Big money spent badly

The global pharmaceutical market will more than double in value to US$1.3 trillion by 2020, according to a new PricewaterhouseCoopers report on the future of the pharmaceutical industry.

The increase is driven by soaring worldwide demand for medicines and preventative treatments as the population grows, ages, becomes more obese and more prosperous.

By 2020, Brazil, China, India, Indonesia, Mexico, Russia and Turkey could account for as much as one fifth of global pharmaceutical sales. Further, the chronic conditions in the developing world will increasingly resemble those of the developed world.

The PwC report indicates, however, that the current pharmaceutical industry business model is both economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets.

In order to make the most of these future growth opportunities, the industry must fundamentally change the way it operates.

The report, entitled Pharma 2020: The Vision - Which Path Will You Take?, contends that despite unprecedented global demand for its product, the pharmaceutical industry is at a pivotal point in harnessing its ability to capitalise on these opportunities.

Pharmaceutical companies are facing a dearth of new compounds in the pipeline, poor financial performance, rising sales and marketing expenditures, increased legal and regulatory constraints and challenges, and tarnished reputations.

At the same time health care payers and providers everywhere have recognised that current health care expenditure levels are also unsustainable unless they deliver more demonstrable care and cost benefit over the long term.

"The pharma industry will not be in a strong position to capitalise on opportunities unless R&D productivity improves," Dr Steve Arlington, global pharmaceutical research and development advisory leader for PwC and principal author of the report, said.

"The core challenge for the industry is a lack of innovation. The industry is investing twice as much in R&D as it was a decade ago to produce two-fifths of the new medicines it then produced. It is simply an unsustainable business model.

"Over the next decade, the industry must shift its investment focus more toward research and less on sales and marketing. Pharma's traditional strategy of placing big bets on a few small molecules, marketing them heavily into primary care with the aspiration of achieving blockbuster sales, will no longer suffice.

"It must focus on the development of medicines that prevent, treat or cure. These must demonstrate tangible benefits and tackle unmet medical needs. Governments and payers must play their part and ensure the industry is rewarded for these efforts."

The report states that new technologies will drive R&D.

"Transformational technological changes in the pharmaceutical industry will reshape the business strategies of pharmaceutical companies," it says. "The role of genetic-based diagnostics in the development of personalised medicines has already shortened the R&D cycle for those products.

"Further research into the human genome will open up a new world of opportunities in molecular science and new ways of looking at targets. These new technologies will be used to improve understanding of diseases and link genomic and clinical data.

"The development of molecular delivery platforms could speed the development of new products that leverage existing/approved platforms. The convergence of therapeutics and medical devices, which started in earnest with the drug releasing stent, will continue and they will become increasingly sophisticated, improving efficacy and reducing the risk profile of many existing therapeutic agents."

PwC also projects that the current linear phase R&D process will give way to 'in-life' testing and live licensing.

"The current R&D model, involving phase I, II III and IV clinical trials that typically end in submission for a drug licence and market approval, will be replaced by collaborative in-life testing and 'live licences' being issued contingent on the performance of the drug over its lifecycle," it says.

"The industry will conduct smaller, more focused clinical trials, continuously sharing results with regulators. If testing confirms that a medicine is safe and effective, a live licence will be issued permitting the company to market the drug on a restricted basis. Further in-life testing will extend the licence to cover a larger number of patients or a different patient population.

To download a copy of the report and a related podcast see www.pwc.com/pharma