Speeches & Presentations

Where Drugs Come From: The Facts of Life About Pharmaceutical Innovation


Sidney Taurel

Chairman - Eli Lilly and Company December 12, 2008

November 4, 2003

Hudson Institute Forum / National Press Club — Washington, D.C.

Thank you. It’s always a pleasure to be at the National Press Club. And I’m very grateful to the Hudson Institute for creating this opportunity to discuss a very important subject.

As Irwin noted, the pharmaceutical industry has been under siege on many fronts. Today, I won’t attempt to mount a comprehensive defense. We don’t have that much time, and I’m not sure it would be the right thing to do, in any case. I doubt that the best answer to a blanket condemnation is a blanket denial. I do believe much of the criticism is unfounded or unfair. But not all of it. There are some complaints my industry needs to hear and take to heart.

However, the topic Irwin has highlighted is not one of them. He’s quite right -- of all the criticisms leveled at the pharmaceutical industry, none is more serious or more consequential than the charge that we overstate our role as creators of new medicines.

Actually, the critics make two related claims. One, that most new drugs aren’t really new, but rather iterations of existing drugs. And two, that many, if not most, breakthrough drugs have actually been discovered by scientists at the National Institutes of Health or in universities, supported by taxpayer funding.

Obviously, I’m here today to refute those claims. But it’s important to understand that this is not some ivory tower squabble about who gets credit for what. The context of this dispute is a policy struggle with enormous consequences not just for my industry, but for everyone, everywhere.

Congress is weighing several legislative proposals that we believe have the potential to decimate innovation in pharmaceuticals. Our opponents counter by saying, in essence, "The drug companies aren’t really the innovators. We can get along without them."

What our policymakers and all Americans need to decide is, what’s the truth in this matter? Is the pharmaceutical industry a driver of medical progress or not? And where, really, do new drugs come from?

Let’s look first at the claim that the NIH and other publicly-funded laboratories are the primary sources of new drugs. What facts support it?

Most critics try to make this case mainly by asserting it over and over as if it were an established fact. I’ve only seen two pieces of data offered as evidence. One was a study of drug patent applications filed in 1998 which found that only 15 percent of the articles cited in those applications came from within the industry. The other was an unpublished NIH document that looked at the five biggest-selling drugs of 1995 and found that 16 of the 17 key scientific papers leading to the discovery and development of these drugs came from outside the industry.

This kind of evidence might have relevance in an academic setting, where scholars are honor-bound to cite all the inspirational precedents leading to their published work. However, patent citations work much differently.

Inventors are bound by patent law to cite certain prior work, even if its scientific value is nil.

Much of what we cite in our patents is work of others that fell short. It typically documents a problem that had not been solved and could not be solved until we made our invention.

Also, timing is everything when looking at what gets cited in patents. In drug discovery research, we can't publish our findings first and attempt to patent them later. For this reason, our most relevant research papers typically appear months or even years after we have finished writing our patents.

In other words, the citation statistics have virtually no relevance to the claim about where innovation comes from.

Actually, there’s no need to travel any such convoluted path to find the facts. It’s easy to research the question from government sources, including the NIH itself.

In 2001, Congress got into this issue of where new drugs come from and asked NIH for a report of its involvement in all drugs with sales of more than $500 million a year. The NIH reported that it found 47 drugs that met the criterion. And of those 47, the NIH had contributed to the discovery or development of four, primarily through its program of grants to universities and other research institutions.

That threshold of $500 million is rather formidable. What would it look like if the question were asked of a broader range of drugs?

Well, scholars at Tufts University looked at all 284 new drugs approved in the U.S. in the 1990s. They found that approximately 93 percent originated from industrial sources.

The remaining 7 percent were split more or less evenly between government and academic or nonprofit sources.

At a deeper level, this entire comparison is based on the faulty premise that public and private-sector scientists are somehow competitors in the search for new therapies. In fact, both sectors, by and large, pursue unique and quite separate objectives, which nonetheless complement one another and, in combination, serve to drive biomedical science forward.

Consider the many contributions of the NIH, which, I believe, deserves to be regarded as a national treasure. It is the single most effective and important medical research sponsor in the world. Among other things, it’s a huge source of training and talent for both academia and industry. It also does some very important applied research that often fills in the gaps or complements work done by industry. For instance, it plays a unique role in conducting long-term studies of therapies already on the market.

But its mission is centered on building the knowledge base necessary for improving human health. It does this mainly by sponsoring basic and clinical research into how biological systems function and malfunction. Some of this work is done within the labs of the various Institutes. But the greater part is done outside the NIH in universities and nonprofit research centers.

Generally speaking, this academic research is not focused on anything so specific as drug discovery. Rather, these scientists are free to range widely over the vast, complex puzzle of health and illness, helping to expand our understanding of physiology and pathophysiology. With new tools and technologies, investigators often carry their inquiries down to the molecular level and frequently make discoveries that open new territories for others to explore.

Advances in basic research redefine the boundaries of the underlying sciences and can have applications in almost every field of health care. They can lead to new or improved diagnostic techniques or to improvements in clinical practice. And, indeed, new discoveries in the life sciences often set the stage for advances in pharmaceutical R&D.

In the vast majority of cases, what these scientists produce is not a new drug, nor even a substance that might become a drug. Rather, from their observations of biology, they generate ideas, hypotheses about the biochemistry of some disease state, which may offer a new target for drug discovery.

This work represents the very early part of the "R" in pharmaceutical R&D and this is where the role of industry typically begins.

The first problem is to find out whether the hypothesis is correct. Many, ultimately, are not. Others may take many years to fully understand and apply to some practical end.

In any case, much of the early work in drug discovery is more basic research trying to verify that the new biological information really does point to a valid target for a potential new therapy.

With or without some further validation, the usual point of invention for industry researchers is the generation of a new chemical entity, a molecule that shows some kind of desired activity against the target. We call these molecules "leads" and they are literally created de novo -- once, by hand; now by sophisticated computer-driven technologies.

A lead is no more a drug than an acorn is an oak tree. It is indeed something like a chemical "seed" that must be tended and pruned and shaped through a very long and very costly process. It has to be grown into a marketable medicine. The stages of growth take many years and require staggering investments.

Let me just give you a closer look at what it takes to develop a molecule to the point that it is ready to be tested for efficacy in patients. This includes the stages from what we call "lead optimization" through the first tests in human beings.

Basically, when you have a lead, you have a molecule that has shown activity in a test tube. But you know next to nothing about how it will work in a living organism. Can the molecule be dissolved in a medium that can enter the body? Does it get to the target once it enters the bloodstream? What happens when the body tries to metabolize it? How does it interact with other chemicals in the body? What might its safety profile look like?

There are a host of such questions you must answer and, based on the answers, changes you must try to engineer in the original molecule, before you can begin to find out whether it will help patients in the real world.

The key thing about this part of drug development is that it combines high costs with high technological risk.

Moving a compound through these early stages of development takes six or seven years. It involves a lot of people putting in thousands of hours in many disciplines. By the time you reach the end of Phase I -- that’s the earliest phase of testing in human volunteers -- you may have more than $100 million invested in that compound, when you include the cost of all the failures and the cost of capital. Yet 70 percent of the molecules that make it this far will never make it to market, and none of this work tells you what you most want to know: will it work in patients?

To answer that question, you have to send the drug candidate through six or seven more years of very costly clinical trials. And the odds are still formidable: somewhere between 40 to 50 percent of drug candidates that enter the third and final phase of trials fail to make it to market. Completing the journey can bring the total costs to $800 million or more.

Moreover, while all this development work is going on, and well before you can have any assurance it will succeed, you have to make other heavy investments to develop the necessary formulations and processes to get ready to manufacture the drug, and to prepare to market it if and when it is finally approved.

By the way, that innocuous term "manufacturing" doesn’t begin to express what is really involved in our industry. It’s a scientific and engineering feat of enormous complexity and cost.

The kicker is that making it to market is still no guarantee of commercial success; historically, only one drug in three makes back its costs of development

This is the true process of pharmaceutical innovation. This is what it takes to turn that question mark from the academic researcher into the exclamation point in the physician’s hands. This, in the full sense, is where drugs come from.

Far from being a contest between the public and private sectors, the true relation is a powerful synergy between the two. Public sector efforts are optimized for more fundamental work; the private sector excels at the applied. Both are necessary for the advancement of medicine.

And by the way, this relationship is unique to the U.S. and is part of the reason why about 70 percent of pharmaceutical innovation comes from the United States.

This is a very broad-brush treatment, of course. The boundaries between the public and private sectors are fairly fluid. In fact, scientists in industry also conduct and publish a great deal of basic research, often in concert with their academic counterparts. And government and academic labs also do a great deal of clinical research and what is called "translational" research -- that is, research designed to provide a scientific link between fundamental research in the labs and human trials.

These scientists do sometimes discover important new molecules: roughly 7 percent of the total, as I said. In certain areas where commercial incentives are low, notably in vaccines and in research aimed at biodefense, the NIH has created some development capabilities, including small-scale manufacturing facilities to produce sufficient quantities of these compounds for clinical testing. But aside from these very targeted exceptions, the capabilities to develop molecules into actual drugs really do not exist, outside of industry.

Some might press the point and argue that the government could, maybe should, build those capabilities.

I suppose that would be theoretically possible. But it absolutely baffles me that anyone could think it would result in more new drugs or cheaper ones.

Just to start, you’d have to duplicate the entire capital base of the U.S. pharmaceutical industry -- the laboratories, the offices, the vast array of high-tech instruments and processing equipment, the army of scientific, medical and other technical talent -- at taxpayer expense.

And why would you ever want to shift the huge ongoing costs and the huge risks I’ve just described from the shoulders of private investors to the backs of the American taxpayers?

Alternatively, if the idea were to redirect current government funding from basic to applied research, what would happen to the underlying knowledge base, the essential "garden" in which so much innovation flourishes?

Fortunately, the government agencies actually involved with pharmaceutical innovation have been working to promote some far more practical and more promising ideas. Both the FDA and the NIH have been looking at ways to create richer and more productive synergies between public- and private-sector capabilities.

Under the direction of Dr. Zerhouni, the NIH has developed a very ambitious "roadmap" for accelerating and amplifying its contribution to medical research. In essence, it is a strategy to "push the envelope" in everything the agency does. Under this roadmap, the NIH will create new tools and technologies in the life sciences to stimulate more innovation; will design new configurations of research teams, including new types of public-private partnerships, to encourage new synergies; and will launch a major upgrade of the NIH clinical research enterprise to make it even more productive and more efficient. This is going to boost all forms of medical research, in all sectors.

As for the FDA, Dr. McClellan and his team have announced an initiative for the agency aimed at bringing more innovations to patients faster and at lower costs, and their ideas for how to do this are really visionary.

In part, the initiative calls for the FDA to apply quality improvement techniques to its own review processes, and to upgrade its capabilities so it will be ready to evaluate the new technologies that will be coming in the near future. Advances like gene therapies or stem cell technologies require corresponding advances from the regulators.

The most revolutionary part of the plan directs the FDA to help the industry do a better job of innovation. The FDA will work with industry to make the drug development process cheaper, faster and more predictable. For instance, the agency wants to promote the development of new methods, such as imaging technology and biomarkers in blood samples, that can help industry sort strong candidates from weaker ones earlier and more cheaply.

There’s a lot more to it. But I believe this is the single most encouraging story now emerging in our field. If it can be implemented, it will make a huge difference in the future of health care.

This effort is also an excellent model for how government and industry can work in synergy. The agency is trying to enable the industry to excel at the work that only industry can do.

Now, what about the claim that the new drugs industry creates aren’t really new? Again, the critics insist that, while we talk about innovation, what we really produce is imitation, either slightly modified iterations of older drugs, or so-called "me-too" drugs, imitations of the few real breakthroughs that emerge occasionally.

The problem with trying to respond to this is that we have no fixed referent for "new." Innovation, like beauty, seems to be in the eye of the beholder.

It may be worth bearing in mind who the beholders are in this case. This is a claim primarily advanced by the insurance industry. In the ideal "world according to HMOs," patients would be covered for one drug in each therapeutic class, and it would be the cheapest one available.

I’ll come back to that. But what is the real accusation here? That we’re not really trying to innovate?

Here’s the most important "fact of life" in the pharmaceutical industry: Innovation is oxygen. You’ve got to have it or you die. You work with an effective patent life of about 10 years, at which point the generic companies are free to come in and repossess your property.

The mergers that we’ve seen in the pharmaceutical industry over the last decade have come about because one or sometimes both companies have not been able to produce enough innovation to maintain the growth that our investors want. Every CEO in the business understands this, and every one is pressing for as much innovation as they can get.

The so-called "me-too" phenomenon is actually a by-product of this hunger, and it’s really an inaccurate label. For the most part, no company sets off to find a "me too." We’re all in search of a "me first."

When an exciting new target is defined in a major therapeutic area, it usually sets off a race. Many companies will take aim and go after it, all at about the same time. But the competitors rarely stay even over the very long R&D course, owing to the degree of complexity and the kinds of setbacks I’ve described. Some surge ahead; others fail and drop out; still others keep going, but more slowly.

The winner usually has a first-mover advantage. But late-arrivals that offer some type of new benefit can also succeed. In fact, unless a drug candidate can offer some such advantage, it won’t sell, and therefore most likely would not be launched at all. Moreover, several studies have shown that new entrants in an existing class usually come in at a lower price than the pioneering brands.

Having a choice of several drugs to treat a disease is a very good thing for doctors and patients. People aren’t machines and they don’t all react to the same medicine in the same way. Factors like age, gender and ethnic heritage, as well as one’s individual genetic makeup, can play a huge role in the success or failure of a given treatment.

We saw this in the use of SSRIs, the class of antidepressants that we pioneered with Prozac® . If one drug didn’t work for a patient, another one often would. A patient might experience uncomfortable side-effects with one SSRI, and none when switched to another. Similar variability shows up in drugs for pain and inflammation, in allergy medicines, in cholesterol treatments, and very notably in cancer drugs.

The history of innovation also illustrates how some important drug classes have been built by incremental improvements. The penicillin family is a classic example. The original wonder drug, penicillin G, had deficiencies. Modifications of the molecule brought greater oral effectiveness, longer half-life, resistance to inactivation by staph bacteria. Over time, such changes created an enormous expansion of the antibacterial spectrum.

Despite the aspiration of insurers, "one-size fits all" is a formula for excluding a lot of people. In fact, medicine is headed in the opposite direction, toward what some are calling "personalized medicine," with drugs tuned to individual genetic differences.

Ultimately, the best response to the claim that we don’t innovate is the historical record.

Within the lifetimes of many of us here, the practice of medicine has been utterly transformed by pharmaceutical innovation. In just 50 years we’ve seen the rise of antibiotics; numerous agents against cancer; major advances in cardiovascular medicine that have helped patients control high blood pressure, blood lipids, and heart rhythm; and treatments for depression, schizophrenia and other mental disorders.

Fifty years ago, we could not build mental hospitals quickly enough and we wondered how to afford the enormous burden of care for the mentally ill; such hospitals have now largely disappeared thanks to pharmacotherapy.

Ulcer surgery used to be commonplace; today it is rare. We’ve seen the advent of drugs that make organ transplants possible and chemotherapy bearable, the dawn of biotechnology and a consequent surge of new therapeutic proteins.

I could go on and on.

Maybe the critics mean to say that all the glory is behind us, that the drug companies used to produce important new therapies but now are doing something else.

I have no idea what evidence the critics would offer to support this claim. But the evidence I see points in exactly the opposite direction.

The absolute apex of pharmaceutical innovation is research that results in a brand new class of medications, something that attacks a disease in a wholly original way. In just the last 10 years, the industry has generated a steady flow of new classes of drugs, many of them representing first-ever therapies for serious medical needs, others amounting to much-improved options over earlier generations of pharmaceuticals. I can only give you the headlines, but they include:

  • In diabetes care, new agents for managing blood sugar levels: notably, the TZD class, and several new types of biotech insulin.
  • In cardiovascular medicine, new classes of drugs for hypertension, for lowering cholesterol, and the development of several antiplatelet and anticlotting agents that have had a big impact in treating heart attacks.
  • In diseases of the central nervous system, the advent of atypical antipsychotics, which have truly revolutionized the treatment of schizophrenia and bipolar disorder.
  • Further advances against infectious diseases, with HIV/AIDS being the most conspicuous target. Four new classes of drugs have been developed to target the three different stages of the virus. Also, a first-in-class drug for treating Hepatitis B.
  • New therapeutic proteins that have revolutionized the treatment of rheumatoid arthritis. And major advances in the treatment of irritable bowel syndrome.
  • The latest breakthroughs have been coming against the toughest enemy of all, cancer, with new highly targeted cancer agents for chronic myeloid leukemia and breast cancer. These are just some of the areas where the industry has laid new track. I’m proud to say that Lilly has played a role in several of these advances. In fact, over the last decade, I can honestly say that virtually every new drug we’ve launched has been either "first in class" -- a breakthrough -- or "best-in-class" -- a drug that lifts the state of the art.

I won’t go though them all, but let me just list our three most recent launches: Xigris®, the first treatment ever approved for severe sepsis; Forteo®, a breakthrough for severe osteoporosis and the only therapy that actually builds new bone; and Strattera®, the first nonstimulant treatment for ADHD, and the first new drug against this disorder in 30 years.

As we look to the future, we can see the tremendous potential for this flow of innovation to expand and accelerate. In terms of the science, we are now in the early stages of a revolution in biomedicine, an explosion of new knowledge, that almost certainly will translate into a whole host of new and better medicines in the future.

I say "almost certainly" because there is some possibility that this future innovation will not materialize, not due to technical limits but political ones.

When I spoke of consequences in the beginning, this is what I was thinking of.

This whole process of pharmaceutical innovation is made possible -- viable -- by two important features of our economic system: one is market-based pricing … the other is intellectual property protection.

In various bills now before Congress, there are provisions that would have the effect of importing drug price controls, along with drugs, from other countries. There are others that would significantly weaken patent protection for pharmaceuticals.

We are working hard to explain why these provisions threaten our ability to innovate. Those on the other side are now countering by saying "don’t pay attention to them. They aren’t the real innovators."

That claim, I hope I have shown, is profoundly untrue. To an overwhelming degree, innovation in pharmaceuticals comes from the research and development work of pharmaceutical and biotech companies. Indeed, it is a sobering measure of how far my industry has fallen in public opinion that I should have to come before you to explain these facts.

I can only ask that all of you who shape policy and communicate to the public help lay this falsehood to rest, once and for all.

The health care debate has enough real issues to wrestle with, without the distraction of such myths.

Assuming the case I’ve made today will reach those who have to decide these matters, let me address my last words to them.

The choices you make will shape the future of medicine for ourselves, our parents, and our children.

Please look at all the facts and choose with great care.

Thank you very much.

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