In the past week I had three lunches with people I had worked with in the pharma industry. Although I should not have been shocked, I was nevertheless shocked all over again. ALL of this company's monoclonal antibodies in clinical development 7 years ago, for which I wrote many clinical trial protocols and study reports, are dead. Not one has reached approval. This company was and still is surviving on one drug, which has been on the market for over a decade. Thousands of employees, several manufacturing sites in operation, billions of dollars made on one drug and spent on the research and development of at least a dozen new products, and thousands of patients in and out of clinical trials around the world. Nothing to show for.
This is the current state of pharmaceutical industry. Expensive failures plague companies large and small. However, small companies and large ones fail in different ways. For the small company, any kind of setback or delay could kill a promising molecule or the company itself, such as a disagreement with FDA on how to measure efficacy, or a couple of serious adverse events --- which may or may not be actually related to the drug --- or the bad luck of hitting a general recession. In large firms, molecules no better than placebo could eat up a few hundred million dollars before flopping spectacularly in Phase 3. It is commonplace to throw good money after bad until someone puts a hopeless candidate drug out of its misery. Last year Pfizer was sitting on $24 billion cash with nary a worthy molecule to spend it on.
I am tempted to believe that, in a free market, no other industry can get away with such outlandish inefficiency and absurdities and still survive for three decades, like the pharma industry has done. But then perhaps I'm wrong. At least the movie industry has been on a similar trend since 1975. Like the pharma industry, in which a few blockbuster drugs (hint: someone picked up this cross-sector term for a reason) support a huge infrastructure of waste, Hollywood has been operating with the same mechanism. The institution of waste has grown ever larger and more elaborate, because there is enough money to support it, until the money finally dries up and the whole party collapse onto itself.
Perhaps Parkinson's law, "Work expands so as to fill the time available for its completion," can be applied to not only bureaucracy but also corporations: The size and complexity of a corporation expands so as to fill the money available to support its existence.
As different as they are, Hollywood and pharma have another similarity: Both are hugely complex systems that require a substantial amount of creativity. It has been noted by some that efficiency in a complex system requires conformity, which is incompatible with individuality and creativity. Therefore, one might deduce, reducing the system's complexity may be the only way to improve creativity. Hence the campaigns in favor of "flat organizations" and for corporations to pretend to be start-ups. Does it work? I doubt it. I have heard from more than one person that, while the upper management tries to eliminate layers of management immediately underneath, new layers of managers are created from the bottom.
One may argue that drug development (or movie-making, perhaps) is inherently complex and cannot be simplified. I'm not convinced. Movie-making CAN be cheaper and simpler without necessarily neglecting quality --- see independent movies and most movies made before 1975. The question is to construct an infrastructure that makes this profitable. Actually, that is exactly what's happening in television, which has seen good writing and high quality shows flourish on cable and video streaming. Hollywood, on the other hand, is being cannibalized from within by people like Michael Bay.
Can the small pharma players --- namely start-up biotechs --- find similar success as AMC or FX or Netflix? It's hard to predict. One player that sucks the air out of the room is regulatory agencies (not just FDA), who have neither the incentive nor the ability to help lower the cost of drug development. Still, other reforms are tried. Big pharma companies have cash. Sometimes I wonder whether they would have done better if they were simply converted to venture capitalists and stay out of R&D altogether. You want efficiency? Let CROs do all your clinical trials. You want innovation? Let small biotechs do the discovery. You just do your due diligence before throwing billions at a molecule. Break up this complex system into smaller sectors, like how the IT sector has separate subsectors in hardware, software, and telecommunication. Let each subsector stay small and specialized and competitive.
Alternatively, we can wait for the behemoth collapse and watch small new seeds grow out of the ruin.
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