I hate to be such a shining beacon of happiness today, but this news can't very well be ignored, can it? For the first time ever, total drug R&D spending seems to have declined:
The global drug industry cut its research spending for the first time ever in 2010, after decades of relentless increases, and the pace of decline looks set to quicken this year.
Overall expenditure on discovering and developing new medicines amounted to an estimated $68 billion last year, down nearly 3 percent on the $70 billion spent in both 2008 and 2009, according to Thomson Reuters data released on Monday.
The fall reflects a growing disillusionment with poor returns on pharmaceutical R&D. Disappointing research productivity is arguably the biggest single factor behind the declining valuations of the sector over the past decade.
This is not good -- although, to be sure, we've had plenty of warning that this day would be coming. But looking at it from another perspective, you might wonder what's taken so long. Matthew Herper has a piece up highlighting the chart below, from the Boston Consulting Group. It plots new drugs versus R&D spending in constant dollars, and if you're wondering what the Good Old Days looked like, here they are. Or were:
[Click to enlarge]
What's most intriguing to me about this graph is the way it seems to validate the "low-hanging fruit" argument. This looks like the course of an industry that has, from the very beginning of its modern era, been finding it steadily, relentlessly harder to mine the ore that it runs on. But that analogy leaves out another key factor that makes that line go down: Good drugs don't go away. They just go generic and get cheaper than ever. You can also interpret this graph as showing the gradual buildup of cheap, effective generics for a number of major conditions (cardiovascular, in particular).
There's one other factor that ties in with those thoughts: The therapeutic areas that we've been able to address. Look at that spike in the 1990s, labeled PDUFA and HIV. Part of that jump is, as a colleague theorized with me just this morning, the fact that a completely new disease appeared. And it was one that, in the end, we could do something about -- as opposed to, say, Alzheimer's. So if you want to be completely evil about it, then the Huey Lewis model of fixing pharma has it wrong: We don't need a new drug. We need a new disease. Or several.
Well, that's clearly not the way to look at it. I don't actually think that we need to add to the list of human ailments; it's long enough already. But given all the factors listed (and the ever-tightening regulatory/safety environment, on top of them), another colleague of mine looked at this chart and asked if we ever could have expected it to look any different. Could that line go anywhere else but down? The promise of things like the genomics frenzy was, I think, that it would turn things around (and that hope still lives on in the heart of Francis Collins), even though some people argue that it did the reverse.