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Eroom’s Law, the pharmaceutical industry of tomorrow and Resolving Pharma

372. It is the number of days between the discovery of the first Covid-19 case in Wuhan, and the vaccination of Margaret Keenan in central England, the first person to receive a dose of Covid vaccine after its commercialization. Never in its history has humanity been so quick to find a solution to a new disease. However, this dazzling success of the pharmaceutical industry should not blind us, the development of new drugs is becoming increasingly inefficient. More than ever, initiatives that enable the use of technology in the research and development of new drugs are essential to maintain innovation.

The pharmaceutical industry is broken. It will not be able, based on its current means and methods of R&D, to replicate the medical progress it has made in the past years. Each new molecule brought to the market will inevitably cost more to develop than the previous one. This is what Eroom’s Law states, describing empirically the decline in the efficiency of the pharmaceutical industry (1). For example, the R&D profitability of the world’s 12 largest pharmaceutical groups reached an all-time low of 1.9% in 2018, whereas it was still 10.1% in 2010 (2).

Figure 1 – An illustration of the decreasing efficiency of the pharmaceutical industry: every 9 years, the number of drugs approved by the FDA per billion dollars spent on R&D decreases by half (1).

Despite the many scientific advances we have witnessed recently (i.e. increase in the size of chemical libraries, identification of new therapeutic targets through DNA sequencing, three-dimensional protein databases, high-throughput screening, use of transgenic animals, etc) and the fact that they allow us both to produce more drug candidates and to select them with greater acuity, various structural problems in the pharmaceutical industry have led over the years to a considerable increase in the amount of money needed to bring a new molecule to the market.

A quick review of the literature helped us to identify some causes of this phenomenon :

  • The structurally incremental nature of the quality of each new product proposed by the pharmaceutical industry: to be marketed and reimbursed, each new drug must be superior or at least non-inferior to the drug corresponding to the treatment of reference for the targeted disease.
  • The gradual tightening of regulations, which is difficult to fight against and is even, for patients and health systems, most likely a good thing.
  • The tendency for pharmaceutical companies to over-invest unnecessarily, based on past returns on investment.
  • The concentration of research projects in therapeutic areas corresponding to unmet medical needs, with higher failure rates and less well understood biological mechanism3.

From an economic point of view, it is conceivable that the cost of capital (corresponding to the rate of return required by capital providers within a company with the regard to the remuneration they could obtain from an investment with the same risk profile on the market) becomes higher than the expected return on R&D : mechanically, available capital will decrease and companies will cut back on their research budgets, which will weaken the position of pharmaceuticals in the drug value chain.

Faced with this bleak outlook for the pharmaceutical industry, there are several answers to it: developing new models of collaboration with biopharmaceutical companies, subcontracting to specialized players, developing a policy of risk aversion, but also and above all, the development of new methods of innovation. This last point will be the focus of our attention.

Thus, Resolving Pharma will be interested, first through a newsletter, in documenting the various technologies that will improve and make the development of new therapeutics and treating patients more efficient. In response to this problem, Resolving Pharma will attempt to unite diverse and complementary actors around a bold and radical approach to innovation and entrepreneurship. Topics will include artificial intelligence, blockchain, quantum computing, 3D printing and many others. Each issue, through articles and interviews, will explore the different opportunities that these disruptive technologies bring or could bring to a particular field of therapeutic development. It will also highlight the emergence of the «PharmaTech» field, technology companies providing services to the pharmaceutical industry.

The fight against the fatality of Eroom’s law is huge and uncertain, but it is our responsibility as health professionals to fight it for the tens of millions of patients around the world, suffering from incurable diseases and for whom research and science are the only hope for a better future. Every long journey begins with a first step and Resolving Pharma is ours. We will see where it lead us.

(1) Scannell et al. «Diagnosing the decline in pharmaceutical R&D efficiency», Nature Reviews Drug Discovery, Volume 11/March 2012
(2) Unlocking R&D productivity – Measuring the return from pharmaceutical innovation 2028, Deloitte Centre for Health Solutions, 2019
(3) Pammolli et al. «The productivity crisis in pharmaceutical R&D» Nature Reviews Drug Discovery, Volume 10

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By Alexandre Demailly

Pharmacist graduated from Lille University, France, Alexandre pursued his studies in Medical Economics at the Paris-Dauphine University and developed his knowledge of Artificial Intelligence in Health at the University of Paris.
Passionate about health innovation and entrepreneurship, Alexandre is currently involved in two early stage biotechs in the neurodegenerative diseases field.

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