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The Failure of Industrialized Research

Drug discovery is unpredictable and unmanageable. So why do large pharmaceutical companies spend so much money on it?

Observing the pharmaceutical industry from a prudent distance, one might wonder at its apparent confidence in its ability to discover new drugs. Pharmaceutical companies maintain great staffs of scientists and spend immense sums of money on technologies meant to increase the chance of discovering new medicines. Their research-and-development budgets surpass that of the National Institutes of Health. And this investment is only growing: global expenditure on R&D has doubled over the last 11 years, from $22.2 billion in 1991 to $44.5 billion in 2001. If the investment by pharmaceutical companies continues to grow at this pace, R&D spending could reach $57 billion in 2006.1

But closer inspection reveals a contradiction: in most cases, these large corporations purchase seminal drug ideas from smaller, entrepreneurial biotechnology companies and university research laboratories. In 2001, the 14 major pharmaceutical companies were responsible for discovering merely 26% of the 32 biologics and new molecular entities (NMES, defined by the Food and Drug Administration as active therapeutic ingredients that have never been marketed in the United States), while being responsible for 65% of global R&D spending. Biotech and academic labs produced the remainder.2 Furthermore, the productivity of pharmaceutical companies is decreasing: the number of medicines in the early stages of development (preclinical and clinical Phase I and II) dropped by more than 20% from 1999 to 2001.3