Giving up on Godot
Shake-Ups in R&D
In Samuel Beckett's play, Waiting for Godot, it becomes clear by Act Two that the characters will never be rewarded for their patience. Though Beckett's hapless protagonists
remain "stuck," many leading pharma manufacturers have been shaken out of their inertia when it comes to the existing R&D
model. They realize it's time to try something different.
Big Pharma companies have shaken up their R&D units with bold moves designed to spark innovation, improve productivity, and
introduce a commercial focus. Of the top 10 pharmaceutical manufacturers, six announced major changes to their R&D models,
and nine have made changes relating to the size, structure, or focus of their R&D.
The earliest R&D models were vertically integrated, encompassing all functions from discovery through launch within the same
company. That model has been deconstructed, as biotechnology spawned startup companies that generated the most innovative
projects—but in most cases without the ability to launch them independently. In recent years, Big Pharma companies have sourced
a growing proportion of their projects from the "innovation incubator" of the startups, and have sustained these startups
with injections of cash for the most promising Phase II projects.
This "dual innovation" model was not without its challenges; in-licensing perennially provoked the "not-invented-here" syndrome,
and internally and externally sourced projects, theoretically equal, were treated differently. In addition, biotech firms
often saw Big Pharma companies—not patients, physicians, or payers—as their primary customers for early-stage projects.
About 10 years ago, there were hints that the dual innovation model would eventually produce diminishing returns. But that
realization did not translate into action because it was also believed that the completion of the Human Genome Project (HGP)
would lead to rampant drug discovery. While the benefits of the HGP have yet to be realized, the first prophecy has clearly
come to pass. The cost of research has climbed steadily and according to the Tufts Center for the Study of Drug Development,
reached $1.2 billion in 2006 for the average biotechnology product. Meanwhile, the mass market potential of new medications
has decreased as many therapy areas become more "genericized," forcing new launches into niche segments.
Because of the rise of the payer as a key customer, certain therapy areas hold no further commercial potential without the
discovery of a major breakthrough worthy of changing treatment protocols. This payer-driven disdain for "incremental" developments
in treatment could, however, be counterproductive in some therapy areas such as oncology, where incremental improvements are
crucial to the long term therapeutic progression.
The best time to make changes to the R&D model is yesterday. Companies must resign themselves to the fact that changes made
today won't deliver tangible benefits for another 10 years. In the meantime, as large pharma companies proceed to adopt new
models, they must:
» Address and align the divergent motivations of R&D and sales/marketing. Developers must be given incentives for meeting not
only regulatory criteria, but payer criteria as well.
» Manage expectations. Shareholders will need to be conditioned to the fact that R&D projects may have to take longer, cost
more, and carry incremental risk.
» Foster an entrepreneurial spirit among researchers. There will be no place to hide for the researcher who is not suited to
an entrepreneurial environment.
With the steps that many leading companies took in 2008, it appears that the longstanding R&D model is at last undergoing
an overhaul. Eventually, there may not be a single prevailing R&D model, but a series of R&D solutions for different therapy
classes or companies. What is certain is that the shotgun approach belongs to the past, while precision focus and selectivity
are taking hold across the industry.