable in furthering our knowledge and without this detailed empirical


evidence pharmacology would revert to merely anecdotal observation which,
in turn, would ensure that future developments in pharmacology would be
delayed.
Failures of drug candidates at this late stage in the process are, of course,
bad news for the business; by this point a very large amount of money, time
and research eort will have been invested, all of which will have been to no
avail. The impact on the morale of the research team should also not be
forgotten; it is not unusual for a medicinal chemist, for example, to have
spent his/her whole career in the industry and to have never worked on a
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successful product. As a consequence, the industry has devoted considerable


eorts in the last few decades to address this problem of late-stage at-
trition.66 The result is that more and more promising drug candidates are
terminated early in the process, at the first sign of any potential problem,
which history tells us may have led to the unnecessary elimination of many
potentially successful drugs. For example, neither aspirin nor penicillin
would have made it to the market under todays industry drug-development
regimes.
People are frequently surprised that drug development takes such a long
time. Approximately 10 years is likely to elapse between the news media
articles that scientists have discovered a cure for X and patients actually
receiving the medication, even if the development is successful. The reason
is that it actually takes this amount of time and the extensive clinical trial
procedures involved to discover if the treatment will actually work. However,
this raises ethical issues, particularly with life-threatening diseases where
patients and their doctors are desperate to try any new treatment as soon as
possible. This becomes a challenge when it seems clear from early trial data
that the drug may have significant beneficial outcomes, but by the time a
marketing authorisation is approved many potential patients will be dead.
Consequently a number of regulatory programmes67 now exist to provide
expanded access or compassionate access to patients with serious or
life-threatening conditions who do not meet the enrolment criteria for the
clinical trial in progress when it is clear that patients may benefit from the
treatment, that the therapy can be given safely outside the clinical trial
setting, that no other alternative therapy is available, and the drug developer
agrees to provide access to the drug. These programmes are, however,
carefully managed so that the body of clinical trial data itself is not
compromised. However, there is increasing demand for wider and more
rapid access to unproven therapies where the need is severe.68
A successful conclusion of the phase 3 trials enables the innovating
company to assemble all the relevant data on the candidate drug for
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The Pharmaceutical Industry and the Future of Drug Development 15

submission as an application for a marketing authorisation to the


appropriate regulatory body, e.g. the Federal Drug Administration (FDA)
in the United States and the European Medicines Agency (EMA) in the
European Union. Assuming that the application is successful, the pharma-
ceutical, with its trade name, will be launched on the market and start to be
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prescribed to patients. It is at this point that phase 4 of the clinical trial


process begins.
Phase 4 relates to the on-going safety surveillance and technical support of
the pharmaceutical. The safety surveillance, usually known as pharma-
covigilance, is designed to detect any rare or long-term adverse eects over a
much larger patient population and longer time period than was possible
during the phase 13 clinical trials. In some instances pharmacovigilance
regimes will be required by the regulator as part of the marketing author-
isation; in other cases they will be being undertaken by the innovating
company for further research into new applications for the pharmaceutical.
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It is relatively unusual for serious harmful eects to be discovered during


these phase 4 trials but in some cases the data may result in a pharma-
ceutical being no longer sold, or restricted to certain uses.69
The product will then continue to be sold at a high price until the
innovators patent expires, usually somewhere between 5 and 10 years after
initial launch. Subsequently, generic product will begin to appear in the
marketplace and the price will drop significantly.

3.3 Environmental Issues


The overwhelming majority of the R&D eort expended in the design of a
new drug is concerned with its eects in humans. As we saw in Section 1.3,
the environmental impact of the pharmaceutical industry in general and its
products in particular were not considered to be significant until the end of
the last century. However, work is now undertaken in the R&D process in two
specific areas related to the environment. One is the move towards more
sustainable manufacturing and the other towards improving understanding
of any potential environmental impacts that might arise from the use of a
new pharmaceutical.70
The manufacture of most pharmaceuticals is undertaken at a relatively
small scale, i.e. 0.1 to 10 tonnes year1 compared to commodity chemicals
such as terephthalic acid which are produced in plants capable of making
4500 000 tonnes year1. Unlike the majority of bulk chemicals, most
pharmaceuticals are very complex organic molecules that have to be con-
structed using multiple synthetic steps, often involving the isolation and
purification of intermediate products. As a consequence, process eciency
has historically been very low71 and, despite the small volumes of
the pharmaceutical produced, the waste-to-product ratio has been
extremely high.
In recent years, driven by both cost and sustainability issues, the research
pharmaceutical companies have become industry leaders in the
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16 David Taylor

introduction of green chemistry and technology techniques into their


process design. The twelve principles of green chemistry were first formu-
lated by Anastas and Warner in 1998.72 Since then they have been actively
taken up by the pharmaceutical sector in the process design area and are
now reaching further upstream, influencing medicinal chemists in research
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and development laboratories.


Work on process design will begin at some point during phase 1 trials.
Until this point medicinal chemists will have been able to meet the demand
for experimental material from laboratory-scale synthesis; however, the
phase 2 and particularly phase 3 trials demand significant amounts of
material, often at pilot-plant scale. Although speed is still a major criterion
in process development research, increased attention is now given to
ensuring that the process is ecient in energy, water, solvents and raw
materials. It is also necessary to ensure that any residual waste produced is
minimised and that it can be satisfactorily and eciently treated.
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Despite the growing concern about the presence of pharmaceutical resi-


dues in the environment, there are still but few regulatory requirements to
assess the potential environmental impact of a new drug, apart from in the
European Union.73 Other countries such as Canada and Japan have been
considering legislation for several years but as yet the only substantive
regulations are those in the EU. Nevertheless, the research pharmaceutical
industry is aware of its producer responsibilities and most of the companies
have been voluntarily undertaking environmental risk assessments of their
new products for many years. In addition, some companies, e.g. AstraZeneca,
have been going further, making their data public74 and introducing
ecopharmacovigilance programmes, mirroring to some extent the pharma-
covigilance activities undertaken for the human population.75

4 Commercial Realities
4.1 Problems with Patents
A successful pharmaceutical, once approved by medicines regulators such as
the FDA in the United States and the EMA in the European Community, can
then be sold. The innovating company will have already patented the drug
and thus has exclusive rights to sell the product until the patent expires.
However, although patents in developed countries are usually granted for
20 years, the window of sales exclusivity will be significantly less, in most
cases no more than 10 years. This is because the innovating company
needs to patent the drug well before its first launch in order to protect its
intellectual property. During this short period, of ten years or less, the
innovating company has to recoup all the R&D costs of both the drug(s)
being sold and of all the other drugs that failed during development,
together with the manufacturing and marketing costs. The instant that the
patent expires, generic competition will lead to a dramatic reduction in price
and major loss of market share.
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The Pharmaceutical Industry and the Future of Drug Development 17


Table 1 Example of pay for delay mechanism.
Annual Profit/1000 Scrips
Patent Status Cost Price Scrip Price Patent Holder Generic Company
In patent $1 $10 $9000 $0
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Expired $2 $1000 $1000


Patent holder pays generic company $2000/ $7000 $2000
1000 prescriptions to delay manufacture
and sale

Since patent life is one of the key determinants of the income that can be
generated from a product it is not surprising that research companies try to
extend patent life as much as possible.76 This patent evergreening48 can
sometimes be done simply by patenting the manufacturing process or the
drug formulation or, in some cases, the drug delivery system, all of which
can be implemented much closer to the launch date. Generic companies, on
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the other hand, endeavour to have patents set aside or to find ingenious
ways to get around the patents.
There has also been an increase in recent years in pay for delay agree-
ments between patent holders and generic manufacturers. Table 1 shows an
example of how these work. If the patent holder pays the generic company
not to manufacture then both the patent holder and the generic company
benefit, but the price remains higher after patent expiry than it would have
done. However, the legality of these deals is under question.77
It is not only the inevitable loss of market share from generic companies
that the innovating company must be concerned about. Once a candidate
drug is patented, many years before product launch, the concept and
principle on which the drug is based will become public knowledge. All
research pharmaceutical companies are keenly aware that everyone else is
keeping a close watch on their patents. Companies can be expected to begin
investigating interesting patents for areas of research in which they already
have major interests and it is, therefore, quite common for several drugs
with the same or similar modes of action to be simultaneously under
development in dierent companies, each one being carefully designed to
avoid infringing existing patents. Indeed, one of these follow-on drugs might
make it into the market first, which could have serious consequences for the
original innovators sales.
These drugs are often given the derogatory term me-toos and frequently
dismissed as being unnecessary and wasteful products of competition.
However, these drugs, which may only show incremental improvements on
the original, are nonetheless important to patients. It is frequently found
that a patient who cannot tolerate or fails to respond to one drug may benefit
from one of the me-toos.78
This short and increasingly diminished patent life available after
pharmaceutical launch has consequences throughout the business. This has
been recognised by legislators and a number of mechanisms have been
introduced to provide extensions to marketing exclusivity in order to
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18 David Taylor

promote the development of certain drugs, e.g. paediatric medicines with


low commercial value. For example, under certain circumstances a manu-
facturer in the European Union can be granted a supplementary protection
certificate,79 which grants continued sales exclusivity for a limited period,
normally 5 years, after patent expiry.
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The short useful patent life is the reason why research pharmaceutical
companies spend such large amounts of money on marketing. When the
patent expires and generic competition begins, marketing is largely
unnecessary because by then everyone is well aware that the new
pharmaceutical exists and understands its potential benefits for patients.
However, at product launch, the patent holder does not have the time to wait
for this information to slowly spread across the medical community. If the
investment is to be recovered, the new pharmaceutical has to be used
immediately by as many patients as possible. This requires intensive
marketing eorts leading up to the launch of the pharmaceutical to ensure
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that all those who might benefit know of its existence.


It is often said that research pharmaceutical companies spend more on
marketing than on R&D1 but this is largely a myth, arising from the way in
which companies display their expenditure in their annual accounts. All
companies clearly display their R&D expenditures because these often
qualify for tax rebates. However, sales and marketing expenditure is usually
incorporated into an expenditure category called sales, general and
administrative expenses (SGA) in which the marketing budget is only a
relatively small proportion. Nevertheless, industry critics persist in com-
paring R&D with SGA expenditure and coming to false conclusions. A more
realistic estimate suggests that the pharma industry spends approximately
twice as much on R&D as it does on marketing.80
The short useful patent life also results in other consequences with sub-
stantially greater risks. In the early days of the industry, drug development
was a linear process; a pharmaceutical would be approved, manufacturing
would begin, distribution would occur and patients treated. This was pos-
sible because the regulatory and testing procedures were simpler and
shorter, thus leaving sucient patent life, after product launch, to generate a
satisfactory return on investment (ROI). Today, development timescales are
much longer, with a corresponding reduction in the potential sales window.
This is leading to much riskier parallel processing, with development and
testing work, such as drug delivery system design, running in parallel with
the clinical development. Manufacturing process design may also now begin
as soon as a candidate drug is approved for development; the manufacturing
plant might be constructed during Phase 2 or 3 clinical trials and the
product might be manufactured and distributed to pharmacies before the
FDA or EMA has given final marketing approval. This would enable doctors
to write prescriptions for the new pharmaceutical the day after marketing
approval was given. However, should marketing approval not be granted, all
this investment will, of course, be wasted. I have personal experience of a
world-scale chemical plant for a pharmaceutical active ingredient being
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The Pharmaceutical Industry and the Future of Drug Development 19

constructed, commissioned, mothballed and then demolished without ever


making any saleable product when the candidate drug was refused its
market authorisation.
Why would companies take such risks? The aim is to reduce the time
taken to bring a candidate drug to the patient; speed to market is one of the
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key metrics in this industry and weeks are important. A blockbuster


pharmaceutical is defined as one that generates US$ 1 billion revenue a
year,76 which translates to almost $20 million loss in revenue to the business
for every week the product launch is delayed.
The increased risk involved in manufacturing also leads to major
structural changes in the business model. The pharmaceutical industry
developed as a set of fully integrated and self-sucient businesses. In-house
research scientists produced candidate drugs, which were then developed
into saleable products; these were in turn manufactured, marketed and
distributed. However, the risks associated with blockbuster drugs have led
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to a considerable reshaping of the business, particularly in terms of


manufacturing.
The telescoping of the development process leads to an increased risk of
building manufacturing plant that you might never use. However, if your
new drug is successfully launched and then turns out to be a blockbuster you
may need to rapidly scale up your manufacture to meet the unexpected
demand which may subsequently increase still further, requiring even more
manufacturing capacity. However, when the patent expires sales will nose
dive and all this manufacturing capacity will be surplus to requirements.
The initial response to this challenge was to attempt to design and build
modular in-house multi-use manufacturing facilities that could be used to
produce any active ingredient. However, a more economical solution has
been to outsource manufacturing to one or more toll-manufacturers, a
practice which is now commonplace in the research companies. The
innovating company will use a pilot plant to manufacture trial batches of
active ingredient for clinical trials and to test out process design options.
The bulk active ingredient used for product sales will, however, be manu-
factured by contractor(s) who is(are) much more able to match production
with demand.81 In addition to the fact that the research company does not
have to invest capital in expensive manufacturing plant for products with
relatively short life expectancies, outsource contracting has a number of
additional advantages. The use of toll-manufacturing increases flexibility,
making it easier to scale production up or down to meet fluctuating
demands. It also provides business resilience by enabling production to be
divided between dierent locations and, finally, modern toll-manufacturers
are often more knowledgeable about ecient process chemistry and have
much lower operating costs, especially in India and China.
Outsourcing benefits in manufacturing have encouraged industry to
extend it into most other areas of the business. Services such as security,
catering, facilities management and IT have commonly been outsourced, but
this is now extending to what would traditionally have been seen as core
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20 David Taylor

business competencies such as pre-clinical R&D. For example, in 2012


AstraZeneca outsourced substantial amounts of safety assessment, devel-
opment drug metabolism and pharmacokinetics to a contract research
organisation.82
Despite the obvious benefits, outsourcing is itself not without risk and the
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US$ 1.4 billion outsourcing agreement between AstraZeneca and IBM in


2007 for telecommunications and IT was widely seen as a failure and needed
to be renegotiated five years later.83

4.2 Maintaining a Viable Business


The pharmaceutical industry consists of a set of businesses in which
shareholders can be persuaded to invest money with the expectation of
receiving a return on their investment. However, this industry is a high-risk
business and thus the value proposition presented to potential investors is a
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little unusual, as is illustrated by the following case study:

Company A has identified research that suggests that regulation of target B in


human beings shows promise in producing a beneficial outcome for disease C.
Company A has also established that, at least in vitro, its candidate drug X
has the potential to regulate target B. It wishes to attract shareholders to
invest between US$ 500 million and US$ 800 million over the next 1215 years
to develop the candidate into a marketable drug.
Investors should be aware that there is no certainty that drug X is actually
able to regulate target B safely in vivo, or that any such regulation of the target
will actually significantly influence the course of the disease concerned. The
company estimates that the odds of success are o100 : 1 against, but that if
successful the drug would generate substantial annual profits in the region of
US$ 15 billion for up to 10 years.

As this example demonstrates, since the investment required is very large,


long term and has a very high risk of failure, the potential return on
investment must be very high if the necessary funds are to be forthcoming. It
is also worth repeating that, unlike many types of business investment where
some saleable assets will be created by the investment, failure in this context
is absolute; when a candidate drug fails, even in late stage development,
there are zero assets available to oset the losses.
Although this business model has many drawbacks, it has been suf-
ficiently attractive to enough investors for a very successful industry to be
developed over the last century, with a stream of new therapies appearing in
the marketplace. Alternative funding models continue to be proposed but to
date none of these have been applied successfully.84,85
There are a number of people who believe that it is fundamentally
unethical to make very large profits out of essential medicines and that
either the state or non-profit organisations should undertake this task.
However, the risk is simply too great for governments or non-profit
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The Pharmaceutical Industry and the Future of Drug Development 21

companies to consider. For example, imagine the response that you would
get from a finance minister presented with the value proposition in the case
study above for the development of a single drug!
This then has a direct impact on research priorities. It is clear that despite
their size, pharmaceutical companies do not have sucient resources to
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work in all areas of medical need; however, because of development time-


scales and the need to spread their investment risk, they must work on
several candidate drugs simultaneously. In choosing which areas to work in,
a company must address the following question: assuming that our potential
candidate drugs in this area can be successfully marketed, will they generate
sucient income during their patent life to cover their development costs, a
portion of the development costs of previously unsuccessful candidates and,
in addition, make an adequate return for the shareholders?
In other words, there needs to be a suciently large number of patients
who require the drugs and also these patients must be able to pay for them,
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either directly or via insurance or taxation. It should, therefore, be no


surprise that pharmaceutical companies heavily invest in research into
chronic illnesses in the developed world, e.g. cancer, dementia, diabetes,
hypertension, etc., whilst paying scant attention to diseases that only aect
small numbers of patients.

4.3 Access to Medicines


This inevitably produces a substantial number of orphan diseases: life-
threatening conditions that aect only a small fraction of the population,
usually defined as between 1/1000 and 1/5000, which no commercial
organisation can aord to investigate, simply because there are insucient
patients from which to recoup the investment cost. As the time and cost
of development increases and the useful patent life shrinks, the number of
commercially unviable areas also increases. Consequently, a number of
separate pieces of legislation86,87 have been enacted which modify the rules
on patents, taxation and subsidies to make R&D investment financially
viable for these orphan diseases. Pharmaceutical companies are frequently
accused of not investing in some areas because they will make too little
profit. A recent example was the public outrage that the pharmaceutical
industry had not already invested in a vaccine active against Ebola. However,
the reality is that investing in areas such as this would inevitably lead to
bankruptcy since in such areas the costs are certain to exceed the income,
even if a successful product could be invented.
In recent years another problem has emerged. Antibiotics are used to treat
infections in the majority of the population so would not normally be
considered as orphan drugs. However, we have now reached the stage
where new drug development in this area has dwindled. One reason is the
inherent diculty of the research challenges; identifying compounds that
will rapidly kill infectious cells in short timescales whilst being harmless to
every other cell is somewhat dicult; however, the principal reason is
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22 David Taylor

economic. Antibiotics are used by patients for very short periods and sales
volumes are now insucient to justify the necessary development costs. This
is exacerbated by the fact that any new antibiotic would now be prescribed
sparingly to ensure that antibiotic resistance was minimised. This problem
was identified as early as 200388 but only recently have serious attempts been
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made to find a funding solution.89


The other requirement, in addition to having enough potential patients, is
ability to pay or, more specifically, ability to pay enough. This is a major
ethical dilemma for the pharmaceutical industry. It has two parts, one less
visible than the other. The less obvious issue is that it is a determinant of
which diseases receive attention. There may be a large number of potential
patients, but if none of them could aord to buy a newly developed drug
then such diseases are unlikely to be a research priority. The second issue
concerns access to medicines that have already been developed. Both issues
are now described as the access to medicines issue90 and every major
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pharma company has a public policy relating to it, e.g. Pfizer.91


The first issue is being addressed by most of the major research
pharmaceutical companies who are now involved, often with philanthropic
partners, in altruistic drug-development programmes for diseases that
predominantly aect the developing world. For example, GSK has a major
drug development programme on malaria, jointly with the Gates
Foundation.92 None of these drug developments will be profitable; indeed,
most will cost money, leading to an overall reduction in profits, but the
major pharma companies accept that they have a social responsibility in this
area. Recently some pharmaceutical companies have begun to share their
entire libraries of chemical compounds, allowing other researchers to
look through them for promising drug candidates which the companies
themselves are unable to take into commercial development.93 This enables
charitable foundations, government agencies and academics to pursue
developments in these areas.
The second issue, ability to pay, also has two components. It is primarily
a problem with pharmaceuticals that are still in patent, since the price of the
subsequent generic pharmaceuticals, which is available after patent expiry,
is much reduced. Traditionally this issue related solely to the developing
world and came to a climax in 1997 during the AIDS epidemic, where
millions of suerers from the disease in Africa were unable to aord the
new retroviral pharmaceuticals that had been developed.94 Arguments over
the tension between international rights to patent protection and health
emergencies were eventually resolved and led to the Doha Declaration on
trade-related aspects of intellectual property rights (TRIPS Agreement) and
public health.95 In fact, many patented pharmaceuticals are now supplied to
developing countries at a fraction of the price that they are sold at in the
developed world.
However, this exacerbates the problem of parallel imports. Dierential
prices for pharmaceuticals between developed and developing countries,
especially where the price dierence is substantial, provide opportunities for
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The Pharmaceutical Industry and the Future of Drug Development 23

significant arbitrage: buying a product in the developing country at the


low price, exporting it to the developed country and then selling it at an
intermediate but highly profitable price. During the AIDS crisis in Africa,
GSK became so concerned at this possibility that they set up some clinics
where the pharmaceuticals could be administered to the patient without the
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

risk of the material being exported. This type of legal but unethical arbitrage
has recently been happening so frequently within the European Union that
artificial pharmaceutical shortages have ensued, leading to manufacturers
trying to impose a quota system.96
However, it is not only patients in developing countries that have dif-
ficulties arising from pharmaceutical pricing. In most countries pharma-
ceutical pricing is at least partially controlled by the state. Pressure on
national health services and private health insurance companies is leading
to increased downward pressure on prices and, in some cases, complete
refusal to allow a new pharmaceutical to be prescribed.97 This market
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information then feeds back into the commercial decisions made by the
industry as to what areas of research should be pursued, which in turn leads
to more orphan diseases to the overall detriment of patients.

5 The Pharmaceutical Industry in the Future


5.1 Commercial Pressures
The research pharmaceutical part of the industry is currently going through
a major crisis as a number of issues come to the surface simultaneously.
Since the first blockbuster pharmaceutical, cimetidine, was launched by
GSK in the 1970s, both industry and regulators have been convinced that the
blockbuster model for the industry was the long-term way forward: drug
discovery and development was known to be high risk, expensive and time
consuming, and that after patent expiry, generic manufacture would
dramatically reduce the price of novel pharmaceuticals. However, new
blockbuster pharmaceuticals would continue to be invented at regular
intervals and the profits made during their patent life would be more than
sucient to fund the necessary R&D for future products. Thus, the industry
as a whole would continue to deliver innovative pharmaceuticals which
would be available to all at low prices after a short patent life.
For the next few years it looked as if this analysis was going to be correct as
a series of new blockbuster pharmaceuticals arrived regularly on the
market from the R&D organisations of many of the major research
pharmaceutical companies. Unfortunately, this didnt last and it turned out
that simply turning the handle of the R&D machinery did not guarantee
that any new products at all would emerge, let alone a stream of novel
blockbusters. In fact, R&D eciency in the pharmaceutical industry has
suered a long-term decline. The number of new pharmaceuticals approved
per billion US dollars spent on R&D has halved roughly every 9 years since
1950, falling around 80-fold in inflation-adjusted terms.98
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24 David Taylor

The initial response to these problems by the industry was consolidation,


with a number of large and sequential mergers and acquisitions followed by
a number of very large ones. The 30 research pharmaceutical companies that
existed in 1989 had by 2010 successively merged to become only 9
companies. Pfizer alone had absorbed American Cyanamid, American Home
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Products, Pharmacia, Upjohn, Warner-Lambert and Wyeth, as well as the


pharmaceutical interests of Monsanto.
The rationale driving this activity was to take advantage of synergy be-
tween the partners to enable sta and cost reductions to be made whilst the
innovation and R&D eort in the two drug pipelines could be maximised.
This activity was very popular with the financial markets but, with hindsight,
the benefits to shareholder value were dicult to realise.99 Much more
importantly, substantially increasing the R&D eort did not result in any
commensurate increase in new products. In 2008, J. P. Garnier, the chief
executive of GSK, finally admitted this publically:100
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The leaders of the major corporations including pharmaceuticals have


incorrectly assumed that R&D was scalable, could be industrialized & could be
driven by detailed metrics and automation. The grand result: a loss of
personal accountability, transparency and the passion of scientists in
discovery and development

A year later, in 2009, Bernard Munos said in print101 what had been
obvious to many in the industry for some time:

Success in the pharmaceutical industry depends on the random occurrence of


a few black swan products.

The fact that the blockbuster drug model doesnt work has dramatic
consequences for the future of the industry. Profits from successful
pharmaceuticals are necessary to maintain the R&D eort, but unless new
pharmaceuticals replace successful pharmaceuticals when their patent
expires it becomes increasingly dicult to maintain the R&D. The scale of
the problem can be seen in Table 2.102

Table 2 Loss of revenue due to patent expiry.


% Revenue loss in 201012 solely
Company due to patent expiry
Pfizer 41
AstraZeneca 38
Sanofi - Aventis 34
Bristol Myers Squib 30
GSK 23
Eli Lilly 22
Merck 22
Novartis 14
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The Pharmaceutical Industry and the Future of Drug Development 25

Faced with this patent cli, the industry has adopted two dierent
strategies: firstly, seeking to improve its record of innovation by acquisitions
of biotechnology companies, e.g. the acquisition of Medimmune by
AstraZeneca in 2007 for US$ 16 billion103 and the acquisition of Human
Genome Science by GSK in 2012 for $ 3.6 billion,104 together with a host of
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

other smaller boutique companies.


The second strategy has been to drastically reduce operating costs using a
combination of direct cost savings from improved eciency coupled with
portfolio rationalisation, increased collaboration and extensive outsourcing.
As a result, the number of jobs in the global research pharmaceutical sector
fell by ca. 300 000 from 2000 to 2010.105 Despite these actions, innovation
rates have not yet improved.

5.2 Environmental Challenges


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In recent years there have been many suggestions that, in the light of the
discovery of residues of pharmaceuticals in water, the pharmaceutical in-
dustry should begin to produce green pharmaceuticals.106108 This then
raises the question of what do we mean by green and how green is the
present generation of pharmaceuticals?
The most comprehensive data that currently exist come from the Swedish
environmental classification system.109 This categorises pharmaceuticals
into five classes based on their risk to the environment, which has been
calculated from their intrinsic hazard data and predicted environmental
exposure. Although work is still underway, it is already clear that the ma-
jority of pharmaceuticals (497%) fall into the insignificant risk category.
Another recent study, carried out under the European Union Framework 6
research programme, has produced a similar outcome.31 This reported that
a large body of literature is now available on the ecotoxicity of pharma-
ceuticals and that analysis of the data, together with an increasing amount
of monitoring and modelling data, indicates that the environmental risks of
the majority of pharmaceuticals are low.
Although the environmental risk can be shown to be very low, residues of
many pharmaceuticals can still be detected in the aquatic environment
using modern analytical techniques. Consequently, many people, invoking
the precautionary principle, continue to put pressure on the industry
to develop greener drugs. The objective of greener drug design is to
produce pharmaceuticals which leave lower residues in the environment.108
A number of environmental scientists continue to make the assumption
that this means that all new pharmaceuticals should be biodegradable.
However, this somewhat simplistic approach, even if it were possible to
realise, would not be a panacea and is certainly not simple to accomplish
given our current state of knowledge. There are a number of pharma-
ceuticals that are biodegradable,109 but this has happened by chance and
none of our current pharmaceuticals has been designed with this in mind.
Pharmaceuticals, like most products, do not need to be 100% persistent
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26 David Taylor

throughout their life-cycle, but they do need to be functionally persistent. In


other words they have to be stable enough to remain unchanged during a
realistic shelf-life and to be able to be transported, unchanged, though
various pathways in the body to reach the site where their eect will be
exerted. Since most pharmaceuticals are taken orally, this means being able
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

to transit through the highly acidic stomach. Not only is stability needed for
the treatment to be eective, but instability can result in side eects caused
by the toxicity of breakdown products, particularly in the liver. The ideal
pharmaceutical would therefore be a substance which only began to break
down after it had been excreted by the patient.
However, producing pharmaceuticals that are more degradable in the
environment will not necessarily eliminate environmental residues. The very
low environmental residues that are currently being detected represent the
equilibrium concentration reached between a constant input from waste-
water treatment plants and the degradation rate in the environment. The
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data from the Swedish environmental classification scheme109 demonstrate


that although very few existing pharmaceuticals are rapidly degraded in the
environment, relatively few of them are highly persistent either, and most
pharmaceuticals appear to degrade, albeit slowly.110 Increasing the degrad-
ation rate of new pharmaceuticals would undoubtedly reduce the current
residue levels found in the environment but, even with existing analytical
methodology, it is highly likely that residues at lower levels would still be
detectable.
However, our objective, taking this precautionary approach, is not to
produce degradable pharmaceuticals but to reduce residue levels in the
environment as far as possible without compromising the health of patients.
Increased degradability of pharmaceuticals is one way that this might be
achieved but there are many other ways to achieve the same endpoint.
One of the drivers of research in the pharmaceutical industry is to improve
the eectiveness of human pharmaceuticals. Consequently, research teams
are always trying to make drugs work better in the patient and most of the
improvements being continuously targeted in drug discovery and develop-
ment teams will also produce a lower environmental footprint. Table 3
shows several of the pharmacological objectives that would deliver improved
patient benefit, alongside the environmental improvements that would
ensue if that objective were reached.70

Table 3 Comparison of criteria for drug design and environmental significance.


Drug Design Criteria Environmental Significance
100% Oral absorption Reduced emissions from patients to
drains
Metabolised in patient to inert substances Releases only inert substances
Eective in all patients treated Produce lower overall drug use
Disease receptor specific No impact on healthy receptors
No eects other than therapeutic ones. No non-target eects
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The Pharmaceutical Industry and the Future of Drug Development 27

The first three of the criteria listed in the table would lead to lower
residues of active substances entering the environment; in other words,
reduction at source. The last two would lead to even lower potential impact
of the residual active material on ecosystems.
Current developments are already leading to candidate drugs with a lower
Published on 27 August 2015 on http://pubs.rsc.org | doi:10.1039/9781782622345-00001

potential for environmental impact. For example, a better understanding of


drug metabolism and pharmacokinetics can result in lower doses being
administered to achieve the same therapeutic eect. Similarly, shorter dur-
ation of therapy, better targeting and improved drug delivery combined with
increased specificity all lead directly to smaller emissions from the patient to
the environment and thus lower environmental residues.
As we have seen above, the industry continues to struggle with the legacy
problems of the blockbuster approach and is also suering from a decline
in the rate of invention. However, two technical revolutions are underway
which may improve this situation and may also reduce the overall environ-
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mental impact of the industry.


The first of these is the advance of biopharmaceuticals.111 The vast
majority of our existing pharmaceuticals consist of relatively small
molecules produced by chemical synthesis. However, advances in our
understanding of genomics and proteomics, coupled with our increasing
technological capability to manufacture very large molecules, are leading to
a rapidly growing interest in the use of biological as opposed to chemical-
based therapies. The first biopharmaceutical, synthetic insulin, developed
by Genentech and marketed by Eli Lilly, was approved for sale in 1982 and by
2013 there were 300 biological pharmaceuticals that had been approved by
the US FDA with a further 5400 under development in the USA alone. In
2012, based on worldwide sales, 7 of the top 10 drugs were biopharmaceu-
ticals112 and it is estimated that this area now accounts for more than 40% of
all drugs in development.
The fastest growth is in the area of monoclonal antibodies, which are
components of the human immune system and are considered by some to
be the perfect human medicines. They have major therapeutic advantages.
Their high potency means that patient doses can be small, which sub-
sequently then requires only small-scale manufacture. They have exquisite
specificity and can be targeted to human receptor sub-types responsible for
pathology or disease; thus they have substantially less potential for side
eects. These proteins are then rapidly metabolised by the human body to
produce fragments with no mammalian biological activity, thus avoiding the
possibility of producing metabolites with undesirable pharmacological
activity. From an environmental perspective these substances appear to oer
major advantages; most of these compounds produce little if any residues of
the active substance, which is in any case much less likely to exert any
adverse impact on the ecosystem, since it is specifically designed to interact
only with a diseased human receptor. However, the full environmental
relevance of these substances is not yet clear. Biopharmaceuticals are not all
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28 David Taylor

easily biodegraded, and modified natural compounds even less so. Struc-
turally related compounds such as plasmids have already been detected in
the environment and it is known that the protein structures known as prions
are very environmentally stable.113
The second therapeutic revolution also stems from our improved under-
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standing of genomics, although it is still in its infancy. This is the area of


personalised medicine.114 It has been known for many years that most
pharmaceuticals do not work successfully in all patients. It was suspected
that this was due to the slightly dierent genetic make-up of individual
patients, but lack of appropriate experimental techniques meant that this
could not be further investigated. However, the recent rapid advances in
the mapping of the human genome and subsequent development of the
scientific disciplines of genomics, proteomics and metabolomics is leading
us to a better understanding of the molecular signals of many diseases. The
expectation is that molecular screens combined with clinical data will point
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to more precise treatment options for each patient sub-group. This should
enable much more precise and eective prescribing to occur which will, in
turn, mean less overall drug use, since every prescribed dose will be eective
first time.

6 Conclusions
The research pharmaceutical industry remains beset with problems, for
most of which there do not appear to be obvious solutions.
Although it has exclusive rights to the sale of a new drug during its patent
life:

 increasing regulation is leading to additional costs and longer devel-


opment times with consequently reduced times to patent expiry;
 increasing risk aversion by executive management teams is contrib-
uting to a slowdown in the appearance of novel pharmaceuticals;
 reducing risk tolerance in patient populations and regulatory bodies
is leading to a lower success rate for marketing authorisation approvals;
 cost pressures within national health services are leading to progressive
downward pressure on prices;
 market penetration by generics is increasing rapidly; and
 many people consider that the current research pharmaceutical busi-
ness model is no longer sustainable, but no-one has yet come up with a
better one.

However, because of the increasing domination of drug-development


pipelines by biopharmaceuticals, we can be certain that the next generation
of human pharmaceuticals will leave significantly smaller residues in the
environment than those that result from the use of current medicines.
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The Pharmaceutical Industry and the Future of Drug Development 29

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