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If the golden age of the blockbuster pharmaceutical is beginning to fade, what does the future hold? With patents on more than half of the top-earning drugs expiring between now and the end of 2005, and a thin pipeline of new products in development, the industry is bracing itself for change.
Despite this gloomy forecast, panelists who gathered at the Harvard Business School European Business Conference to discuss the challenges facing U.S. and European pharmas were universally enthusiastic about their chosen field. All agreed that mapping the human genome has created great potential for future developments in the field—although it could be years before this knowledge translates into saleable products.
According to Muz Mansuri, a partner and executive-in-residence at Flagship Ventures, the industry's most pressing challenges fall into three categories. In addition to the difficulty of financing a product that can cost $600 million to $800 million to develop, Mansuri noted that the rising cost of launching a new drug is driving up the monetary definition of what constitutes a "blockbuster" by millions of dollars.
| There's more money to be made in developing a pill to treat diabetes than there is in finding a cure for tuberculosis. |
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— Muz Mansuri, Flagship Ventures |
"What that means is that there's increasing pressure to research orally deliverable products for chronic diseases," he said. "There's more money to be made in developing a pill to treat diabetes than there is in finding a cure for tuberculosis."
Securing top quality management to see a company through transitional growth is another hurdle. "From the venture point of view, finding good people is a real nightmare," he said. "I'm sorry to say there are a lot of mediocre people in important jobs."
Dr. David Meeker, a senior vice president at Genzyme, described a world in which patients will wear genetically imprinted bracelets that can be quickly scanned to allow for treatment with customized medications. "That's going to fragment the market," he explained. "There will no longer be one drug for one disease."
| What the public doesn't hear is that in any given year we will routinely fail one to three trials. |
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— Soren Andersen, GlaxoSmithKline |
This poses new challenges to regulatory bodies as well. "How do you establish standards for approving gene therapies?" he asked. The FDA, he suggested, will need to work even more closely with industry experts. "You could participate in designing future regulations," he told the audience. "It's a very exciting time."
In discussing industry differences between the United States and Europe, Meeker said that while the drug review process is universally political, each country brings its own cultural biases to the table.
"Approval does not equal access," he said. "You might be able to get a new drug right away in Germany. In Portugal, it could take four years."
There's also the matter of cost. With an average annual price tag of $175,000 for Genzyme therapies, Meeker continued, the question quickly turns to how such drugs can become more affordable in countries across the globe.
It's still profitable
Soren Andersen (HBS MBA '91), GlaxoSmithKline's executive head of strategy for neurology, acknowledged the industry's "staggering" numbers, noting that the top ten global pharmas generate annual sales of roughly $240 billion, employ about 1.2 million, and enjoy a market capitalization of approximately $1 trillion.
"Despite share prices dropping somewhat, it's still a very profitable business," he said.
| The mistake is often made of sending the U.S. star from a company to launch its European operations. |
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— David Meeker, Genzyme |
It's also very risky. "What the public doesn't hear is that in any given year we will routinely fail one to three trials. That's very expensive." Financial figures aside, Andersen emphasized the human dimension of his work. "You're part of creating new medicines and new hope where there was none," he said, citing the eradication of Alzheimer's and stroke over the next ten years as his personal career objective.
When one audience member asked about the talent drain from Europe to the United States, Alex Martin (HBS MBA '95), vice president of global development at Novartis, acknowledged the hot-button nature of the topic. It's difficult to ignore the profits and wider talent pool in the United States, he said; Novartis is currently investing millions in its Cambridge, Massachusetts, office. "We see this as increasing, not exchanging, talent," he added.
The trend could be reversed or slowed, too. Muz Mansuri said that since the late 1990s, new-business development has occurred in Germany, Switzerland, and the U.K., driven by tax breaks and other government incentives. "The challenge, as always, is getting good people to go back to Europe to run these companies."
Country experience wanted?
How necessary is it for executives to have experience specific to the country in which they're working?
"Good is good," said Mansuri. "Chinese, African…whatever. You want the best person."
"With that said, there's a strong case to be made for diversity," responded Martin. "People from different cultures bring different pieces of the puzzle."
"It's truly a global industry," said Andersen. "I'm on the road all the time. People aren't really hired to only look at the European or U.S. market."
"The mistake is often made of sending the U.S. star from a company to launch its European operations," said David Meeker. "There is so much cultural sensitivity and understanding that comes from living in Europe. That's a real value."