Dropped from the private research agenda
Moreover, global expenditure on health R&D has increased dramatically and is still on the rise. For 2001, an estimated record US$70 billion will be invested globally in health R&D, with the U.S. private sector alone accounting for just under half of the spending at US$30.5 billion.1 While the public sector has traditionally been the major funder of health research, the private sector has recently taken the lead. Global health research priorities are changing accordingly.
In the "social contract" that has over the years emerged around drug development, industrialized countries rely on the pharmaceutical industry to develop and produce medicines, and governments attempt to ensure that the industry meets public needs through a variety of incentives. These incentives include the patent system, tax credits, and R&D grants, as well as subsidies provided by national health care or insurance systems to help pay for health commodities.
This balance between public and private capacity, investments, and interests has worked well to develop drugs for diseases such as heart disease and cancer, and has helped the pharmaceutical industry to prosper, with companies often having sales of hundreds of millions or even billions of dollars a year on a single drug. This profit-driven system has also mobilized R&D funds for "lifestyle" conditions such as impotence, baldness and obesity. By investing in these conditions or in "me-too" drugs (medicines that are only slightly different from existing compounds and are not considered to be true innovations or clinical advances), drug companies can also expect phenomenal sales figures.
According to the 2000 Fortune 500 ranking, pharmaceutical companies top the US industry performance list for return on investment, with a 39% return for shareholders.2 Furthermore, corporate mergers and consolidations have led to fierce competition between a shrinking number of players. To maintain expected profit levels, the R&D-based pharmaceutical industry focuses on the profit potential of wealthy markets. Figure 2A projections show that North America, Europe and Japan will account for 80% of the world pharmaceutical market in 2002 (with a total projected world value of $406 billion), while Africa, Asia, Latin America and the Middle East, representing 80% of the world's population, will account for only 20% of the pharmaceutical market.3
It is a matter of simple economics: potential return on investment, not global health needs, determines how companies decide to allocate R&D funds. According to the drug industry, the low purchasing power of developing countries - coupled with the high cost of R&D and drug registration - rationalizes their focus on wealthy country markets.10 Fierce market competition means that for diseases that primarily affect developing countries, neither promising drug leads nor research on new applications of existing drugs will be pursued.
Gaps in the drug development process
A closer examination of the drug development process shows exactly where the system breaks down. Developing a new drug from basic research can be a complex, capital-intensive and time-consuming activity. In order to produce one successful drug, thousands of candidate-compounds and successive selections based on biochemical properties, safety, clinical performance, and market considerations may be needed. Figure 2B outlines this process and identifies the gaps that occur when market prospects are low.
The public research community, namely universities and institutes, is primarily involved in the early phases of basic research and drug discovery. The expertise, infrastructure and management capacity
for moving these discoveries through the drug development process is concentrated in the private sector. Thus, final drug development is largely conducted by private industry, according to its own priorities.
It is clear that the multinational pharmaceutical industry cannot be relied on to develop the medicines required to treat the diseases that affect the world's poor. Governments are ultimately responsible for ensuring that people's health needs are met. They must take action when the private sector or the market fails. The current crisis in R&D for neglected diseases is a result not only of the failure of the market, but also of the failure of public policy.
© Alexandr Glyadyelov
1) The latest figures available are US$56 billion (from 1992), but experts estimate current annual health research funding at around $70 billion (including $40 billion on
the part of the private sector). Global Forum for Health Research, The 10/90 Report on Health Research. [Online]. (2000). Available: www.globalforumhealth.org. Pharmaceutical Research and Manufacturers of America, 2001 Industry Profile. (Washington, D.C.: PhRMA, 2001).
2) Fortune 500 Top Performing Industries, (2000, April 16). Fortune. [Online], F-26, F-28. Available: www.fortune500.com [2001, July].
3) IMS Health Market Report: Five Year Forecast of the Global Pharmaceutical Markets. [Online]. (2000).
Available: www.ims-global.com/insight/report/global/report.htm [2001, August].
Population Reference Bureau, 2001 World Population Data Sheet, estimates for mid-2001. [Online]. (2001). Available: www.worldpop.org/prbdata.htm [2001 August 20].
4) J.A. DiMasi, R.W. Hansen, H.G. Grabowski, and L. Lasagna, "Cost of innovation in the pharmaceutical industry," Journal of Health Economics l 10 (February 1991): 107-142.
5) Dr. Hannah Kettler, Updating the cost of a new chemical entity, (London: Office of Health Economics, 1999).
U.S. Congress, Pharmaceutical R&D: costs, risks and rewards, (Washington, D.C.: Office of Technology Assessment, 1993).
6) William S. Comanor, "The pharmaceutical research and development process, and its costs" (paper produced for the MSF/WHO Workshop on Drugs for Communicable Diseases,
stimulating development and securing availability, Paris, October 14-15, 1999).
7) National Institutes of Health, "NIH contributions to pharmaceutical development," administrative document, (2000).
Stéphane Jacobzone, Pharmaceutical policies in OECD countries: reconciling social and industrial goals, Labour market and social policy occasional papers, no. 40 (Paris: OECD, 2000).
8) "Rx R&D Myths: the Case Against the Drug Industry's R&D 'Scare Card," Public Citizen Congress Watch, (July 2001): 2-3.
9) Initial Estimates from "Pharmacoeconomics of TB Drug Development," Global Alliance for TB Drug Development. (New York, September 2001).
10) Barton Gellman, (2000, December 27) "An Unequal Calculus of Life and Death," The Washington Post, [Online].
Available: www.washingtonpost.com [2001, August 13].
11) Fred Hassan, "Being a modern pharmaceutical company: New paradigms for the pharmaceutical industry" (plenary lecture given by Chief Executive Officer of the Pharmacia Corporation at the World Conference on Clinical Pharmacology and Therapeutics, Florence, Italy, July 17, 2000), quoted in Clinical Pharmacology and Therapeutics 69 (May 2001): 281-285.