Health
The Failure of Pharmaceutical R&D: Part 1
The NYTimes is carrying an interesting piece of news - a non-profit organization (NPO) is conducting trials of a long-forgotten medicine to combat black fever in India. This is not a new development but it does highlight the failure of pharmaceutical R&D in satisfying the needs of the developing world. This failure is known as the 90/10 gap - that 90% of health research expenditures worldwide are devoted to diseases afflicting only 10% of the earth’s population.
The root cause of this gap is obvious – the inability of the poor to pay prices that make them attractive consumers for pharmaceutical R&D investment. Attempts to address the problem, however, suggest it is not as simple as that. In this, and subsequent posts, I will attempt to analyze the many other aspects that exacerbate the failure without a fundamental policy shift.
The posts will be in four parts:
- This post looks at the health gap, its extent, and basic cause.
- Next, I will consider some of the strategies being used to bridge the gap, their benefits and shortcomings.
- Third, I will explain the fundamental drivers of and current state of the pharmaceutical industry
- The final section will bring these concepts together to explain why current efforts cannot work, and why the industry might even fail in the west.
It should be pointed out that the lack of healthcare in the developing world is far more complex than mere drug development. The inability of poor countries to provide healthcare cannot be viewed as a failure of the pharmaceutical industry. The complete lack of medicines against major diseases, however, can be and it is this failure I will try to analyze. In doing so, I will avoid normative judgments, for this is first a problem of economics, and then of equity.
The Global Health Gap
The extent of the health gap is well documented, but still disturbing.
A 2002 study [1] of drugs approved in the USA and Europe found that of 1393 new chemical entities (NCE) marketed between 1975 and 1999, only 16 were for tropical diseases and tuberculosis. The same study surveyed 20 companies to find that of the respondents, 7 companies spent less than 1% of their R&D on 5 major tropical diseases.
The study also proved a clear correlation between the amount of R&D spending, the financial returns on a drug, and its therapeutic area. As shown in the table, the number of NCEs approved for central nervous or cardiovascular disorders was significantly higher, as were the drug sales they generated.
| Therapeutic area | Approved NCEs (1979-99) | Proportion of worldwide sales, 1999 (%) |
| Central nervous system | 211 (15.1%) | 15.1 |
| Cardiovascular | 179 (12.8%) | 19.8 |
| Cytostatics (neoplasms) | 111 (8%) | 3.7 |
| Respiratory (non-infectious) | 89 (6.4%) | 9.3 |
| Anti-infectives & antiparasitics | 224 (16.1%) | 10.3 |
| HIV/AIDS | 26 (1.9%) | 1.5 |
| Tuberculosis | 3 (0.2%) | 0.2 |
| Tropical diseases (total) | 13 (0.9%) | 0.2 |
| - Malaria | 4 (0.3%) | 0.1 |
| Other categories | 579 (41.6%) | 41.9 |
| Total | 1393 | 100% |
It is easy to see why so little R&D money goes to tropical and other ‘neglected’ diseases. For any disease to attract the attention of big pharma, it requires not only that the disease afflict a lot of people, but also that those people be able to pay substantial amounts for treatments.
In much of the developed world, individual purchasing power and insurance programs cover the majority of drug prescription costs. In Europe, such programs cover 80-100% of costs, compared to 35% in Latin America and only 8% in Africa. At the same time, public spending on drugs in OECD countries was $239 per capita per year, compared to $20 in most developing countries and less than $6 in sub-Saharan Africa.
The result is a very small market that is, in general, unattractive to pharmaceutical countries, leading to a health gap.
References
- Patrice Trouiller et al. (2002). Drug development for neglected diseases: a deficient market and a public-health policy failure. The Lancet, Vol 359, June 22, 2002.
Discussion
5 comments for “The Failure of Pharmaceutical R&D: Part 1”
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[...] This is part 2 in a 4 part series. Read Part 1. [...]
[...] In previous posts (part 1-the health gap & part 2-current responses) I pointed out that the basic reason for the failure of pharmaceutical R&D was a lack of markets in the developing world. However, current responses are inadequate to address the gap. As I argue here, there are other systemic problems that inhibit market incentives from working, not just in the developing world but even in the developed world. [...]
[...] This is part 4 in a series (Read part 1, part 2, part 3). [...]
[...] This is part 2 in a 4 part series. Read Part 1. [...]
[...] Finally, the problem becomes even bigger if one considers the investment in research for TB medicines. As previously pointed out, of the approved New Chemical Entities in USA and Europe between 1979-99, only 3 (0.2%) targeted TB. [...]