July 2000

Pharma's Blockbuster Habit

Genomics will make possible the kind of customization that undermines the drug industry's blockbuster mentality. But can Big Pharma kick the habit?

By Stephen S. Hall

About 15 years ago, I traveled to Nutley, N.J., to interview a molecular biologist at Hoffmann-La Roche. I vividly recall my host waving at an impressive little skyline of buildings worthy of a college quadrangle and proudly saying, "Valium built all this." As recently as a month ago, when I visited the gleaming research and development complex of SmithKline Beecham just outside Philadelphia, my scientific host waved at an expanse of tinted-glass buildings and explained, "Tagamet paid for all of this."

I'm sure they say the same thing in Indianapolis about Prozac, and in various townships of New Jersey about Claritin and Lipitor, each of which racked up annual worldwide sales in excess of $2 billion in recent years. For many years, Big Pharma has had a bottom-line love affair with Big Drugs-blockbusters that generate billions of dollars in sales each year.

Part of the reason is history. Discovering and developing drugs has always cost a bundle, although one could argue that hyperbole as well as inflation has contributed to the steadily rising estimates for the cost of developing a new drug. Little more than a decade ago, the standard figure was $50 million to $75 million to bring a new drug to market, but the pharmaceutical industry now likes to float a figure of $500 million. (It's a rickety number that conveniently includes the costs of drugs that died on the way to the market, including ones that should have been abandoned but weren't.) But let's stipulate: There's no question drug development is a dicey business, where bad luck, unanticipated side effects and unexpected lack of efficacy can blow holes
in any company's pipeline.

Perhaps a more compelling reason is the view ahead: After a quarter-century of molecular biology and the first early returns from genomics, the industry is confronted with what Big Pharma R&D chiefs routinely describe as a "cornucopia" of possible gene-based drug targets. It's going to cost big money to place a lot of chips on the genomics game board. Moreover, a lot of these genes do not come with operating instructions and an owner's manual, so companies will have to do the kind of basic biology traditionally pursued by academia.With future R&D budgets projected to be between $4 billion and $5 billion, companies need
enormous revenue streams to feed the development beast.

But what if the blockbuster strategy represents yesterday's wisdom? If the philosophy behind genomics is correct, companies may face what might be called "the allele gap"-or, to invoke a popular phrase from my college years, a kind of "polymorphic perversity."As each new gene is identified and characterized, drug developers have a potential target for therapy.