Our previous analysis used an imperfect definition of “biotechnology” based on the year each company was formed, and defined biotechnology companies as those formed in or after 1971. This left out the contributions and fate of the remaining “pharmaceutical” companies that were founded before 1971. Here, we address this gap by taking a broader and more detailed look at the fate of all companies involved in the business of developing new medicines, referred to here as “biopharmaceutical” companies. Our analysis identified 312 innovator biopharmaceutical companies that had produced FDA-approved medicines, from the beginning of FDA record keeping through to the end of 2015. The participants range from Merck, founded in 1668, to companies established just a few years prior to product approval. The dynamics of where and when these innovator companies were formed, as well as their fate over time, reveals waves of foundation and consolidation. Looking beyond this pattern, the overall trend is troubling as we see that the number of innovator organizations actively participating in new medicine development has plummeted to a level not witnessed since the Second World War, raising important questions about the sustainability of new drug development.

The project began as an attempt to catalog all new molecular entities (NMEs) ever approved by the US Food and Drug Administration (FDA) (). In doing so, we identified the organizations that had contributed to the research or development of new medicines, ranging from the submission of the investigational new drug (IND) application through to the final approval by the FDA (). These companies will hereafter be referred to as “innovator” or “successful” companies. Based on many high visibility mergers and acquisitions, we also tracked the fate of those organizations, which revealed patterns of consolidation over time that largely erased the gains in innovator biotechnology organizations (those founded after 1970) to a level not seen since the mid-1980s ().

It is widely understood that the biopharmaceutical industry is rather unique in terms of the transient nature of its products. Patent-protected products are tightly regulated and provide the mainstay of revenues (). However, even the most efficacious and popular products will ultimately succumb to generic competition. This constant churn requires a robust pipeline of products to ensure continuity, thus explaining the need for high R&D expenditures. A recent report suggests that the average costs of developing a new drug now exceed $2 billion (). Such eye-wateringly large numbers reflect the increasing costs of clinical investigation and declining efficiency. According to insightful and entertaining discussions byand, the declining productivity in new product development can be measured using a logarithmic scale and gives rise to a trend they termed “Eroom's Law,” a playful inversion of Moore's Law of computer processing power. To counter the consequences of Eroom's Law, the biopharmaceutical industry has experimented with ways to maximize the reward while minimizing the risks associated with drug discovery and development. Unfortunately, these measures include decreased participation by many established companies in the early stages of R&D (). We have been interested in analyzing the sources of pharmaceutical innovation for a number of years now as a way of getting a deeper insight into what drives innovation in this area, how we can assess the health and robustness of the industry, and to make recommendations for ensuring the long-term growth and viability of the biopharmaceutical enterprise, not only for its own benefit, but, more importantly, for the benefit of global public health.

The biopharmaceutical enterprise has contributed fundamental improvements to the health and wealth of the developed world. According to PhRMA, the pharmaceutical industry sector is the most research and development (R&D)-intensive in the world (), and makes an annual economic contribution of $790 billion, including employment of more than 800,000 workers in the United States alone. More importantly, the output of the pharmaceutical industry has had a remarkable impact on public health, as we now live longer and, overall, healthier lives from infancy to old age. Therefore, the sustainability of pharmaceutical enterprise is of significant importance both in terms of public health and economic viability.

To identify the sources for all FDA-approved medicines, we initiated an extensive analysis of the organizations participating in their research or development by reviewing documentation publically available on the FDA website. Specifically, the medical and pharmacology reviews of each new molecular entity (NME or active ingredient) were analyzed to identify both the “successful” organization submitting the approval as well as all organizations participating in the development of the drug as reported to the FDA. Extensive FDA documentation was not available for many medicines approved before the mid-1990s. We addressed this deficiency by conducting additional research of the scientific, medical, and commercial literature detailing the drug products and the companies sponsoring the R&D activities. Particular emphasis was placed on publically available databases, including those from the National Library of Medicine of the NIH and the US Patent and Trademark Office; the latter was used to identify both patents and trademarks. We pulled from all these resources to create a database that includes both the approved medicine and the organizations that contributed to the preclinical and clinical activities ranging from the submission of the IND through to the final licensure by the FDA. This aggregated list of organizations was the starting point for the next layer of analysis as we set out to determine the foundation and fate of each company by searching numerous resources including company websites and press releases, with emphasis on identifying key dates and locations of all relevant organizations. At the end, our analysis revealed that 311 different companies have contributed to the research or development of an FDA-approved NME.

The “biotechnology” revolution began in the 1970s and can be seen as a dramatic spike in the formation of new companies (). Unlike the previous era, the biotechnology era was largely restricted to North America and parts of Europe ( Figure 1 C). Whereas the rate of company foundation was limited to an average of roughly one per year in Europe from the period spanning 1971 to 2000, North American company formation was 6-fold higher. A more detailed analysis of North American innovators reveals an interesting trend ( Figure 1 D). Historically, “successful” companies founded over a period of more than a century and a half, stretching from 1800 to 1970, were equally located in either the Northeastern or Midwestern United States. In contrast, the growth associated with the US biotechnology revolution happened primarily in the Northeast and the West Coast. Although some additional growth was observed in the Midwest United States, Southeast United States, and Canada, these areas are less-well represented than might have been expected based on the larger trends over time.

Looking at the geographic distribution of pharmaceutical innovator companies founded during the 1668 to 1970 period, most of them were located in North America (N = 52) and Europe (N = 48), with fewer (N = 19) in Australasia, a large area encompassing Asia and Australia and Oceania, and none in Africa, or Central and South America ( Figure 1 C). Closer inspection of the location data indicates that, during this time period, conventional pharmaceutical companies were widely dispersed throughout North America and Europe, and, although they tended to be found in or near major financial centers or places with the largest populations (e.g., London, Paris, New York, Tokyo, etc.), no standout preferred geographic areas emerged.

The earliest foundation event we could identify was the 1668 creation of the Merck company, which was split to Merck & Co. and Merck KGaA as a result of American confiscation of German-owned properties during the First World War. Merck was established in the city of Darmstadt in the Landgraviate of Hesse (now Germany) and later went on to discover and market morphine, the widespread use of which, starting in 1827, predated the formation of the modern FDA by more than a century (). In the early days of the biopharmaceutical industry, the formation of these companies, which would later go on to generate an FDA-approved medicine, occurred at a low and somewhat sporadic rate of fewer than one new entrant per year until 1880 ( Figure 1 A ). Thereafter, the number of new entries generally exceeded one per year until the middle of the 20th century. At that point, the net number of biopharmaceutical companies contributing to FDA-approved drugs barely exceeded 100 ( Figure 1 B). Over the following two decades (from 1951 to 1970), formation of new innovator biopharmaceutical companies stalled again, with the rate dropping below one new entrant per year.

(B) The net effect of entries and exits is indicated, which reveals the growth and then stagnation of the pharmaceutical industry (1688 to 1970) and then the rise and consolidation of biotechnology (1971 to 2015).

(A) In an assessment of biopharmaceutical companies, the year of founding (Entry; shown in black) and acquisition (Exit, shown in red) is indicated from 1800 to the end of 2015.

As documented elsewhere, the biotechnology explosion in the latter quarter of the 20th century witnessed an impressive increase in the net number of successful organizations that had contributed to the research or development of an FDA-approved medicine. However, undermining this increase in the number of new companies entering the arena was a gradual exit of many companies as first the pharmaceutical, and later biotechnology, sectors went through a period of industry consolidation ( Figure 1 A). Beginning in 1950, the rate of exits remained modest (although higher than at any time during the previous century), with six companies departing in the 1950s and seven in the following decade. By the end of the 1970s, the rate of exits exceeded an annual average of one per year (a loss of 1.1 companies per year) and this negative rate more than doubled to 2.4 in the 1980s. Consolidation expanded rapidly thereafter, with the average rate of acquisitions tripling to 6.4 companies per year in the 1990s and more than doubling again throughout the first decade of the new millennium (14.1 acquisitions per year). In the first half of the present decade, the annual average rate of exits has come down, although it still exceeds ten per year (10.4 per year). Consequently, the net number of companies that actively participate in the R&D of new medicines approved in the United States has declined dramatically from a peak of 195 companies in 1997 to less than half that number (N = 95) as of the end of 2015.

Our analysis of company creation revealed a steady accumulation of experienced companies that continued largely uninterrupted from the beginnings of the 19th century until the early 1950s ( Figure 1 A). Relatively few of these companies were either subject to consolidation or underwent bankruptcy. From 1801 to 1952, we recorded only three exits: Davis & Geck and Lederle Laboratories were purchased by American Cyanamid in 1930, and Bayer was merged into IG Farben in 1925. As a consequence of steady growth and infrequent exits, the net number of active and independent organizations participating in pharmaceutical R&D that had success in obtaining FDA approval and delivering NMEs to market exceeded 100 by 1950 ( Figure 1 C). The two decades thereafter saw stagnation in the number of innovators as new entries were entirely offset by corporate acquisitions.

Further refutation of the hypothesis that consolidation proximal to the first approval is a recent trend arose from an analysis of the mean and median time of independence following an FDA approval. Specifically, we assessed the fraction of companies that remained active in R&D and independent after 1, 5, or 10 years following their first FDA approval ( Figure 2 C). This rate remained consistent over time with no obvious trends detected. An average of more than two-thirds remained active and independent 1 year after their first approval for from the 1960s to 2015. Likewise, the fraction of companies remaining active and independent for at least 5 and 10 years after their first approval averaged 47% and 40%, respectively.

In evaluating biopharmaceutical industry consolidation, we postulated that company acquisitions at or near the time of their first FDA approval was a relatively recent phenomenon. In fact, our studies revealed surprisingly little change in the average time from when a company received their first FDA approval until when they were acquired ( Figure 2 B). When viewed over time, the average time from an FDA approval until acquisition remained relatively steady at just under 10 years. Indeed, the primary outlier was an increase in the decade starting in 1981, which, as noted earlier, represented consolidation among relatively mature pharmaceutical companies. Again, comparable outcomes were observed when analyzing the mean and median period of independence following the first FDA approval.

To assess further the trend in consolidation that has impacted the biopharmaceutical industry, we related demographic features of a subset of “successful” companies being acquired with the acquirers themselves. This analysis focused on consolidation events from the 1950s to the end of 2015. The first parameter examined was the average age of innovator companies at the time they were acquired and we examined those as decade-by-decade trends based on the decade of acquisition ( Figure 2 A ). For acquisitions occurring in the 1950s, the average age of the acquired company was 65.8 years (with a median age of 74), and comparable maturity was observed with companies purchased throughout the 1960s and 1970s. An uptick in the average company age to 81.9 years (93 year median) in the decade beginning in 1981 seemed to signal the end of the purely “pharmaceutical era” and largely represented consolidation of relatively mature companies with one another. In the years thereafter, the average age of the acquired innovators consistently declined and stands at 24.6 years (a median age of 21 years) for the ongoing decade, as of December 2015. The decrease in average age largely reflected acquisitions of biotechnology companies (founded after 1971) by one another and by their pharmaceutical predecessors. Since comparable findings were obtained when analyzing either the mean or the median company age, this suggested that a small number of unrepresentative transactions did not skew the data.

(C) The likelihood that a company will remain active in new pharmaceutical R&D and independent for the times indicated is shown for all companies that gained their first FDA approval in the decade shown.

(A) The average age (time from foundation until acquisition) is shown for all acquisition events from 1951 to 2015. The “date” indicates the date in which the acquisition took place.

It is clear that consolidation has played a major role in pruning the biopharmaceutical sector. Such findings raise questions as to the current demographic of the industry as a whole. As noted above, the number of active and independent biopharmaceutical companies stood at 95 as of the end of 2015. From the standpoint of geography, acquisitions by European conglomerates narrowed the lead that North America had achieved through the creation of innovator biopharmaceutical companies. We also assessed the longevity of organizations currently involved in biopharmaceutical R&D. The average and median ages for companies headquartered in North America are 45 and 27 years, respectively, with 79% of North American companies founded less than 50 years ago, and fewer than one in five (17%) in existence for more than a century ( Figure 6 ). In contrast, European (mean, 78 years; median, 69 years) and Asian (mean, 100 years; median, 96 years) companies are considerably older. Surprisingly, only 38% of European companies are less than 50 years old, and more than one-quarter (29%) were founded more than a century ago. Older still were Australasian companies, of which none was younger than 21 years of age and nearly half (44%) were founded more than 100 years ago.

The age of active and independent innovator companies is clustered into four groups and shown for the three major geographic areas. Note that whereas more than three-quarters of North American companies have been in existence for less than 50 years, the majority of European companies have been around for more than 50 years, while companies younger than 20 are practically non-existent in Australasia landscape.

Based on this so-called “Valeant model,” we compared the time of independence and R&D capabilities of acquiring companies from the time they performed an acquisition through to the end of 2015 ( Figure 5 B). Of the 148 private sector organizations that have acquired at least one company actively involved in new drug R&D, only 67 (45.3%) remain independent entities as of the end of 2015. Most acquiring companies (N = 135% or 91.2%) were themselves actively involved in R&D as of the time of acquisition, but only 40 remained both active and independent as of the end of 2015. Stated another way, as a result of multiple waves of acquisitions, just over one-quarter (40 of 148; 27%) of acquiring companies were still active in NME R&D as of the end of 2015. Moreover, these 40 companies are what remains from a total of 317 companies, each of which had achieved the milestone of gaining an FDA approval for an innovative drug product and which had been subject to a merger or acquisition.

The rise of Valeant to the top tier of innovator organizations is somewhat ironic given this company's well-understood approach to eliminate research, development, and regulatory risks (). Indeed, Valeant has given rise to a relatively recent trend in which acquiring organizations take over companies and products at or near the time of FDA approval (). A hallmark of this strategy centers upon an immediate dismissal of R&D operations in the months following acquisition. Until recently, the perceived cost savings and de-risking of R&D has translated into powerful rewards as Valeant's business strategy was preferred by many investors and aped by a host of similarly minded companies focused on acquisitions rather than direct R&D. However, the recent travails of Valeant and catastrophic losses in its stock valuation, as a result of questions surround its accounting methods and product-pricing strategies, raise questions about the sustainability of this model. An unintended consequence of this turmoil could be a positive effect in decreasing the loss of future “innovator” companies.

The specific identities of the acquirers and their acquisitions revealed that Pfizer and Valeant Pharmaceuticals are the most acquisitive companies ( Figure 5 A ). However, the manner in which these organizations executed their strategies differed considerably. Pfizer generally participated in a relatively small number of acquisitions with established pharmaceutical partners, which, in turn, were also quite active in mergers and acquisitions in their own right. Thus, Pfizer was able to gain control over 19 different organizations as a result of a relatively small number of direct events, the remainder representing legacy companies. Likewise, Sanofi, Novartis, and GlaxoSmithKline racked up a large number of companies largely via legacy acquisitions. In contrast Valeant's growth largely consisted of a larger number of smaller events that emphasized takeovers of smaller and younger innovators.

(A) The five leading acquirers of organizations that had contributed to the research or development of at least one new molecular entity are shown.

While European companies were less frequently the targets of an acquisition, Europe hosted a disproportionately large number of acquiring organizations ( Figure 4 A ). In total, 148 different companies participated in the acquisition of at least one innovator company, and 63 (43%) acquiring organizations were based in Europe, thus outperforming Europe's relative contribution in terms of innovator organizations. When evaluated over time, European sources have increasingly driven the acquisitive events ( Figure 4 B). Notably, Australasian companies also participate in acquisitions, albeit more sporadically, as evidenced by trends observed in the 1980s and again in the ongoing decade. Overall, the data reveal a migration away from North America of organizations that currently capture innovator organizations. Almost four in five innovator companies founded in North America are no longer active in R&D and independent. The number of companies founded in Europe and Asia also declined by 55.8% and 33.3%, respectively. However, the magnitude of loss outside North America is blunted by the fact that the relative fraction of biopharmaceutical innovators hosted in Europe and Asia has grown as the relative fraction of organizations hosted in Europe and Australia has increased, whereas in North American in general, and the United States in particular, it has dropped precipitously.

(C) A summary of the regions hosting NME innovators and acquirers and the changes resulting from consolidation is shown, with emphasis on the impact that consolidation has had on the number and geographic distribution of innovators.

(B) The location of acquirers is shown relative to the year of acquisition, thus revealing an increase in European acquirers (shown in red) relative to their North American (blue) or Australasian (black) peers.

Next, we took a closer look at the location of acquired companies and the organizations that acquired them ( Figure 3 A ). The biopharmaceutical industry is a globalized phenomenon and thus we documented the location of the corporate headquarters for each “successful” company. Of the 214 innovator companies subject to consolidation, 164 (77% of all innovator companies) were located in North America. The next largest source of acquisition targets was Europe (N = 42 or 20% of innovators) followed by Australasia (N = 8 or 3% of all innovators). At first glance, these data were not surprising given that North America is the major source of innovator companies. We also note that North American companies are more likely to be acquired (79.8%) than companies with European (54.6%) or Australasian (29.6%) roots ( Figure 3 B).

Implications

The major insight of the analysis we present in this perspective is that waves of industry consolidation have erased more than seven decades of gains in terms of the number of experienced companies participating in biopharmaceutical R&D. A dramatic increase in merger and acquisition activities in the past decade thus nullified the dividend in terms of new company formation that had been gained from the biotechnology revolution that began in the early 1970s. The number of active and independent organizations that contribute to the R&D of new medicines now stands at a level not seen since the end of the Second World War. Diving deeper, a large fraction of innovative companies has been assimilated into an aging biopharmaceutical sector that is increasingly dominated by European conglomerates.

Some view the early years of the modern biopharmaceutical industry (the period from the passage of the 1938 Food, Drug and Cosmetic Act to 1970) as the “golden age” of drug research and innovation. Indeed, the modern sciences of medicinal chemistry and pharmacology arose in this period. Furthermore, the innovations and new medicines to combat historical scourges such as bacterial infection, hypertension, and cancer translated into unprecedented, before or since, increases in human health and longevity. Indeed, this age corresponded with a rapid growth in the number of organizations that obtained an approval from the FDA. However, the number of “successful” companies engaged in pharmaceutical R&D seemed to stagnate only halfway through this “golden age.” This raises many questions such as whether reminiscences about this era are warranted, especially given that the number of NME approvals remained at a relatively low level. On the other hand, a steady number of companies may have simply been more efficiently able to seize upon the opportunities arising from increasing knowledge of disease, science, and technology.

Munos (2009) Munos B. Lessons from 60 years of pharmaceutical innovation. In a prescient analysis,showed that a larger number of companies involved in NME research increases output more than would be expected from a simple proportional increase. This is attributed to the idea that a larger number of companies increases the rate of knowledge gain and that a spillover effect increases overall productivity. Extrapolating the idea to the present-day situation, the ongoing and rapid decrease in the number of organizations involved in NME research, as a result of vigorous consolidation, might be expected to have detrimental effects on the entire enterprise.

Another argument is that the recent uptick in FDA approvals (since the mid-1990s) is the result of a movement away from ambitious drugs developed for widely applicable indications toward more focused orphan and ultra-orphan diseases. Indeed, 2015 witnessed the first year in which more than half of all NMEs were approved for orphan indications. The majority of this increase is attributable to ever-more focused oncology indications, in which a subset of mutations occurring in a limited array of tumors can now be treated in a meaningful way, leading to highly focused medical improvements. The emphasis on relatively narrow oncology applications has been steadily growing since the turn of the 21st century and these strategies differ greatly from the strategies surrounding anti-hypertensives and antibiotics that characterized the advancements of the “golden age.”

Perhaps the most surprising outcome of our analysis presented here is a demonstration of a geographical redistribution of pharmaceutical R&D. Whereas North America has been the source of more than two-thirds of innovator companies, 207 in total, most (79%) have already been acquired. Instead, a mere 43 North American biopharmaceutical companies remain independent and continue to pursue new pharmaceutical R&D. In contrast, Europe has contributed fewer (N = 77) innovators but a higher proportion (44%; N = 34) remained active and independent as of the end of 2015. The large heterogeneous Australasia region contributed another 27 innovator organizations, two-thirds of which (N = 18) remain active and independent.

Kalsi et al., 2016 Kalsi J.

Cartwright H.

Khera R. Shire aims for market leadership in rare diseases with US $32 B Baxalta acquisition. LaMattina, 2015 LaMattina J. Allergan's Saunders to Be Pfizer CEO – Say It Isn't So!. Mullard, 2016 Mullard A. What does Pfizer's merger mean for drug development?. Even within North America, the net number of R&D innovators suggests a movement away from the United States, which has provided the historical source of most innovator companies. Specifically, companies such as Canadian-domiciled Valeant have captured an outsized portion of innovator companies. The data reported herein are limited to transactions through to the end of 2015 and do not include tax inversions such as the early 2016 announcement of the acquisition of Baxalta by Shire and the attempted takeover involving Pfizer and Irish-based Allergan (). As of writing, it is not clear if Pfizer will continue its goal of seeking an international partner to effect tax savings. Such trends are more an indictment of US tax policy in general and are not unique to the biopharmaceutical industry. Clearly, the relocation of a domicile to another country does not imply that a company will suddenly abandon research or development activities in the United States, nor do these trends suggest that R&D activities will increase or remain at current levels.

Thomas III, 2001 Thomas III, L. The Japanese Pharmaceutical Industry. Saxonhouse and Stern, 2004 Saxonhouse G.

Stern R. Japan's Lost Decade: Origins, Consequences and Prospects for Recovery. Another insight is the relative absence of the biotechnology revolution in Asia and Australasia, which is especially surprising and concerning given the broad geographic range of this region encompassing Israel, Japan, and New Zealand, and the world’s two most populous countries, China and India. Indeed, these latter two countries encompass more than one-third of the planet's population but neither has yet to give rise to a company that has gained an approval for an NME in the United States. The relative absence of Japanese biotechnology companies is also unexpected as Japanese companies have at least as long a history in pharmaceutical research as their European counterparts (). Despite this tradition, the country has produced few biopharmaceutical start-ups and exhibited more limited participation in acquisitions than their European peers. The decade starting in 1981 experienced a flurry of corporate acquisitions but this virtually disappeared until the first half of the current decade, perhaps reflecting the economic travails of the “Lost Decade of the 1990s” and a weak currency ().

Scannell et al., 2012 Scannell J.W.

Blanckley A.

Boldon H.

Warrington B. Diagnosing the decline in pharmaceutical R&D efficiency. The trends we identified here may suggest that pharmaceutical industry withdrawal from the early stages of drug development was a logical outcome of “Eroom's Law” (). Declining efficiency in bringing NMEs to market may be an outcome of what appears to have been a stagnating pharmaceutical industry environment that started in the 1950s and continued until the birth of the biotechnology industry. Unfortunately, despite the promise of the biotechnology boom, and the growth of the biopharmaceutical space that we witnessed as a consequence of more rapid development in biotechnology arena, we have not reached an unfavorable situation that, as a result of many factors, most notably acquisitions, the global biopharmaceutical innovator industry stands at 95 companies as of the end of 2015, in the same place where the pharmaceutical industry found itself before the birth of biotechnology.

Baldwin, 2011 Baldwin J.J. Is drug discovery dead?. Servick, 2015 Servick K. The drug push. Ainsworth, 2008 Ainsworth S.J. Carving out a biopharma career. A key difference separates the biopharmaceutical innovators of today from their biotechnology predecessors of the past. The first generation of biotechnology companies, founded in the last quarter of the 20th century, was able to, by and large, mature into stable and efficient R&D engines for the pharmaceutical industry. The opportunity to grow this, primarily biotechnology-driven, pipeline no longer appears to be an option. Given the consistent decline in the age that companies are being acquired at, it is unclear if and how the future may give rise to innovative and productive engines of discovery such as Genentech, Genzyme, Amgen, or others founded in the 1970s and 1980s. Aspiring successors face the dual challenge of building diversified pipelines while holding off short-term but lucrative offers from suitors. Rather, the dominant trend as of writing is to create companies strategically designed to be acquired and later dismantled. Such a strategy entails an inherent dependence on the industry's ability to continue creating new feeder material. Prominent examples include the disposal of R&D activities at Cubist following the Merck acquisition, the shuttering of Miles Laboratories by Bayer, and the many closures following acquisitions by Pfizer (). Much less common is the bolstering of research activities such as occurred following the takeover of MedImmune by AstraZeneca ().

The dual trends toward consolidation of newer innovators, coupled with the downsizing of internal R&D activities by established companies, raise questions of who will ensure the continuity of new pharmaceutical R&D. The fundamental business of biopharmaceuticals requires constant replenishing of product pipelines to counter revenues lost due to patent expiries and generic competition. The predominant model that has gained steam since the 1970s has relied upon business development activities to replenish the pipeline with programs acquired from less mature companies. However, the rapid depletion of innovator organizations seems likely to undermine this food pyramid. As one example, we find the net number of companies available for acquisition is at a level not seen since the mid-1940s.

Gautam and Pan, 2015 Gautam A.

Pan X. The changing model of big pharma: impact of key trends. Alternative models for drug development have sprung up in recent years that emphasize outsourcing and/or mitigating risk via partnering. Specific examples include the outsourcing of many clinical and preclinical activities to a growing number of contract research organizations (CROs). The number of CROs over the past decade has gone up in part to support “virtual” biotechnology start-ups that seek to maximize capital efficiency by minimizing staffing. In addition, many established pharmaceutical companies have adopted a CRO model. For example, Pfizer outsourced many clinical trials activities to Parexel, PPD, and Icon (). Taking this one step further, the creation of virtual entities within pharmaceutical companies such as Chorus at Eli Lilly & Co, JLabs at Johnson & Johnson, and Discovery Partnerships with Academia are experiments worth monitoring. While such moves may not fully compensate for the dual impacts of internal downsizing and industry consolidation, they nonetheless may provide a model to improve the sustainability of the drug discovery enterprise.

A limitation of our present perspective is the focus on “successful” or “innovator” companies, as defined by delivery of FDA-approved NME. This emphasis necessarily precludes the contribution of organizations that have not yet had the chance to reach this critical milestone. In the light of scientific advances and an uptick in capital (due to low interest rates since the 2007–2008 economic downturn), it will be interesting to see if funding of new startup companies, particularly those focused on new technologies and opportunities, will reverse the current demographic trends in which consolidation favors fewer and older companies.

Kinch et al., 2014b Kinch M.S.

Merkel J.

Umlauf S. Trends in pharmaceutical targeting of clinical indications: 1930-2013. While much has been made about decreasing biopharmaceutical R&D efficiency, a counter-argument is that the complexity of therapeutic applications has increased in recent years. For example, the past three decades has witnessed a general movement away from relatively straight-forward targeting of infectious diseases (e.g., antibacterial agents) in favor of more complex diseases such as cancer and autoimmunity (). This increasing complexity corresponds with a migration of research activities to smaller companies, many of which do not persist if their product fails to achieve an FDA approval. The inability to track such organizations from the approach herein thus necessarily underestimates the research activities of the larger industry. Indeed, we hope to address the need for a larger picture by identifying such organizations in the future.

In an era of increasing globalization, are the trends observed here unique to the biopharmaceutical industry? Based on the participation of innovator companies in the areas of vaccine development and medical devices in FDA approvals, which is stable and growing, we do think that the biopharmaceutical industry is facing distinct challenges. It is unlikely that we will suddenly be unable to produce new medicines any time soon. However, private sector organizations, particularly those that are publically traded, are unlikely to reveal pipeline vulnerabilities, and industry advocacy groups are likewise not inclined to broadcast potential shortfalls. Thus, while our present analysis does not suggest such an event has happened or is even inevitable, the economic and public health implications of a disruption would be sufficiently impactful to warrant more discussions of how to avoid such a possibility.

The high rates of consolidation that concern professionals in the public health sector may be succor to investors contemplating biopharmaceutical ventures. Despite such attractions, the long times and high costs needed to research, develop, and gain acceptance for a new medicine seem to have decreased investor interest in biopharmaceutical ventures. If correct, then one might expect gaps to arise in industry capabilities to meet the demand for innovative new products. Given the time needed to assemble and execute biopharmaceutical R&D, such gaps could take decades to bridge. Therefore it is important to initiate discussions of ways that the private and public sectors might begin reconsidering the ways in which new medicines are discovered and regulated. Specifically, the long times and monies needed for an approval might be mitigated by revisiting the requirements needed for an FDA approval. Likewise, the earliest stages of drug discovery are by definition the furthest from the market and thus are at the greatest risks in terms of continuity and the potential for disruption. Therefore, we think that intense and open conversation among the key stakeholders, funding bodies, venture capital, and non-governmental organizations (e.g., foundations focused on key diseases) about how to ensure sufficient levels of funding for early-stage R&D activities are an important first step to close the funding gap and ensure long-term innovation. These are but a few suggestions intended to prime further discussion of a subject of importance for both economic and public health.

One may question whether specific evidence for such gaps already exists. For example, a shrinking armamentum of antibacterial agents in a time of rising drug-resistant pathogens has been anticipated for many years, and the recent realization of these concerns might be a symptom of a larger problem. To avoid a continuation or widening of such issues to other indications, we need to gain greater clarity as to the health and robustness of the drug discovery and development pipelines. We can achieve this by increasing transparency on all levels, from regulators, to established biopharmaceutical companies, to entrepreneurs and investors, to public health scientists and patient advocacy groups. We must work together to align behind the joined interest in thwarting disease and improving well-being, and create incentives to ensure the continuation of the medical advances that have characterized the past seven decades.